Dhiraj and Srinidhi are keen to plan for their long-term goals.

Dhiraj, aged 42 and Srinidhi, 41, are employed in the IT industry and well-positioned in their respective careers. They were keen on professional help to do their financial planning.

Goals and aspirations

1.   They wanted to set aside ₹2 crore for their daughter’s undergraduate studies in the US and ₹1 crore for her graduate studies. She may need the funds in the next seven years and 11 years respectively.

2.   Dhiraj is planning to upskill himself to be ready for the leadership roles in his company. He wanted to be in a position heading the national level in the next five years.

3.   Srinidhi wants to build a school in her hometown, and this was the motivating factor for her to continue her employment. She is also expecting ₹2 crore from her parents in the next 2-3 years. Using her savings, she would like to create an endowment fund of ₹5-7 crore by year 2035. Initial set-up cost may be at ₹3-4 crore along with all infrastructure costs in the next three years. She would like to have the dream school operational when she turns 50.

4.   The couple are keen to continue working as long as health permits. But they wanted to have a Reserve Retirement fund in the next 18 years to support their lifestyle of ₹2 lakh per month for the rest of their lives.

Review and recommendations

After a review of the couple’s cash flow and assets, an action plan was drawn up for them, as follows:

·        The family is adequately covered for their life and health requirements through suitable insurance products.

·        They were advised to go in for a suitable home insurance product as the house in Bengaluru is a multi-storey building with wooden and bamboo interiors.

·        As they plan to get their daughter educated in the US, they need ₹3.3 crore in the next seven years for undergraduate studies and ₹2.2 crore for graduate studies. They were advised to set aside ₹2.5 crore from the equity mutual fund portfolio towards this goal at an expected annualised return of 10-11 per cent.

·        If they want to maintain their lifestyle at this level, they need ₹9.08 crore when Dhiraj turns 60, with the economic assumptions of lifestyle inflation at 7 per cent per annum, expected return 9 per cent for next 30 years after he turns 60.

·        Their contribution to EPF and NPS, along with current value, is sufficient to build the corpus in the next 18 years. As the interest above a certain threshold is taxable on EPF and there is a limit for tax efficient contribution to EPF and NPS, they need to review their contribution to both products and reassess regularly to successfully reach the target.

·        Srinidhi wants to use the balance amount in their MF Equity portfolio — after the allocation to their daughter’s studies — towards her school project. With her regular contribution of 50 per cent of the current committed savings into MF Equity portfolio, she can accumulate ₹2.1 crore at an expected return of 8 per cent in the next three years. She expects ₹2 crore from her parents in the next 2-3 years. She may have a surplus of ₹1 crore towards initial set-up cost for the school, which can be used to build endowment corpus.

·        The school project is a high-cost goal, and we advised her to build a supportive network. Though this is an emotional goal for Srinidhi, she needs to realise that the project cost may be higher initially. She may need to decide on continuing her employment or to get involved fully in the school project. Her decision will affect building the endowment corpus. Dhiraj is willing to participate in the funding only if things go well with him in his career.

·        Dhiraj wanted to keep the rest of the mutual fund portfolio, PPF, stock options, lands, and gold bonds to create wealth for the family. He will also be increasing his contribution to build wealth.

·        With the uncertainties associated with employment, economic factors, and health, Dhiraj wanted to ensure the family is protected first with their income earning capabilities and assets. Srinidhi wanted to get as much financial support and commitment from Dhiraj for the project. 

Setting up a school is more of an emotional need for which Srinidhi is expecting adequate support from her spouse. While Dhiraj wants to ensure that the family is wealthy enough to focus on the school project, meeting Srinidhi’s expectations is a challenge for the short term. This inevitably means that both have to focus on their careers to go up the ladder, ensure aggressive growth of their investments over the next 3-5 years without taking undue risks and be well-prepared for their own fundamental needs, before moving to the school project which is also important.

This may entail short-term challenges in balancing career and personal lives but that is the price they have to pay to reach their emotional goal of setting up an educational institution, which will reward the couple in the long term!

The author is a SEBI-Registered Investment Adviser (www.financialplanners.co.in)