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Rahul was working with a telecom company,but recently he lost his job. He is a management graduate with 17 years of experience. His spouse,Nisha,is a homemaker

Written by Express News Service |
June 25, 2012 12:22:10 am

Name: Rahul Dev (43) & Nisha Dev (41)

Reside in: New Delhi

Currently unemployed

Net Annual income (through interest)

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(Rs 5,00,000)

Status & goals

Rahul was working with a telecom company,but recently he lost his job. He is a management graduate with 17 years of experience. His spouse,Nisha,is a homemaker. They have a daughter Alisha (15). They stay in their own house in Delhi. Rahul is sure that he will find a suitable job in the next six months. Nisha is also looking for a job in education sector. Alisha’s graduation is due in next few years

Needed

The first priority for the couple is getting a job. Alisha’s education and marriage are the other important priorities along with retirement planning

Net monthly surplus

Rs 21,000

Current Investments

Bank Fixed deposits: Rs 50 lakh

Land: Rs 30 lakh

PPF: Rs 10 Lakh

Findings

Emergency fund: With the good inflow of income,he never bothered to maintain an emergency fund.

Life insurance: He doesn’t have any life insurance cover.

Health Insurance: He doesn’t have any health insurance cover. He was totally dependent on his employer provided cover.

Investments: His investments are more tilted towards safe instruments and he also prefers real estate.

Liabilities: He’s having a costly personal loan in the portfolio.

Provident fund: He has withdrawn almost all his provident fund to purchase the land.

Recommendations

Emergency fund: He needs to break his FD and park R 2.50 lakh in savings account and maintain it.

Express tip: Emergency fund helps cope up with the uncertainties of job loss or health related issues.

Life Insurance: Rahul does not have any life insurance coverage. He should get one with the first salary of his new job.

Health Insurance: Rahul should immediately buy a family floater health insurance policy with sum assured of R 5 lakh (premium outgo R 11,500).

Express tip: Individual health insurance policy must be separate from employer provided cover.

Alisha’s education (2015):

He should allocate R 10 lakh from his bank fixed deposit for this goal. Park R 8 lakh in a separate FD and R 2 lakh in a balanced mutual fund.

Rate of return assumed 8% post tax

Express tip: When there’s uncertainty on regular income flow,one should invest in a relatively safer option.

Alisha’s marriage (2023):

Allocate R 5.45 lakh from the bank fixed deposit to diversified equity mutual funds.

Rate of return assumed is 12% post tax.

Express tip: When the goal is more than 5 years away,the asset allocation should be tilted more towards equity and diversified mutual funds are the best route.

Loan Repayment (2012): With no second thoughts he should close the loan from the money available in the bank fixed deposit. There’s no point keeping such a high interest loan in such a financial state. Allocate R 7 lakh towards this goal.

Express tip: A personal loan comes under the worst loan category due to extremely high interest rates.

Retirement Planning (2042): For this goal nothing much is left in liquid investments for allocation. The balance in fixed deposits should be reinvested in a fresh fixed deposit with monthly interest pay-out for routine house expenditure. For retirement planning,the land investment should be allocated. But this investmentshould be closely watched as land investments have their own inherent risks.

One should be out of this risky investment at least 3 years before the targeted goal year.

Rate of return assumed 12%

Express tip: One should first allocate the savings into liquid investments and then if there is some surplus left,that should go into the real estate.

Conclusion

Financial planning should start from the first day of your financial life. Proper insurance coverage,allocation of resources to respective goals and arrangement of finances will only make your life easy and thus help you in managing such emergencies

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