Integrated Financial Planning Case Study

Assignment Task

Case Study

Aniket is an IT professional working in a reputed company at Hyderabad. He is working as Group Vice President. He is 41 years old and has been working in the same company for the last 7 years. His wife Rashmika, of age 43, is working with a Bengaluru-based IT company in a work-from-home mode. Aniket and Rashmika got married 13 years ago. They have a daughter, Sayali, aged 11, studying in standard VI in a reputed school at Hyderabad. The younger son, Rigved, aged 6, studies in standard II in the same school.

Aniket’s CTC is Rs 36 lakh per annum, while Rashmika is working at a consolidated CTC of Rs 15 lakh. The distribution of Aniket’s monthly salary is given below:

Basic Rs 1,25,000

Dearness Allowance Rs 37,500

House Rent Allowance Rs 60,000

Executive Allowance Rs 58,000

EPF (employer contribution 12% of Basic+DA

Aniket expects annual raise of at least 5%, and up to 15% in the year/s of his elevation to next level in the company. He can expect even up to 35% rise in case of lateral shift to another like company. Aniket’s job profile requires him to travel frequently to different foreign locations. Sometimes he gets to save the admissible foreign currency in daily allowance and travel allowance. His last visit to London, where he stayed with his friend, fetched him 500 GBP similarly. Rashmika has held herself to WFH due to children’s upbringing and Aniket’s frequent travels. She can take up full-time assignment in a few years which is likely to fetch her a CTC of Rs 30 lakh. Her current assignments afford a pay rise of just 5% annually.

They stay in a rented 2-bedroom flat at a posh Banjara Hills locality for which they pay Rs 35,000 toward monthly rent. The consolidated monthly expenses of the family at Rs 1,75,000 cover rent, home loan Pre-EMI and car loan EMI.

Aniket’s father, retired from Central Government service, is a pensioner while his mother is a home maker. They own a house at Dehradun, Uttarakhand and stay there with their son Arjun, who is younger to Aniket. Arjun runs a chain of bakeries in Dehradun and Mussoorie. Arjun, married and with two kids, plans to move shortly to a place that is on the outskirts of Dehradun. He has suggested Aniket to buy a property in the same area that would serve as his retirement abode.

Rashmika is the only child of her parents who live at Nainital, Uttarakhand. Both parents retired from a teaching profession with the state government of Uttarakhand. They both get enough pension which takes care of their living and other expenses.

In September 2021, Aniket and Rashmika contracted a loan of Rs 75 lakh to purchase an underconstruction house at Hyderabad. They paid Rs 25 lakh upfront. The 20-year tenor post-possession in September 2023 involves an originally contracted 7.5% floating rate of interest. The rate has been hiked initially to 8% in August 2022 and to 8.75% in Feb 2023. They intend to repay the entire loan as early as possible, best by 55 years age of Aniket.

They have been aware of the importance of insurance to protect risks. Aniket has taken a term insurance policy on his life for a Rs 50 lakh sum assured, for which he pays Rs 12,000 annual premium. Rashmika doesn’t have a life insurance policy. She however has purchased pension plans in deferred annuity form. Aniket’s employer covers Aniket and his family under a group health insurance policy. Such policy provides a health protection to the extent of Rs 10 lakh.

Assets

House – Rs 1.1 crore market value of flat’s allotment letter

Cars – Rs 11 lakh (Rashmika) and Rs 5 lakh (Aniket) 

Jewellery – Rs 35 lakh

Stock Market Investment – Rs 24 lakh

Mutual fund Investment – Rs 7 lakh

EPF accumulation – Rs 21 lakh (Aniket)

Real Estate – Rs 50 lakh, being the current market value of a plot of land at Dehradun which they purchased in 2012 for Rs 15 lakh.

Liabilities

Home loan – Rs 75 lakh

Car loans – Rs 8 lakh

Credit Cards outstanding sum – Rs 26,500 payable within a month.

They expect to work at the latest until their individual age of 65 years, which would largely depend on their health permitting and their achievement of all financial goals including retirement fund. However, their best bet would be to retire jointly once their son is settled in life. Both are expected to survive until their respective age of 90 years. They plan to utilise their real estate investment at Dehradun during their retirement, developing the same toward letting out for rental income or even using as their retirement home. Depending on circumstances then, they may choose to stay during retirement either at Dehradun or Hyderabad while selling outright their flat or plot to supplement their retirement corpus.

They would like to have a financial outlay for their kids’ education which would help them in their pursuing advanced learning in technology/medicine/law/finance. Such availability of funds would enable kids to utilize them toward various courses up to their individual age up to 24 years. The couple’s idea is to have for each kid, a lump sum funds availability of Rs 1 lakh, at current costs escalating at 8%, from their age 12 to 18 and Rs 7.5 lakh from their age 19 to 24. Any superfluous funds in the account shall be utilized for the kids’ marriage. However, no funds are provisioned exclusively to be utilized for marriage of kids.

Aniket, despite his job profile, is not much fond of travelling. Family’s annual trip covers either Dehradun or Nainital. They would however want to travel to some domestic/foreign destination together as a family every 2-3 years. A dedicated fund to serve this goal for at least 5 future trips, mostly abroad, costing currently Rs 4 lakh per trip and escalating at 5% annually, needs to be provided and/or sought to be accumulated and utilized simultaneously.

You construct a plan for the financial affairs of Aniket’s family, their immediate and future goals while protecting them from various pure risks that might derail their goals. You also consider a multi-asset investment with applicable optimization of resources including tax outgo, wealth creation and intergenerational transitioning of wealth.

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