Personal financial case study of abhishek goel

1. Personal financial case study
of Abhishek Goel
By Dnyaneshwar Ugalmugale
(ASHOKA BUSINESS SCHOOL)

2. About case
 Name – Abhishek Goel (30)
 Family – Father (67), Mother (63)
 Resides in – Delhi
 Occupation: Service
 Job Details: Works as Chief Manager
Claims for a Private General
insurance company.

3. Source of Income of Abhishek
Source Category Per month
Abhishek Salary 90000
Total Monthly Income 90000
Total Annual Income 1080000
What is the present situation?

4. Source of Income
Source Category Per month
Abhishek Salary 90000
Total Monthly Income 90000
Total Annual Income 1080000
Expenses Per month Annual
Household 10000 120000
Home loan EMI 19500 234000
Personal expenses 10000 120000
Insurance premium 17978 215740
Total 57478 689740

5. Assets Rs. Liabilities Rs
Savings Account 105000 Home loan 1850000
Fixed deposits 800000
EPF 532000
Insurance Cash value 454758
Equity Mutual funds 1070000
Shares 476000
Under Construction property 2500000
Total 5937758 1850000
Networth 4087758
Net worth Statement

6. Findings
 Emergency fund: Apart from the savings account, the
fixed deposits provide a decent back up In case of any
emergency.
 Life insurance: Abhishek is covered for Rs. 1.09 crores
through 1 term pan of 1 crore and two traditional plans.
He also has a traditional pension plan for which his
monthly contribution is Rs. 8145 and the maturity is in
2041. He has a limited premium traditional policy where
the last payment is to be done next year. The last policy
is an endowment policy which will mature in 2028.
 Health Insurance: Abhishek is covered for Rs. 5 lakhs
through his employer group insurance policy. His
parents are covered for Rs. 2 lakhs each through a
separate policy. He also has a separate health cover of
Rs. 15 lakhs through a combination of mediclaim and
top up policy.

7. Loans
Original
Amount
Interest &
Term
EMI
Present
Outstanding
loan
Home loan ₹ 19,00,000
9.75%, 15
years
₹ 19,500 ₹ 18,50,000
Investments: Investments are very well diversified into debt and equity with debt
comprising 55% of the allocation and equity at 45%. Property has been excluded as
its for self-consumption.
Liabilities: Presently there is only 1 loan which is a home loan taken on the under-
construction property.

8. Recommendations
 Life Insurance: Considering the financial goals and
outstanding liabilities,Abhishek’s cover is adequate. He
needs to stop the traditional pension policy as well as the
endowment policy which matures in 2028. The yield on these
policies are less than 6% and hence coming out of those will
make sense now rather than continue them till maturity which
is more than 12 years to 20 years from now. Surrender of the
2 policies will fetch him approximately Rs. 3 lakhs. He should
revisit the cover post marriage.
 Emergency fund: Abhishek needs to maintain an
emergency fund of Rs. 1.75 lakhs, which should take care of
nearly 3 months of expenses. Presently he has maintained
Rs. 1.05 lakhs in savings account which can be maintained as
it is and additionally he should move Rs. 70000 from his FDs
into a liquid fund.

9.  Health Insurance: The present cover is adequate as per his
age. He should include his wife’s name when he gets married
next year.
 Debt Management: Even though the actual loan approval
amount is Rs. 50 lakhs,Abhishek should not take the full
disbursement. He should try and use his own sources to pay
for the property and keep the loan to less than Rs. 30 lakhs. A
higher loan and EMI can hamper future goals. He can use the
Rs. 3 lakhs from insurance surrender to pay for slab wise
payments. The policy surrender will also enable the increase
in surplus amount every month.
 Accident Insurance: Abhishek should take a personal
accident comprehensive policy which will cover for accidental
death, permanent and partial disability including
weekly/monthly compensation for loss of work due to total
temporary disability. A PA cover of Rs. 50 lakhs with a TTD
cover of Rs. 15 lakhs are suggested. The premium for this will
be approximately Rs. 7000

10. Sr.No
Financial
goals
No of
years
to goal
Year
Present
Value
Future
value
Inflation
conside
red
1 Marriage 1 2017 400000 436000 9%
2 Buying a Car 2 2018 400000 466560 8%
3
Educational
Funding for 1
child
20 2036 300000 1681323 9%
21 2037 300000 1832642 9%
22 2038 300000 1997580 9%
23 2039 300000 2177362 9%
24 2040 1000000 7911083 9%
25 2041 1000000 8623081 9%
4
Retirement at
55
25 2041 360000 1953876 7%
Financial Goals:

11. 1. Marriage (2017)
Current value: Rs 4 lakh
Future Value: Rs. 4.36 lakh
Status of goal 1:
Abhishek does not want to spend too much on marriage and considering the
fact that the marriage expenses will be shared with his spouse, he would not
like to exceed Rs. 4 lakhs. A part of the Fixed deposits can be used for this
goal.
Returns expected in fixed deposits: 6% post tax.
2. Buying a car (2018)
Current value: Rs 4 lakh
Future Value: Rs. 4.66 lakhs
Status of goal 2:
He needs to start Sip of Rs. 18500 in ultrashort debt funds for a period of 24
months to achieve this goal.
Returns expected in Ultrashort debt funds: 6% post tax over the required time
horizon.

12.  3. Educational funding for 1 child (2036 –
2041)
 Current value: Rs. 32 lakhs
 Future Value: Rs. 2.42 crores
 Status of goal 3:
 Considering the long-term nature of this goal,
Abhishek needs to invest Rs. 14000 per
month for 25 years in a combination of
largecap and balanced funds. Due to the
present surplus, he can easily invest for this
goal.
 Returns expected in the mutual funds
portfolio: 13% over the required time horizon

13.  4. Retirement Planning (2041)
 Present Annual expense (Excluding children’s expenses and EMI’s)
–Rs. 3.60 lakhs
 Future Annual Expense – Rs. 19.53 lakhs
 Corpus required – Rs. 4.53 crores.
 (Inflation considered: 7%, Returns on corpus during retirement 9%,
Expected life expectancy at 85 years)
 Status of retirement goal– One principle which Abhishek has
followed when he left his last organisation in 2014 is to transfer his
EPF to the new employer rather than withdraw which most people
do. With compounding and regular contribution, the EPF turns out to
be a good amount during retirement. Considering a 5% increase in
basic year on year his EPF in the year 20141 should be worth Rs.
1.93 crores. The mutual funds and equity shares if maintained that
long can fetch him Rs. 1.45 crore and Rs. 1.56 crore respectively.
These 3 assets are sufficient to create a good retirement corpus as
per today’s needs.
 Most of us plan retirement when there are either 10 or less years for
one to retire. That leaves very little time to enable compounding of
your investment and the savings and investments required in the
short time will also be huge.

14.  Taxation:
 Abhishek’s EPF and life insurance premiums of 2 policies (Term and
1 traditional) exceed the limit of Rs. 1.5 lakhs provided under
80C. He is also utilizing the 80D deduction up to Rs. 25000 due to
health insurance premium of self and parents. He can avail the home
loan interest benefit on under construction property in 5 equal
installments from the year of completion of his flat.

15. Conclusion
 Abhishek’s life is a live example of how his
childhood period of financial turmoil has
moulded him to be a better saver and
investor. At his age, he had done a fairly good
job of creating a good investment basket.
There are several like him who have an
opportunity to choose what is right.
 Many of his age, having similar salary may
not have accumulated as much as he has. In
this age of uncertainty, it’s very critical that
the younger generation focuses on saving
and building up a good corpus right from the
first salary. Else there will always be regrets
and “I should have done that” sighs when you
evaluate your life in your 40s and 50s.