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Case Study: Family Profile

Prasad Poojary works as a sales manager and supports his family of four on a monthly income of approximately 77,000 rupees. The family has several financial goals including buying a bigger home, funding their children's education, and retirement planning. An analysis of their finances recommends increasing life and accident insurance for Prasad, investing monthly surpluses into mutual funds to achieve their goals, and selling their current home to help fund buying a new flat in 2014.

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Satyaki Patra
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72 views1 page

Case Study: Family Profile

Prasad Poojary works as a sales manager and supports his family of four on a monthly income of approximately 77,000 rupees. The family has several financial goals including buying a bigger home, funding their children's education, and retirement planning. An analysis of their finances recommends increasing life and accident insurance for Prasad, investing monthly surpluses into mutual funds to achieve their goals, and selling their current home to help fund buying a new flat in 2014.

Uploaded by

Satyaki Patra
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CASE STUDY

Business Standard analyses a familys finances and suggests a suitable way forward

POOJARYs
Prasad (40), Prema (36), Sunil (10) & Prakash (4)
RESIDE NET ANNUAL INCOME RATING

Pune

~9.24 lakh

6/10

>FAMILY PROFILE
Prasad Poojary works as a sales manager with a non-life insurance company, while his wife is a homemaker. Having lost heavily in equities during the dotcom bubble in 2000, Prasad has preferred to invest in FDs over the last decade. The family now feels they need to move into a bigger apartment, as they are staying in a 1BHK flat. Other goals include planning for childrens educational funding and retirement. Monthly income: ~77,000
Basic expenses (~) Per month Annual

Monthly expenses Childrens education Life insurance premium Total Net monthly surplus: ~36,000

24,000 9,000 8,000 41,000

2,88,000 1,08,000 9,6000 4,92,000

>GOALS
BUYING A BIGGER FLAT (2014, Inflation - 9%) Current value: ~65 lakh Future value: ~70 lakh SUNILS GRADUATION
(2021-2025, inflation 9%) Current value: ~14.5 lakh Future value: ~36.75 lakh

PRAKASHS GRADUATION
(2027 & 2031, inflation 9%) Current value: ~14.5 lakh Future value: ~67.20 lakh

RETIREMENT PLANNING
(2033, inflation 7%, Life expectancy - 85 years) Future annual Corpus Current annual value: required: retirement expenses:

~2.88 lakh
Assets

~13.42 lakh
~

~2.71 crore
~

Liabilities

Savings account Fixed deposits EPF Insurance cash value Equity mutual funds Self-occupied property Net worth

2,86,000 13,00,000 5,46,000 4,68,000 2,56,000 45,00,000 73,56,000 73,56,000

>PRESENT STATUS
EMERGENCY FUND: Good amount of liquidity in the form of cash in bank and fixed deposits. This seems sufficient for contingency LIFE INSURANCE: Prasad has a total insurance cover of ~12.5 lakh through traditional and unit-linked insurance plans, while Prema has a cover of ~4 lakh through traditional plans. Prasad is highly underinsured HEALTH INSURANCE: Family is covered by employer-provided health insurance cover of ~3 lakh and they also have a family floater cover of ~5 lakh INVESTMENTS: Very high exposure to debt. Equity allocation is through ELSS funds LIABILITIES: Completely debt-free

>RECOMMENDATIONS
EMERGENCY FUND: Too much liquidity in savings accounts. Need to keep only ~125,000 in joint account and move the rest to short-term debt funds LIFE INSURANCE: Prasad needs an insurance cover of ~1.2 crore, which will cost approximately ~20,000 for a term plan. No cover suggested for Prema HEALTH INSURANCE: Present cover is adequate. Need to assess cover annually ACCIDENT INSURANCE: Prasad needs to take a personal accident policy worth ~50 lakh with a ~10 lakh TTD benefit. Annual premium will be around ~6,000

>PLANNING
BUYING A FLAT (2014): Present surplus of ~36,000 per month needs to be invested in ultra-short term debt funds, which along with fixed deposits will fetch ~18 lakh in 2014. Prasad can comfortably go for a home loan of around ~25 lakh but that would still be short of the targeted amount. Therefore, in order to achieve this goal, their existing house should be sold, which will fetch ~49 lakh. The rest of the amount can be sourced from existing FDs and monthly surplus which will be invested into debt funds Rate ofreturn on FD and ultra-shortterm funds - 8% post tax, Home loan interest - 10.75% SUNILS COLLEGE EDUCATION (2021 - 2025): Need to invest ~14,000 per month in balanced mutual funds to fund this goal Rate ofreturn expected: 11% on this portfolio PRAKASHS COLLEGE EDUCATION (2027 & 2031): An amount of ~10,500 per month needs to be invested in large and multicap equity funds (70%) and long-term debt funds (30%) to fund this goal Rate ofreturn expected: 12% on this portfolio. RETIREMENT PLANNING (2033): The EPF of Prasad will be worth ~78 lakh, while his existing equity funds will be worth ~25 lakh at retirement. For the balance shortfall, an amount of ~19,500 needs to be invested p.m in a combination of 70% equity and 30% debt mutual funds. This investment can start next year, once the home purchase is done
Plan by Steven Fernandes, certified financial planner

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