Sample Income Plan

      Section 1 : Current Income Analysis

                                        Current Cash Flow  ...
Sample Income Plan

     Section 2: Goal Funding
     Goal 1: Retirement Corpus (Nest Egg)

                              ...
Sample Income Plan

   Goal 2: Bike Purchase


                                 Purchase Bike in 2011      Details
       ...
Sample Income Plan
Goal 3: Your Wedding

                         Your Wedding in 2012                 Details
           ...
Sample Income Plan



      Upfront payment of INR 2.7 lacs is achieved by saving on a monthly basis till the year 2013.
...
Sample Income Plan

  Medical Insurance


                         We are currently evaluating various medical insurance o...
Sample Income Plan


Salary Components       Current Structure Option 2: Other Components Option 2 - Claim HRA & Other Com...
Sample Income Plan

               Find below the NSC Interest Accrrual table for future reference.

                Claim...
Sample Income Plan

Section 6: Revised Savings & Investments Statement


 Cash in Bank                                    ...
Sample Income Plan

DISCLAIMER

This is a sample income plan, and not an actual plan of the customer. We maintain high sta...
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Draft income plan

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This is draft income plan created by Plan My Income. At this stage, the draft plan is sent to the customer, and the income planner has a detailed discussion with the customer. Then post the discussion, the plan is finalized, and a final set of recommendations, with a “Will Do” list and timelines is incorporated.

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Draft income plan

  1. 1. Sample Income Plan Section 1 : Current Income Analysis Current Cash Flow Amount in INR Cash Flow Gross Salary 369000 Contribution to PF -25800 Income Tax -11227 Household Expenses -87000 Education Expenses -19300 Funds available annually to meet goals 225673 Savings Savings Instrument Amount in INR Cash in Bank 300000 NSC 120000 EPF 175515 Total Savings 595515 Your Goals Goals Amount in INR Year Achievable? Retirement To be calculated 2038 Yes  Purchase Bike 84000 2011 Yes  Sister's Wedding 1000000 2011 Partial  Your Wedding 800000 2012 Partial  Buying a House 4000000 2014 No  1. You have a very healthy rate of savings, and have zero debt! This is very rare amongst youngsters today so keep it up! 2. Whilst your savings rate is high you haven’t utilized the surplus to compound your income. The idle funds in your savings account are too high! You should reduce the funds in the savings account to only emergency funds which is 3-6 months monthly expenses Observations 3. Currently your investments are not designed around your lifestyle goals. 4. You have zero exposure to equity. Considering you are less than 30 years old, you should consider equity exposure to grow your income 5. You do not have any life insurance, considering that you have two dependents it makes sense to buy a term insurance plan. Even though you have a cover from the company it makes sense to have a personal cover to take care of unplanned situations like lay offs. 6. You do not have any medical insurance. Considering the rise of medical costs, you should take a family floater policy which would cover your parents as well. You can also consider taking a medical insurance for your sister and her children
  2. 2. Sample Income Plan Section 2: Goal Funding Goal 1: Retirement Corpus (Nest Egg) Retirement Corpus(Nest Egg) Calculation Amount in INR Current Annual Household Expenses 174000 Expected Annual Household Expense in 2038 1501116 Current Savings from EPF 175515 Retirement Corpus Required to meet expenses 14905212 Monthly Investments Required to build Retirement Corpus 8071 Is it achievable? Yes!  Asset Allocation Mix Amount in INR % Equity 3771 47% Debt 4300 53% 8071 100% Debt Investments  The debt investments are already taken care through the contribution made to the Employee Provident Fund. Please note that if you change jobs, and the PF component at new work place is lower, then you need to accordingly allocate more money to meet the gap. Equity Investments  Start monthly systematic investment plans as shown in the table below.  You can either directly invest with the fund house or create an online investment account with banks or go for online mutual funds service providers. Amongst the banks the cheapest mutual fund investment account is available with HDFC at Rs.400/year. Amongst the online mutual fund providers, Fundsindia.com and fundsupermart.com are recent entrants, and they do not have any charges for account opening. Equity Fund Allocation Type of fund Monthly SIP in INR % Allocation Benchmark NIFTY Index Fund Index ETF 1000 26% HDFC Top 200 - Growth Large Cap Diversified 1000 26% Reliance Regular Savings Equity - Growth Large & Mid Cap Diversified 800 21% DSP Blackrock Small and Mid Cap- Growth Mid & Small Cap Diversified 1000 26% 3800 100% Assumptions Used for retirement calculations Year of Retirement – 2038 Rate of Return on Equity Investment - 13% Rate of Inflation - 8% Rate of Return on EPF – 8% Rate of Return before retirement -10% Life Expectancy – 85 years Rate of Return on retirement corpus after retirement - 8%
  3. 3. Sample Income Plan Goal 2: Bike Purchase Purchase Bike in 2011 Details Cost of Bike INR 84000 Withdraw INR 84000 from the 3 lacs Action savings and open a 400 day FD with HSBC Is it achievable? Yes!  Recommendations Since this goal is one year down the line, it makes sense to put the money in a fixed deposit. Withdraw INR 84000 from the savings account, and put the same in an FD. Otherwise park the money in the 400 day Fixed Deposit of HSBC which is the most competitive. You can use net banking to open an FD with HSBC. You may get 0.25% extra with some other banks, but you need to take the extra effort of opening an account with another bank and going there physically. Taxation Note: Please note that the interest earned on the FD is taxable. So do remember to show the interest earned while filing your tax returns in 2012. TDS would be deducted by the bank, so all you need to do is show it in your IT returns. Goal 3: Sister’s Wedding Sister's Wedding in 2011 Details Estimated Cost INR 10 lacs How much can you contribute? INR 2 lacs Action to be taken Withdraw 1.5 lacs from your savings account and put it in Templeton India Short Term Income Fund. For the remaining INR 50000, open a recurring deposit with HSBC, and contribute INR 5556 Achievable? Partial  Recommendations  With your current income & savings, versus the time left to meet the marriage goals, it is highly unlikely that you would be able to meet the estimated cost of INR 10 lacs.  According to us the best case scenario for you would be to contribute INR 2 lacs to the wedding expenses. The rest can probably come from your Dad’s savings like PF & Gratuity. Please note that this contribution of INR 2 lacs will have a bearing on your future goals like your wedding, and purchase of the house  If your Dad doesn’t have funds, then the only other option is a personal loan which is not advisable. What would make more sense is to reduce the cost of the wedding. However, if you opt for a personal loan do try and go for a loan against gold as the interest rate would be around 12-14% in that case, as against 16-18% in case of unsecured personal loans.
  4. 4. Sample Income Plan Goal 3: Your Wedding Your Wedding in 2012 Details Estimated Cost INR 8 lacs How much can you contribute? INR 1.5 lacs Monthly contribution from your salary towards the goal. INR 3482 in 2010 - 2011, and INR 8000 in 2011 – Action to be taken 2012 Achievable? Partial  Recommendations  With your current income & savings, versus the time left to meet the marriage goals, it is highly unlikely that you would be able to meet the estimated cost of INR 8 lacs.  According to us the best case scenario for you would be to contribute INR 1.5 lacs to the wedding expenses. The rest can probably come from your Dad’s savings like PF & Gratuity. Please note that this contribution of INR 1.5 lacs will have a bearing on your goal of purchasing a house in 2014.  If your Dad doesn’t have funds, then the only other option is a personal loan which is not advisable. What would make more sense is to reduce the cost of the wedding. However, if you opt for a personal loan do try and go for a loan against gold as the interest rate would be around 12-14% in that case, as against 16-18% in case of unsecured personal loans.  Where to invest: We shall include that in the final report after discussing the various options with you. Goal 4: Buying a house Buying a home in 2014 Details Estimated Cost INR 40 lacs How much can you afford? INR 18 to 20 lacs Monthly contribution of INR 4910/month in 2010-11, INR 10000/month in 2012-13 & Action to be taken 2013-14 Yes if budget reduced to 18 lacs  No if Achievable? budget remains 40 lacs  Recommendations  Even after assuming a 5% increase in your salary every year, the maximum budget you can afford for buying a house is INR 20 lacs. Hence to meet your goal of buying a house worth 40 lacs in 2014 can only be met if you sell existing property to buy a new one.The only other option is to reduce your budget, and look at houses in another location or smaller house in the same location.  Based on a budget of INR 18 lacs, you can get a loan of INR 15 lacs. At 9% interest, and 20 year tenure, the EMI would work out to INR 16200, which is manageable with your existing cash flows.
  5. 5. Sample Income Plan  Upfront payment of INR 2.7 lacs is achieved by saving on a monthly basis till the year 2013. Invest INR 4910/month in 2010-11, INR 10000/month in 2012-13 & 2013-14. Balance through INR 30000 through accumulated savings.  Where to invest: We shall include it in our final report after discussing the various options with you. Section 3: Insurance Life Insurance Life Insurance Cover Details Current Cover INR 0 Proposed Cover INR 15 lacs Purchase LIC Anmol Jeevan Plan 164 with an annual Action to be taken premium of INR 5034 Recommendations  Currently you have a personal accident cover provided by the company, also in the unfortunate event of death the bank may pay a discretionary amount to the next of kin.  It is advisable that you take life insurance policy as you have to take care of your sister’s children’s education  Our calculations show that a cover of 15 lacs would be adequate for the time being. Please note that insurance needs should be evaluated annually based on changes in your lifestyle and needs of your dependents. For Eg: If you get married, and your spouse is not working, then she gets dependent on your income, and you need to increase the cover to take her income needs.  We would recommend a term plan from LIC. Take the LIC Anmol Jeevan Plan 164 which has an annual premium of INR 5034 for a sum assured of 15 lacs over a tenure of 25 years  In case of the unfortunate event of your death, your family can put a major portion in an FD, and get annual income for the same. Just to give you an idea, 15 lacs put in a FD at 6% per annum will give INR 90000 per year. There are many options into which the life cover money can be put into.  While buying the policy select an LIC agent who has been in the insurance business for a while, say at least 10 years and someone who would continue to be in the field. The role of the agent becomes crucial at the time of claim settlement. In the unfortunate event of death, your family would have to submit the relevant details to the insurance company for claim processing. If it’s a seasoned agent, then it will be a hassle free process for your family. If its an agent who has discontinued his/her insurance business, then your family would have to do the running around, making the claims process more painful.
  6. 6. Sample Income Plan Medical Insurance We are currently evaluating various medical insurance options for you, we shall include the same in the final plan. We have included INR 3000 as expenses towards medical insurnace in your cash flow statement. Auto Insurance When you purchase the bike in 2011, do buy the relevant insurance. Most dealerships have tie-ups with insurance companies. You can go with the same. Your premium amount for a bike worth INR 84000 would come to approximately INR 1700 – INR 2000. We have included INR 1800 as expenses towards auto insurance in your cash flow statement. Home Insurance We are currently evaluating various home insurance options for you, we shall include the same in the final plan. This has not been accounted in the cash flow statement. Section 4: Salary Structuring & Tax Saving Investments Salary Structuring Recommendations  On the next page we have provided options for salary structuring. Option 2 is the best option to save tax. Since you are living with your parents, you can pay them rent, and claim HRA deduction. You would need to pay your parents by cheque, and also have a rent agreement to support the claim. Your Dad would need to show the rental income in his name. Please note if you own the property you cannot pay rent to your parents.  Option 3 would involve an annual meal voucher of Rs.26400. Utilizing the same would be quite cumbersome if you don’t shop from retail chains or eat at places which accept vouchers. Unless you have a regular usage of vouchers we do not recommend option 3, as a lot of people end of wasting these vouchers. The saving in your case is less than Rs.2000, so it may not worth the time and effort.
  7. 7. Sample Income Plan Salary Components Current Structure Option 2: Other Components Option 2 - Claim HRA & Other Components Option 3 - Meal Vouchers & Other Components Basic 21500 21500 21500 21500 Medical 1250 1250 650 1250 LTA 2000 1400 200 300 HRA 6000 4200 6000 3800 Conveyance 0 800 800 800 Meal Vouchers 0 0 0 1500 Telephone 0 1600 1600 1600 Gross Salary 30750 30750 30750 30750 Less: PF Contribution -2150 -2150 -2150 -2150 Taxes -936 -719.25 -101.25 -564.75 Net Salary 27664 27880.75 28498.75 28035.25 Increase in Hand/month 0 216.75 834.75 371.25 Increase in Hand/Year 0 2601 10017 4455 Sec 80 C - Rs. 1 lac investment, LTA Rs. 800 Sec 80 C - Rs. 1 lac investment, tickets, Mediclaim Rs.3000, Medical Bills: Sec 80 C - Rs. 1 lac investment, LTA Rs. 800 tickets, LTA Rs. 800 tickets, Mediclaim Rs.1000. Rent Paid to parents is Mediclaim Rs.3000, Medical Bills: Rs.1000. Rent Rs.3000, Medical Bills: Rs.1000, Rs.9000/month.Telephone Bills: Paid to parents is Rs.9000/month.Telephone Bills: Assumption Telephone Bills: Rs.900/month Rs.900/month Rs.900/month. Meal Vouchers of Rs.1500/month Tax Saving Investments Section 80 D Investments  The medical insurance premium can be claimed under Section 80 D. As of now we have included Rs.3000 in your tax calculation. This might change when we make our final recommendations. Infrastructure Bonds  Even though infrastructure bonds upto Rs.20000 can be claimed, we advice against investing the same, as you are in the 10% tax slab, so the overall benefit is minimal. Section 80 C Investments Amount in Proof of Status Section 80 C Investments INR Investments Taken care as part Done EPF Contribution 25800 of salary Already invested, Done just submit NSC Interest Accrual from NSC 4773 certificate Submit premium Pending. Need Life Insurance 5034 receipt to buy policy Submit mutual Pending. Need fund statement to purchase ELSS Mutual Fund Towards House Buying Goal 64393 MF 100000
  8. 8. Sample Income Plan Find below the NSC Interest Accrrual table for future reference. Claim in Year NSC Interest Accrued in INR FY 2008 - 2009 4080 FY 2009 - 2010 4413 FY 2010 - 2011 4773 FY 2011 - 2012 10875 FY 2012 - 2013 11762 FY 2013 - 2014 12722 FY 2014 - 2015 7228 FY 2015 - 2016 7817 FY 2016 - 2017 8455 Section 5: Revised Cash Flow Statement Salary Investment Insurance Home Household Education Gross Retirement Sister's Your Buy a Tax Investible Year Age Income Income Taxes Premiums Loan EMI Expenses Expenses Savings Corpus Wedding Wedding House Saving Surplus Apr-10 28 276750 0 6750 8034 0 65250 19300 177416 45600 50000 17423 64393 0 0 Apr-11 29 369000 0 9450 9834 0 95700 21230 232786 45600 0 128895 0 58291 0 Apr-12 30 387450 0 9923 9834 0 105270 23353 239071 45600 0 0 120000 57404 16067 Apr-13 31 406823 80075 10419 9834 0 115797 25688 325160 45600 0 0 120000 56444 103116 Apr-14 32 427164 10940 9834 0 127377 28257 250756 45600 0 0 0 61938 143218 Apr-15 33 448522 112070 11487 9834 0 140114 31083 368074 45600 0 0 0 61349 261125 Apr-16 34 470948 12061 9834 0 154126 34191 260736 45600 0 0 0 60711 154425  The above table is the revised cash flow statement after taking care of all the investments towards goals.  We have assumed your salary will have a 5% increase from 2012 onwards.  We have assumed Household & Education Expenses will rise at 10% per annum  The entries under the Year 2013-14 & 2015-16 is on account of your NSC certificates getting matured  Since buying the house is only in 2014, the tax saving investments made for this year can be used to finance the goal. Hence no need to make separate investments towards tax saving in 2010. In the rest of the years the tax saving instruments can be used for other goals.
  9. 9. Sample Income Plan Section 6: Revised Savings & Investments Statement Cash in Bank Amount in INR Opening Balance 304691 Withdrawal for Sister's Wedding -150000 Withdrawal for Bike Purchase -84000 Lumpsum Investment in MF to meet retirement goal -11400 Investment in Liquid Fund -29291 Closing Balance(Emergency Fund) 30000 The final amount in your savings bank at HSBC should be INR 25309. The total amount of INR 30000 is equal to three months expenses put together. This fund can be called an emergency fund, to fall back on cash under emergencies or temporary loss of job etc. Once we discuss and finalize investments, a similar table for all investments will be put in this section Section 7: Summary of Actions to be taken Once we finalize the plan, a summary table of what all needs to be done would be mentioned for ease of use.
  10. 10. Sample Income Plan DISCLAIMER This is a sample income plan, and not an actual plan of the customer. We maintain high standards of data confidentiality, and do not share customer data with anyone. Please note this is the plan at the draft stage. At this stage, the draft plan is sent to the customer, and the income planner has a detailed discussion with the customer. Then post the discussion, the plan is finalized, and a final set of recommendations, with a “Will Do” list and timelines is incorporated.

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