Manish is a leading professional with good reputation in the society ,apart from being a professional he is also involved in social activities, a member of Rotary group.
Manish is having a very strong cash flow coming every day from the practice, having a house located in the posh area of town, going very regularly on domestic tours and enjoying his life. Juhi is also a professional however not in practice as she choose to give more importance to the upbringing of their children but surely will start practice as her younger child goes to graduation.
One day while reading the news paper she come across an article about financial planing and got interested however Manish is not keen on same as he believes that he had managed his finance in good way and may not need any consultation on same but she successfully convinced him.
During the first meeting with there was a clear signal from Manish that he is not in need but only because of Juhi he is doing that but in the second meeting when the cash flow presented to him, was a eyeopener and shaken his belief system.
The data which was collected during the initial meeting process reveals the following :
Manish stays with Juhi and 2 children Manasi ( Daughter ), Samir ( Son),
The ages are Manish : 40, Juhi : 40, Manasi :10, Samir : 7.
Existing financial data
Net asset :
Residential house ( Personal property ) : 6500000/-
Office space : 5500000/-
Gold : 942000/-
Mutual funds : Nil
Equity : Nil
FD's : 300000/-
PPF ( both ) : 328000/-
Savings a/c : 785000/-
Net asset Approx. : 7855000/-
Allocation of the investment ( Residential house is not considered as investment )
Equity : 0%
Debt : 8%
Commodity : 12%
Cash : 10%
Real estate : 70%
The asset allocation clearly shows the tilt towards real estate, this is majorly because the need of office space and the appreciation in the real estate over few last year.
For acquisition for this new property as there is a regular income Manish decided to liquidate all investments in MF and Equity as these investments were not performing since from the investment i.e. over last 3 years in 2010.
Real estate is not a bad investment however tilting your investment portfolio to any asset class is dangerous.
The family has following financial goals :
1. Manasi's education 8 years from now. Today's cost Rs.3500000/-
2. Samir's education 10 years from now. Today's cost Rs. 3500000/-
3. Manish's and Juhi's retirement 20 years from now and they choose to maintain the standard of living after retirement.
5. Creation of medical corpus in tune of Rs.1000000/- today's value.
6. Want to go on World tour every alternate years from now which expenses are measured to be rs.400000/- in today's term.
7. Want to buy a car next year costs Rs.1200000/-.
The Suggested allocation is to be achieved over a period of time and support for same is provided by us.
Monthly cash inflows :
Manish : 200000/-
Monthly cash outflows :
Household exp : 60,000/-
Life style exp. : 15,000/-
Loan EMI : 0/-
Insurance premiums : 12,000/-
PPF : 20,000/-
Savings : 93,000/-
The incomes are very strong and expenses are in limit which reflects in strong savings on monthly basis
As it was shown Mr. Manish from the cash flow that if there is no proper optimization of cash flows ( financial plan) he may fail to complete his all financial goals.
After the proper cash flow optimization he not only in position to complete all financial goals but also could plan for his dream, farm house at the time of retirement.
The couple also given the idea to have a proper protection plan to take care of financial risk and suggested with Term plan , Accidental death and disability and Medical insurance. In medical insurance medical benefit and critical illness plan is also suggested on the basis of family history.
The major differentiator is a rate of inflation which was completely ignored by Juhi and Manish.
Now they were suggested to build equity investment and sufficient balance in savings a/c for emergencies.
We observed in this case, even having a handsome income and strong capacity to invest individuals may fail to their financial goals without proper financial planning.
Suggested investment includes :
ICICI Pru focused bluechip, DSPBR top 100 fund, IDFC premier equity fund, SBI magnum emerging businesses fund, DSPBR microcap fund, UTI dividend yield fund.
Case Ashok and Anjali.
About the author : Ashish Ramesh Bhave is a CERTIFIED FINANCIAL PLANNER, focused and specialized in financial planing for individuals and families. He is a personal financial coach for more than 100 families across the globe. Can be reached at arbfinancials@gmail.com or Cell : 08793107044
Manish is having a very strong cash flow coming every day from the practice, having a house located in the posh area of town, going very regularly on domestic tours and enjoying his life. Juhi is also a professional however not in practice as she choose to give more importance to the upbringing of their children but surely will start practice as her younger child goes to graduation.
One day while reading the news paper she come across an article about financial planing and got interested however Manish is not keen on same as he believes that he had managed his finance in good way and may not need any consultation on same but she successfully convinced him.
During the first meeting with there was a clear signal from Manish that he is not in need but only because of Juhi he is doing that but in the second meeting when the cash flow presented to him, was a eyeopener and shaken his belief system.
The data which was collected during the initial meeting process reveals the following :
Manish stays with Juhi and 2 children Manasi ( Daughter ), Samir ( Son),
The ages are Manish : 40, Juhi : 40, Manasi :10, Samir : 7.
Existing financial data
Net asset :
Residential house ( Personal property ) : 6500000/-
Office space : 5500000/-
Gold : 942000/-
Mutual funds : Nil
Equity : Nil
FD's : 300000/-
PPF ( both ) : 328000/-
Savings a/c : 785000/-
Net asset Approx. : 7855000/-
Allocation of the investment ( Residential house is not considered as investment )
Equity : 0%
Debt : 8%
Commodity : 12%
Cash : 10%
Real estate : 70%
The asset allocation clearly shows the tilt towards real estate, this is majorly because the need of office space and the appreciation in the real estate over few last year.
For acquisition for this new property as there is a regular income Manish decided to liquidate all investments in MF and Equity as these investments were not performing since from the investment i.e. over last 3 years in 2010.
Real estate is not a bad investment however tilting your investment portfolio to any asset class is dangerous.
The family has following financial goals :
1. Manasi's education 8 years from now. Today's cost Rs.3500000/-
2. Samir's education 10 years from now. Today's cost Rs. 3500000/-
3. Manish's and Juhi's retirement 20 years from now and they choose to maintain the standard of living after retirement.
5. Creation of medical corpus in tune of Rs.1000000/- today's value.
6. Want to go on World tour every alternate years from now which expenses are measured to be rs.400000/- in today's term.
7. Want to buy a car next year costs Rs.1200000/-.
The Suggested allocation is to be achieved over a period of time and support for same is provided by us.
Monthly cash inflows :
Manish : 200000/-
Monthly cash outflows :
Household exp : 60,000/-
Life style exp. : 15,000/-
Loan EMI : 0/-
Insurance premiums : 12,000/-
PPF : 20,000/-
Savings : 93,000/-
The incomes are very strong and expenses are in limit which reflects in strong savings on monthly basis
As it was shown Mr. Manish from the cash flow that if there is no proper optimization of cash flows ( financial plan) he may fail to complete his all financial goals.
After the proper cash flow optimization he not only in position to complete all financial goals but also could plan for his dream, farm house at the time of retirement.
The couple also given the idea to have a proper protection plan to take care of financial risk and suggested with Term plan , Accidental death and disability and Medical insurance. In medical insurance medical benefit and critical illness plan is also suggested on the basis of family history.
The major differentiator is a rate of inflation which was completely ignored by Juhi and Manish.
Now they were suggested to build equity investment and sufficient balance in savings a/c for emergencies.
We observed in this case, even having a handsome income and strong capacity to invest individuals may fail to their financial goals without proper financial planning.
Suggested investment includes :
ICICI Pru focused bluechip, DSPBR top 100 fund, IDFC premier equity fund, SBI magnum emerging businesses fund, DSPBR microcap fund, UTI dividend yield fund.
Case Ashok and Anjali.
About the author : Ashish Ramesh Bhave is a CERTIFIED FINANCIAL PLANNER, focused and specialized in financial planing for individuals and families. He is a personal financial coach for more than 100 families across the globe. Can be reached at arbfinancials@gmail.com or Cell : 08793107044
No comments:
Post a Comment