CASE STUDY

Business Standard analyses

one familys finances and
suggests a way forward

THE LOBOs
Brian (38), Patricia (38), Pearl (7), Bernard (1)
RESIDES IN

NET ANNUAL INCOME

Mumbai

RATING

~37.80 lakh

8/10

>STATUS & GOALS

Brian works as a captain for an oil tanker transportation
company based in the Gulf, while his wife works as assistant
manager human resource for a multi-national corporation
bank. They have used their good inflows to create decent
assets. The couple want to retire early and, hence, want to plan
their childrens educational funding in advance
Basic expenses (~)
Per month (~)
Household and lifestyle
52,000
Home loan
58,104
Daughters education
10,000
Insurance premium
20,417
Annual vacation
15,000
Total
1,55,521

Annual (~)
6,24,000
6,97,250
1,20,000
2,45,000
1,80,000
18,66,250

Monthly income: ~3,15,000 Net monthly surplus: ~ 1,59,479

>GOALS
DAUGHTERS COLLEGE &
POSTGRADUATION

SONS COLLEGE &

POSTGRADUATION

Current value: Future value:

Current value:

Future value:

~70 lakh

~4.18 crore

(2027 - 2032)
(Annual inflation 9 per cent)

~70 lakh

~2.50 crore

(2033 - 2038)
(Annual inflation 9 per cent)

RETIREMENT

(2028) (Annual inflation 7 per cent, Annual rate of return on

corpus 9 per cent) (Life expectancy 90 years)
Current annual
expenses:

Future annual
expenses:

Corpus
required:

~9.24 lakh

~20.81 lakh

~5.41 crore

Assets

~ Liabilities

Savings account
6,73,000 Home loan
Fixed deposit
7,38,000
EPF
8,42,000
Insurance cash value
11,30,250
Equity mutual funds
48,25,000
Shares
18,32,000
Self-occupied property 1,30,00,000
Let out property
1,10,00,000
3,40,40,250
Net worth
3,27,80,250

12,60,000

12,60,000

>FINDINGS
EMERGENCY FUND: Huge amounts maintained in savings
account and fixed deposits for any short-term emergency
LIFE INSURANCE:Brian is covered for ~27 lakh through traditional
and unit-linked insurance plan (Ulip) policies, while his wife has
a cover of ~9 lakh through Ulips. Brian is also covered for
personal accident through his company for a decent sum
HEALTH INSURANCE: The family is covered for ~5 lakh through
wifes employer family floater policy. They also have a
separate ~10 lakh family floater policy
INVESTMENTS:He has primarily invested in land to build his own
house later. Other investments are mostly in Fixed Deposits (FDs)
and a small allocation to equity mutual funds
LIABILITIES:They are servicing a home loan with a balance tenure
of two years and dues amount of ~12.60 lakh

>RECOMMENDATIONS
EMERGENCY FUND:The couple can maintain ~5 lakh for
emergency requirements. A total of ~3 lakh can be maintained
in flexi FD account and ~2 lakh in liquid funds
ACCIDENT INSURANCE: Patricia needs to take a ~50 lakh Per
Annum policy with ~15 lakh Temporary Total Disability benefit.
Her premium will be about ~8,000
LIFE INSURANCE: Brian and Patricia need to take an online
term insurance of ~1.50 crore and ~50 lakh, respectively, for
30 years. The approximate total premium will be ~35,000
HEALTH INSURANCE: The present health cover is adequate.
They need to review it once in two years

>PLANNING FOR GOALS

DAUGHTERS COLLEGE & POSTGRADUATION (2027-2032) &
SONS COLLEGE & POSTGRADUATION (2033-2038): As most of
the childrens college funding will be required after their
planned retirement age, Brian needs to invest ~1.05 lakh
each month in a balanced funds portfolio for 12 years to take
care of educational funding for both of his children
Annual rate of return assumed: Eleven per cent on the
balanced funds portfolio
RETIREMENT (2028): If the couple maintain their let out
property, then considering the future rental income, the
actual corpus required will be ~3.77 crore. Patricias Employee
Provident Fund will be worth ~76 lakh in 2028, while their
mutual fund and shares will be worth ~1.88 crore and
~98 lakh. From the current surplus, ~40,000 can be invested
each month in a 60 per cent equity and 40 per cent debt
mutual funds portfolio, to enable creation of a surplus
retirement corpus
Annual rate of return assumed: Eight per cent on EPF, 11 per
cent on the mutual funds portfolio, 15 per cent on shares
Plan by Steven Fernandes, certified financial planner, chief planner,
Proficient Financial Planners

TIPPING POINT

What is a PINS
account?

If a non-resident Indian (NRI)

wishes to invest in Indias
secondary stock market, he
needs to open a Portfolio
Investment Scheme (PINS)
account. Reserve Bank of India
has imposed a ceiling on how
much ownership NRIs can
have in Indian companies. It
requires NRIs to invest via a PINS account, so that their
ownership levels can be monitored.

How can an NRI open a PINS account?

He should close the demat account he had as a resident Indian.
A PINS account can be opened at designated branches of dealer
banks authorised to run the scheme. The NRI needs to open an
NRE (Non-Resident External) or Non-Resident Ordinary (NRO)
account exclusively for PINS-related transactions.