Sanket Shah (Name changed) is 40 years married HR executive. His wife is working as government employee in a granted educational Institutions for differently abled students. They are blessed with 8 years old daughter. Both are earning greater than 11 lakh per annum. They have purchased a tenament with a cost of 20 Lakh for which their current outstanding loan amount is 10 lakh. Their total savings are in access of Rs. 20 Lakh . Out of this fund apprx 80% are parked in Cash Management Fund and some 20% are in stocks and Tax Saver Mutual Fund. Mr. Sanket is paying insurance premium of Rs. 31000 per annum with Insured Value of Rs. 7.5 lakh and his wife is paying premium of Rs. 15000 p.a with insured value of Rs. 2 Lakh. They need Rs. 8 lakh for their home improvement and renovation in 2 years time. Mr. Sanket wishes to upgrade his car with an additional financial outlay of Rs. 5 Lakh after 5 years. The couple wishes to provide for their daughter Higher Secondary , College education and marriage. Mr. Sanket aspires to go on an international tour every 3 year and a domestic tour every year. Mrs. Sanket being government employee is having pensionable job but Mr. Sanket is executive in a private manufacturing company do not have pension.

Now Important Issues :
a. Total Savings of couple is very low as compared to their income
b. 80% funds hardly beat inflation forget growth as they are parked in Cash Management Fund/ Debt funds earning less than or equal to inflation.
c. The couple is paying relatively large premium but are inadequately insured as compared to their financial life as their insurance is investment linked.
2. Solution :
a. We did risk profiling of Mr. Sanket and found him to be aggressive investor with asset allocation of 70% equity- 30% debt. As couple financial situation enhances their risk taking capacity and Mr Sanket wishes to cover time lost in late start coupled with inadequate savings parked in debt funds ,we jointly decided to do more aggressive asset allocation ratio of 75% Equity – 25% debt.
b. We advised all except 2 insurance policies to be surrendered and buy two term plans with annual premium outlay of Rs. 39,000 and insurance Value of Mr. Sanket Rs. 50 lakh and his wife Rs. 25 Lakh and also advised to enhance their medical insurance to 5 Lakh Family floater to ensure financial security of Family.
c. Based on future value of Family Financial goals/ Obligations and retirement , we advised to do SIPs in diversified funds mapping towards their Goals.

3. Wrap up – A few important points to remember
The family is not having enough savings as compared to their earnings
b. Couple being both working were under insured , though they were paying relatively higher premium as their insurance policy was investment linked
c. Their Majority of savings was parked in Low return Short term debt fund which was hardly growing.
As stated in title 98% of Indians are parking their funds in Debt funds/ Bank Deposits etc for the sake of security or lack of financial literacy.
d. There is also a problem of mixing investments with Insurance thereby creating a problem of inadequate insurance and most Indians do not plan for their financial goals and obligation.
Above planning ensures that Mr. Sanket Achieves Financial Independence in life.

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PlanetWealth Financial Advisors
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