I used to do financial planning for few HNIs earlier and manage/recommend for their portfolio. I stopped financial planning/analysis for individuals few years ago.
It was primarily because I’m mostly working abroad now and respecting recent SEBI guidelines (as I’m not registered financial planner anymore). I just stay in touch with my earlier clients on friendly/social basis.
However, I keep getting mails from a lot of our readers regarding their financial planning. When I find time, I do reply to them in email as far possible but do not suggest specifics or promote products. I just give an outline so that atleast they do not make mistakes.
We plan to publish a few case studies in coming months so that it might be useful for readers who find themselves in similar shoes.You must always consult a reputed, ethical fee based financial planner for your investments.
Below is an email exchange I had between one of our readers Mr.Abdul from Chennai. Hope this is useful for you as many questions from different readers is on similar line.
Note: This case study/email has been published with written permission from the individual.
Hope this mail finds you in good spirit and health.
Yesterday i have gone through you blog. Its really amazing work.
1.My Age is 34 yrs old, Married, blessed with 2 girl kids.
2.Working in a private firm(HR Consulting) as a Sr.Manager-HR with Salary of Rs.38300/- pm. at Chennai.
3. My Wife – Degree holder – Now home maker
4. Living in a rental house Rs.8500/- pm.
Need some investment / savings ideas from you.
1. You have given that you holds 2 term plans from HDFC & LIC.
Really i want to follow the same way like you. But please let me know is it HDFC Click to protect or protect plus. If so in my age 34, term of 35 years what could be my ideal SA in both HDFC & LIC. Is it 50L from each is OK. My current expenditures is around 35000 pm.
2. Cheapest Medical Insurance for my parents age 62 & 57 respectively.
3. Which is the best Critical Ilness / rider benefit for me.
4. Right now i am investing Rs.1000/- each in 3 funds in SIP format thru FUNDSINDIA at ICICI Pru Blue chip fund, HDFC Mid cap Opportunities fund & Reliance Tax Saver fund. Is it OK or i should concentrate in some other funds too.
5. Saving Rs.1000/- in PPF thru SBI.
6. Having health insurance in Star Health (Family Floater)
7. Money Back policy in LIC (Rs.13000/- pa)
8. Real Estate (saving in instalment scheme in Ponneri & Melur(Nr Madurai) Rs. 3000/- & Rs.1000/- respectively.
Is it OK, or i should concentrate some more.
My Future Planning.
1. Since i have 2 girl kids i need to save for their marriage & educational expenses.
2. I dont have own house. Which i want to buy
3. My retirement planning
4. Want to buy a car in 3 years down the line.
5. Emergency Fund atleast 3 lakhs should be maintain.
To Achieve all those things what should i do. Please help me.
Now from this you’ll pretty much see that Mr.Abdul is akin to many of us. He is a hardworking individual with family and wants to secure his future. Many of us can relate to this situation.
We may earn differently, be employed in different sector or location and our profiles/investment habits might be different. But on some aspect we might find ourselves in similar situation. So below is my reply to him. Hope it helps you a bit. Check that out and let me know your opinion.
Thanks for writing to me.
1) I hold HDFC Click 2 Protect only. There is no ideal cover I can suggest for you. It is usually minimum 10 years of gross expenses. I have written a post on How to calculate the approximate ideal Sum Assured. On reading it you should get a fair idea. 50 lakh should be sufficient if you don’t have any marriage/education responsibilities for dependents . You should always review/revise SA every 2 years based on your financial situation.
2) Medical Insurance should not be decided based on cheapness but based on the service in your city and diseases it covers(based on family history illness). But United India and Star Health provide good network coverage since you’re in Chennai. Research to find a more suitable product for your parents. Be forthcoming about their pre-existing illness.
3) Depends on insurance plan you take and its available riders, your family illness history. Check out the best insurance plans in India
4) All the 3 funds are really good funds having good large cap and mid cap exposure. Please continue (advise based on current fund holding information). Try to increase the SIP amount as much possible as I feel your savings is less as percentage to your salary.
5) PPF investment is one of best. Continue or increase exposure.
6) Continue Health Insurance. Plan to have minimum 5 lakh cover aside from employer provided health insurance.
7) I would recommend getting out of money back policy. Invest proceeds in good term policy and mutual fund/PPF. Read my post on “ Most common investment mistake made by Indians” to understand why I believe so.
8) No comments on Real Estate as it is very geographic specific. Can’t provide sound advise.
Since you have 2 girl kids (you didn’t mention their age) and assuming you have 10 years for their marriage, allocate accordingly in mutual funds. When their marriage nears, You can also take loan on PPF. Have reasonable expectation on returns from mutual funds. So your SIP amount must be planned & increased accordingly.
Please consult a fee based financial planner not driven by commission . He should be able to devise a tailor made plan for you. What do you mean by “My current expenditure is Rs 35000 pm”. If this is your house hold expenditure per month(excluding savings,investments) then it is really high based on your current income.
Either you must increase income or reduce expenses. It would be very difficult to achieve your goals with such high income-expenditure ratio. The longer and more you save or invest, the closer you’ll get to realize your goals.
All best for future.
As you can see, this is not an exhaustive planning or to-do document like you get from a financial planner . But it does provide the direction Mr.Abdul can pursue. Now, do you agree with my suggestions? How could we have done it different or better ?
Disclaimer: I’m not registered with SEBI or any institution for financial planning. The discussion above should not be considered as recommendations but taken only for education purposes. No commission or financial kickback of any kind was received from any products/institutions mentioned above.