CASE STUDY

Business Standard analyses

one familys finances and
suggests a way forward

THE KURIENs
Suraj (31), Padma (30), Vinolia (3)
RESIDE IN

NET ANNUAL INCOME RATING

Khargar, Navi Mumbai

~13.32 lakh

6/10

>STATUS & GOALS

Suraj works as a commercial manager with a plastics
manufacturing company in Navi Mumbai. His wife, Padma,
works in the accounts department of an engineering firm. The
couple were able to purchase their first home three years ago
with some financial support from their parents. Recently, they
bought a car on loan. The couple would like to put a plan in
place to purchase a bigger house in the next five years. They
also want to plan their daughters higher education and their
own retirement as they have realised that starting early will
give them the advantage of compounding.
Basic expenses (~)
Per month (~)
Annual (~)
Household
34,000
4,08,000
Home loan
32,057
3,84,679
Car loan
6,448
77,376
Childs education
4,000
48,000
Insurance premium
8,000
96,000
Total
84,505
10,14,055
Monthly income: ~1,11,000

Net monthly surplus: ~26,495

>GOALS
DAUGHTERS HIGHER
EDUCATION

DAUGHTERS MARRIAGE
(2037) (inflation 9%)

(2029- 2033) (inflation 9%)

Current value: Future value:

~17 lakh

Current value: Future value:

~76.81 lakh

BUYING A 2BHK FLAT

(2019) (inflation 9%)

~7.50 lakh ~54.50 lakh

Current value:

Future value:

~72 lakh

~1.15 crore

RETIREMENT PLANNING
(2041) (inflation 7%) (Life expectancy: 85 years)
Current annual retirement
expenses :

Future annual
expenses:

Corpus
required:

~ 4.10 lakh

~25.35 lakh

~5.43 crore

Assets

Savings account
89,000
Fixed deposits
1,25,000
EPF
1,78,000
Equity mutual funds
90,000
Self-occupied property 52,00,000
56,82,000
Net worth
27,82,000

Liabilities

Home loan 26,00,000

Car loan
3,00,000

29,00,000

>FINDINGS
EMERGENCY FUND: Money maintained in savings account and

fixed deposit can take care of max 2.5 months of expenses

LIFE INSURANCE: Suraj is insured for ~1.05 crore through a term
insurance and Ulip. Padma is insured for ~15 lakh though
term and endowment plans. Surajs cover is not adequate
HEALTH INSURANCE: Family is covered through employer-provided
family floater mediclaim cover of ~ 2 lakh, which is inadequate.
INVESTMENTS: Low, heavily skewed towards debt assets.
LIABILITIES: Presently servicing 2 loans with total EMI outgo of
~38,505. Balance term for home loan is 12 years, while for car
loan it is 5 years. Total outstanding is ~29 lakh.

>RECOMMENDATIONS
EMERGENCYFUND: Maintain ~2.5 lakh in savings account to take

care of at least three months of expenses in case of any emergency. Move ~20,000 surplus from savings account for next two
months on receipt of salary to reach the targeted fund amount.
LIFE INSURANCE: Suraj needs an additional insurance cover of
~50 lakh. A suitable online term plan for 25 years tenure will cost
~10,000 p.a. Extra life insurance cover not suggested for Padma.
HEALTH INSURANCE: Suraj should take a separate family floater
mediclaim policy of ~3 lakh. The annual premium for this will
be approximately ~8,000.
ACCIDENT INSURANCE: A personal accident policy of ~25 lakh, with
~ 7.5 lakh as TTD benefit is recommended for Suraj. Padma
should take an accident cover of ~10 lakh, with a TTD benefit of
~5 lakh. The total premium for this should be ~8,000 p.a.

>PLANNING FOR GOALS

DAUGHTER'S HIGHER EDUCATION (2029 & 2033): Need to start SIPs
of ~11,000 in diversified large and multi-cap equity funds.
Rate ofreturn assumed: 12% in equitymutual funds.

DAUGHTERS MARRIAGE (2037): SIP of ~4,000 needs to be done in

a mid-cap fund for this goal.
Rate ofreturn assumed: 13% post-taxin mid cap mutual funds.

BUYING A 2BHKFLAT (2019): First, clear car loan by decreasing the

loan period to 2 years so that monthly EMI becomes ~ 13,912. Use
this car loan EMI saving from 2016 onwards to increase EMI of
home loan so that tenure of the home loan in 2016 reduces to 7
years. In 2019 the outstanding loan will be ~15.50 lakh and existing flats value will be ~84 lakh. The shortfall including the due
loan amount will be ~47 lakh. Loan can be arranged for this
amount for tenure of 15 years. Considering an annual increase of
5% in income, the EMI of ~52,000 for the 2BHK will represent 36%
of annual income at that point of time, which is manageable,
unless the family is not able to control their expenses.
Interestrate assumed: 11% for car loan and 10.5% for home loan.

RETIREMENT PLANNING (2041): Suraj and Padma's EPF will be

worth ~1.26 crore in the year 2041. To cover the shortfall SIPs of ~
17,000 need to invested in mutual funds in the ratio of 70%
equity and 30% debt. Currently, this is not possible due to the
allocation of surplus for other goals. The couple will only be able
to start investing for retirement after 5 years, from 2019 onwards.
This will push up the required investment amount to ~32,000
per month. The couple will have to keep a tight check on their
expenses or raise their income levels by that time, to be able to
invest that kind of amount to reach their retirement goal.
Rate ofreturn assumed: 8% in EPFand 11% on mutual funds portfolio.
Plan by Steven Fernandes, certified financial planner, chief planner,
Proficient Financial Planners