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Mrs. Yogita Shah (name changed to protect privacy) is 60 years old and retired from her job. She is a widow and has 3 daughters. Her eldest daughter is married and settled, so Mrs. Shah is not concerned about her financial life. Her younger daughters (twins) are both working and unmarried, they live at home.
Mrs. Shah's net worth is as follows:
| Own home: |
Rs. 1.50 crore |
| Stocks & Equity Mutual Funds: |
Rs. 60 lakhs |
| Debt Mutual Funds: |
Rs. 90 lakhs |
| PPF: |
Rs. 4.60 lakhs |
| Cash in Bank (total of 3 accounts): |
Rs. 15 lakhs |
| Total Net Worth: |
Rs. 3.20 crore approximately |
| out of which, Investible Net Worth is: |
Rs. 1.70 crore approximately |
Mrs. Shah's monthly & annual expenses are as follows:
| Household (including groceries, salaries, day to day): |
Rs. 60,000 per month |
| Society fees, electricity & phone bills & other utilities: |
Rs. 25,000 per month |
| Regular medical & travel expenses: |
Rs. 10,000 per month |
| Annual Professional Fees: |
Rs. 30,000 per year |
| Health insurance and car insurance premium: |
Rs. 28,000 per year |
| Annual maintenance contracts: |
Rs. 50,000 per year |
| Home & car maintenance & repairs (annual): |
Rs. 1.25 lakh per year (average) |
Thus the average monthly expense can be considered as approximately Rs. 1,15,000 per month.
Mrs. Shah has no income stream other than dividends and interest from her investments.
Her 3 daughters together contribute Rs. 50,000 to the monthly expenses.
Mrs. Shah's main concern is that her income from her investments should meet her expenses.
She is fine with cutting down her lifestyle to a basic one, as long as there is no significant risk on her investments. She has a conservative risk tolerance. However at the same time she understands that because of inflation she does need to have some portion of her wealth in equity. She does not know if the current proportion in equity is too low or too high for her requirements.
Her second main concern is that both her younger daughters are unmarried. She estimates that she will spend around Rs. 10 lakhs on each of their weddings, i.e. Rs. 20 lakhs on their wedding goals. They are 24 years old now, she estimates that they will get married within 2 years.
She also wants to be well prepared for any personal medical emergency. There is a history of heart disease in the family, and also high blood pressure. For this reason, she is not sure if she should reduce the amount of funds in her bank account and deploy them into more useful investment avenues or not.
We need to help Mrs. Shah on the following points:
- How much equity-debt exposure should Mrs. Shah ideally have, considering her age?
- Is it advisable to consider spending Rs. 20 lakhs on her younger daughters' weddings or is it necessary to re-align priorities?
- Considering Mrs. Shah's fixed income requirement, how should she structure her investments so as to generate maximum fixed income?
- She is not sure if she is currently making use of her tax free limit as she doesn't know which instruments are tax-efficient. What would you suggest to her?
- Other than the above points, would you give any specific or general advice to Mrs. Shah?
So what do you think Mrs. Shah needs to do to sort out her financial life?
Do write in to us with your answers to the above questions, at yp@personalfn.com.
Remember, if you provide the best, most usable financial advice to Mrs. Yogita Shah, you will win a 20% discount on any of PersonalFN's Financial Planning services!
We look forward to hearing from you, at yp@personalfn.com
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