In the age of 40s, every parent confronts multiple financial challenges such as paucity of funds, future children financial needs on the rise and commitment towards retirement thanks to rapid growing the monster inflation. Despite these challenges, Mr Pawan Aggarwal , age 41 has approached our financial planner to achieve the financial goals that he has listed.

Mr Aggarwal is staying in New Delhi with wife Shalini Aggarwal, age 36, son Rohit, 5 years and daughter Saumya at 1 year. He works as the head of finance in a private limited company while Shalini is a school teacher. They earn Rs10 lakh per annum comprises yearly income of Mr Pawan has Rs 6 lakh p.a. and Shalini has Rs4 lac p.a. They spend Rs40,000 per month on household expenses and have been leaving a handsome monthly surplus of Rs 43,000. Their investments include bank savings of Rs1.50 lakh, equity mutual funds of Rs50,000 and one bank fixed deposit of Rs 2.50 lakh. Pawan has bought an ULIP of sum assured of Rs5 lakh and his family covered with a medi-claim policy provided by his employer. Shalini has also bought an endowment life insurance policy with sum assured of Rs3 lakh.


Financial Goals

  1. To provide for higher education of Rohit and Saumya. The expenses, at current cost required for each their respective age of 18 years are Rs 8 lakh.
  2. Marriage Expenses of Rs 10 lakh in today’s value for each child at their respective age of 27 years.
  3. Retirement corpus at Pawan’s age of 60 to sustain the same life style till their expected life time.
  4. To build a corpus to buy a flat 5 year from now, valued at Rs 45 lakh today.
  5. Plan to buy a car in two years worth Rs 4 lakh in today’s cost.

The Financial Plan

While working on Aggarwals’ financial plan, we have assumed 10 percent inflation on their children’s education and 8 percent on the other goals. Based on their family life history, we have assumed their life expectancy to be 80 years. Income is assumed to grow at 10% year on year. Bonus and any such payment in future have not been taken into account, as no specific information has been provided over the same.

Life Insurance

Pawan has covered with a paltry sum assured of Rs5 lakh which is considerably underinsured as he is in need to take a term cover of Rs 1.51 crore to cover all the future financial goals and monthly commitments. Likewise, Shalini has also an endowment plan worth Rs3 lakh, it is not enough according to her income. She is also in need to take term cover of Rs50 lakh by her income replacement method.

Health Insurance

He has a medical insurance from his company, assumed to the extent of Rs2 lakh. The benefit of the medical cover from the company can be availed of by Mr Pawan during the tenure while he is employed with the company or till his retirement and that cover ceases on his retirement. Family security comes first and he should take a family floater policy for Rs5 lakh covering self, spouse and his children. To enhance the cover, he should also consider taking top-up plan in the next two years. Along with a medical cover he will also get the benefit of under section 80D of the income tax Act. In addition to the above mediclaim policy, we also recommend that he should take a critical illness cover also.

Emergency Fund

Emergency fund is a high priority for any prudent financial plan of every parent; no plan can be completed without emergency funds as it gives cushion against any sudden expenses, arising due etc. It is recommended to have about 3-6 times the amount of his monthly expenses. Aggarwal’s bank FD seems to be sufficient to meet this requirement. To cope up inflation, he should increase the emergency fund as their expenses will rise year on year.

Planning for Goals


Years to Goal

Today’s Value

Future Value

Monthly Investment @ 12% p.a.

Monthly Investment @ 15% p.a.

Rohit’s   Education


8   lakh

28 lakh



Rohit’s   Marriage


10   lakh

54 lakh



Saumya’s   Education


  8   lakh

      41 lakh



Saumya’s   Marriage


10   lakh

74 lakh



Retirement   Corpus


 2     lakh^




^annual expenses, #retirement corpus calculated @ 8% annual inflation considering life expectancy to be 80 years

The costing requirement for his children education and marriage is indicated in the above table. In today’s market, it is recommended that to put the money in equity instruments as this money is required in longer period. The equity market should give him the return to the tune of 12% to 15% per annum. While assuming the return of 12% p.a., Pawan will have to invest around Rs22,900 per month for his children education and marriage. Moreover, there will be the maturity proceeds of ULIP and endowment plans. This will also help them achieve their goal of children’s education and marriage, if any deficit falls.

Based on Aggarwal’s current expenses and inflation of around 8%, his requirement Rs 1.44 crore retirement kitty seems sufficient. Pawan needs to invest around Rs18,000 per month in good performing equity diversified fund to build a corpus for his rainy days. He must allocate his EPF contribution towards his retirement corpus, if he were live beyond 80.

Buy a new house and a car

Pawan wants to buy a new house and a car to accommodate the needs of his family, by the year of 2019 and 2016 respectively. The current value of his desired house is Rs45 lakh and that of the car is 4 lakh. If we assume that prices of real estate will go by 10% p.a.,  Pawan needs            to budget around Rs 72.50 lakh in 2019. He will have to budget for a down payment of around 15%, i.e. Rs10.87 lakh. Given his rising income, he can take a home loan for the reminder. If we assume auto inflation to be 5%, the car that Pawan wishes to buy would cost around Rs 4.41 lakh in 2016. As per given, their current expenses and incomes, buying a new house and a car appear difficult considering these important requirements. They need to cut down their costs and put more money into savings and generating return. While keep investing of existing mutual fund portfolio of Rs50,000 and bank saving balance of Rs1.50 lakh can be utilized to buy the car. In addition to this, they should also start small recurring deposit amount of any surplus arise in future to meet the requirement of the car.

Investment Strategy

He needs to follow basic financial facts that continue investing and review the performance of his investments at least once a year to assess its progress towards his financial goals. This way he will be able to not only trail its progress, he will also be able to step in when required to make any course correction. He needs to have more realistic goals and in some cases where it is an absolute must. As he reaches closer to specific goal, start moving his equity investments to debt to protect and preserve the gains.

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Suresh Kumar Narula

SEBI Investment Advisor, Founder & Principal Financial Planner at Prudent Financial Planners
Suresh K Narula is founder and Principal Financial Planner at Prudent Financial Planners. He has earned the professional CERITIFIED FINANCIAL PLANNER and got registered with SEBI as Investment Advisor. He writes on personal and financial planning articles and got published in Dainik Bhaskar, Business Bhaskar and The Financial Planner's Guild, India. He is also a member of Financial Planner's Guild India ( An association of practicing SEBI registered Investment advisers) to create awareness about Financial Planning in general public, promote professional excellence and ensure high quality practice standards. Suresh received his an from Himachal Pardesh University and an MFC from Punjab University, Chandigarh. He can be reached at
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