CASE STUDY Every Monday, Business Standard analyses one family’s finances and suggests a suitable way forward PATILS Yogesh (28), Vidya (28), Prasad (1) RESIDE IN NET ANNUAL INCOME RATING (Near ) ~6.48 lakh 4/10 >FAMILY PROFILE Yogesh works as a graphics designer with a multimedia company, while wife Vidya recently quit her job due to health complications. The couple has a one-year-old son, Prasad, and they live with Yogesh’s parents in their 1BHK home in Virar. Monthly Income ~54,000

Basic expenses (~) Per month Annual Household 25,000 3,00,000 Insurance premium 2,417 29,000 Total 27,417 3,29,000 Net monthly surplus: ~26,583 Yogesh struggled in the initial days of his career and has found stability in the last two years. The couple have started diligently saving in the last couple of months to fund their various goals, on son’s education, buying their own house and a foreign tour. Retirement seems their last priority. >GOALS PRASAD’S GRADUATION PRASAD’S POSTGRADUATION (2030, inflation 10%) (2033, inflation 10%) Current value: ~5 lakh Current value: ~10 lakh Future value: ~25.27 lakh Future value: ~67.27 lakh

FOREIGN TOUR WITH FAMILY (2017, inflation 10%) Current value: ~3 lakh Future value: ~4.4 lakh

BUYING A 1BHK FLAT (2018, inflation 10%) Current value: ~30 lakh Future value: ~48.3 lakh

RETIREMENT PLANNING (2040, inflation 7%, Life expectancy - 85 years) Current annual Future annual Corpus retirement expenses: expenses: required: ~3.29 lakh ~20.44 lakh ~4.74 crore *Considering household expenses

Assets ~ Liabilities ~ Savings account 55,000 Fixed deposits 1,25,000 EPF 65,000 Equity mutual funds 45,000 2,90,000 0 Net worth 2,90,000 >PRESENT STATUS EMERGENCY FUND: Sufficient funds in savings account and fixed deposits to take care of up to three months of expenses LIFE INSURANCE: Yogesh has a total insurance cover of ~50 lakh, which is not adequate, while his wife has a life cover of ~2 lakh HEALTH INSURANCE: Family is covered by a family floater health cover of ~3 lakh. Health cover is not adequate INVESTMENTS: A very small portfolio, with major investments in debt LIABILITIES: No liabilities >RECOMMENDATIONS EMERGENCY FUND: Since Yogesh is the only earning member, he needs to maintain nearly 6 months of his expenses in liquid form. His present savings account balance and fixed deposit should be earmarked for this purpose LIFE INSURANCE: Yogesh needs an additional insurance cover of ~70 lakh. A suitable term plan for 30 years needs to be purchased, which will cost ~13,000 a month. Vidya does not need any life cover at present HEALTH INSURANCE: Need to increase family health cover to ~5 lakh, which will cost an additional premium of ~3,000 per annum ACCIDENT INSURANCE: A personal accident policy of ~25 lakh, with ~5 lakh as TTD benefit, is recommended for Yogesh, which will cost ~4,000 a month >PLANNING PRASAD’S GRADUATION (2030): Need to allocate ~4,000 a month in a large-cap mutual fund for this goal Rate of return assumed: 12% in large-cap mutual funds PRASAD’S POST GRADUATION (2033): ~7,000 a month needs to be invested in multi-cap mutual funds Rate of return assumed: 12% in mutual funds FOREIGN TOUR WITH FAMILY (2017): ~7,500 needs to be allocated a month into dynamic bond debt mutual funds for this goal Rate of return assumed: 9% post tax BUYING A 1BHK FLAT (2018): After allocating surplus to above goals only ~8,000 a month remains, which can be allocated for buying the flat. This will create a corpus of ~6.9 lakh, assuming 10% increase in allocation every year. Still, this falls short of the at least 25% down- payment required to buy the flat. Either this goal can be postponed or the foreign tour goal might have to be compromised BUDGET: ~1 crore to ~1.5 crore Rate of return assumed: 10% on the 80% debt and 20% equity mutual funds portfolio Realty check RETIREMENT PLANNING (2025): Yogesh’s PPF corpus will be worth Business Standard brings you a snapshot ~ 33 lakh at age 55 years, assuming he invests ~30,000 a year, while of average current rates and unit sizes in localities his existing mutual funds will be worth ~9.6 lakh. To accumulate the that offer property in a price range of balance corpus, Yogesh will have to invest ~22,000 a month in a 70% ~1 crore to ~1.5 crore. If you are looking at equity and 30% debt mutual funds portfolio, which is not possible buying real estate and your budget falls within presently this range, an idea about prevailing rates would come in handy Rate of return assumed: 8% in PPF and 11.5% in the mutual funds portfolio

FARIDABAD Avg price (~/sq ft) Avg unit size (sq ft) Plan by: Steven Fernandes, Certified Financial Planner Sector 77 4,200-4,500 2,500-2,700 Sector 80 4,500-5,000 2,400-2,600 Sector 30 5,000-5,500 2,000-2,200 Sector 28 6,500-7,000 1,800-2,000 GHAZIABAD Indirapuram 4,500-6,000 2,300-2,500 Vasundhara 5,500-6,000 1,900-2,100 G T Road 3,500-3,800 3,500-3,700 Vaishali 5,500-6,500 1,800-2,000 , 6,500-8,000 1,600-1,800 7,200-8,000 1,400-1,600 Panvel 5,200-6,200 2,000-2,300 9,000-11,000 1,200-1,400 Seawoods 7,500-10,500 1,400-1,600 Koparkhairane 8,000-10,500 1,200-1,400 Wagle Estate 10,500-12,000 1,000-1,200 8,000-8,500 1,300-1,500 Hiranandani Estates 9,500-11,000 1,200-1,400 6,500-7,500 1,600-1,800 Source: PropEquity