It really doesn't matter whether your present bank balance resemble shoe sizes or
telephone numbers: what will matter is what are your financial aspirations and how
well are you preparing yourself to achieve them. It can all start with a Personal
Financial Plan, exclusive and customized to meet your dreams.
Case
The family of Mr. Dipak Saha (34 years) comprises of his wife (30 years)-a self-
employed professional, son (3 years) and mother around 55 years.
Annual Income/ Expenditure Statement
Item Self (Rs. In Wife (Rs. In Gross (Rs. In
Lakh) Lakh) Lakh)
Income (Salary/ 1.40 3.50 4.90
Professional)
Interest Income 0.70
Income 5.60
Expenses
Household Expenses 1.92
Misc. Expenses 0.95
Car Loan Repayment & 0.52
Car Insurance
Club Fees 0.32
Personal Loan 0.12
Repayment
LIC Premium* (Self & 0.28
Wife)
Mediclaim Premium (Self 0.07
& Family)
Total Expenses 4.18
Investable Surplus 1.42
* LIC cover of Self (Rs. 2 Lakh) and Wife (Rs. 5 Lakh)
Net Worth Statement:
Assets Rs. In Lakh
Mutual Fund (Equity 1.27
Oriented)
NSC 0.50
Company FD 2.55
PPF (Self) 2.45
PO MIS 6.00
PF (Self) 2.00
Total Investments 14.77
Liabilities
Loan without Interest 2.00
Net Worth 12.77
Short-Term Goals:
Apartment in Mumbai Rs. 50 Lakh
Apartment in Native Place Rs. 8 Lakh
Mid-Term Goals:
Self Owned Office for Wife Rs. 15 Lakh
Long- Term Goals:
Marriage & Education Rs. 15 Lakh
Comfortable Retirement at 60
Recommendations
1. Your wife's income being more than your income, it is advisable that the
investments (LIC, PPF, Mediclaim) shall be made from your wife's account
only for maximum joint benefit for all tax purposes.
2. The next step would be to increase your insurance cover by atleast Rs. 10
Lakh. A pure-term cover will be cost effective (Rs. 3000/- only p.a.
approximately). You may nominate your mother (50%) and Wife (50%) with
respect to the policy.
3. Your wife may opt for similar Insurance Cover and meet the premium through
her business account, which will further reduce the outgo through incremental
tax savings.
4. After reviewing your present financials (Net Worth + Surplus), it appears that
your present surplus may not be able to support your present goal of
purchasing an apartment costing Rs. 50 Lakh. Further with high cost of
residential property, home loan rates shooting up, the recent order on Mill
Land release by Court and further since the obvious increase in transportation
if you relocate to the suburbs, I feel that you can swap the idea with the
Medium Term goal of actually purchasing an office space for your wife's
business. The benefits of the same would be obvious in terms of savings in
rentals. Further in the present market condition, it may prove to be sound
investment: of-course identifying the right location would hold a key in such a
decision. The fund can be sourced by partially liquidating the taxable fixed
income instruments like FD & MIS and partially as a Bank Loan for purchasing
commercial property.
5. Purchasing a residence in your native place would involve increased cost of
maintenance and can be useful only if you can identify a lessee, who is
interested in a long term arrangement.
6. The next step is to start building your Children's education and Marriage fund.
You will require this money in the next 15 - 20 years. The ideal investment
mix here will be a fund, which will invest 40% in Equity Oriented Instruments,
40% in debts and the remaining 20% in precious metals like gold. Careful
rebalancing of the portfolio to be done regularly to maintain the balance. Out
of the present surplus, invest Rs. 0.50 Lakh per annum in the recommended
ratio to achieve the target. Keep on increasing the allocation by 10% every
year. A joint life cover may also be taken as a risk management tool.
7. For purchasing your dream home, the first thing you need to build up a
Margin Fund (minimum 20% of the property price) and a Cash Flow, which
can take care of the EMIs. We can start working on the same by creating a
regular investment plan, whereby we can invest Rs. 0.50 p.a. in a Balanced
Mutual Fund (65% Equity & 35% Debt) with growth perspective.
8. The rest of the surplus money of around Rs. 0.40 Lakh p.a. shall be directed
to Diversified Equity Mutual Fund. Over the next 25 years, it is likely that
these investments would grow at market driven rate of interest and coupled
with the existing investments would reach a figure, which may give a
comfortable retirement kitty.
9. As your wife is a business owner, a careful succession plan needs to be
chalked out. The plan will be automatically triggered into auto-pilot in case of
any exigencies.
10. With rapidly changing dynamics of economic, financial and social fabric, it is
imperative that a plan once implemented needs to be reviewed on a
disciplined time bound manner. Further the uniqueness of this case lies in the
fact that one of the spouse is salaried and the other one a business woman,
which needs further fine tuning to get the best out of the situation.
