A Women generally shifts the decisions to be made on investments to the close member in her family it may be her husband or her father or any body whom she trusts on. While shifting the responsibility is not wrong at all however depending completely on them for decisions on investment can lead to trouble in future in case of any uncertainty death or separation.
Separation not only leads to emotional distress but also it makes a women financially handicapped in case when she is not working and was depending.Therefore, to secure one’s life financially, it is important for women to have a financial plan.
The below case study deals with a person i.e. Ms. Saara Sinha , who was divorced and required assistance in financial planning.
Facts of the case[/b]
Ms. Saara Sinha is 31 years old and is working as an Assistant Manager with Mahindra with post-tax salary of Rs 30,000 per month (p.m.).
She has a 7 years old son.
She had taken a car loan for 5 years @ 12%; the EMI for this comes to Rs 8,500.
She had taken a joint home loan for 2BHK apartment with her ex-husband for 20 years; the EMI for this comes to Rs 25,000.
Her total monthly expenses are Rs 24,500 p.m.
[/list]
Current Portfolio[/b][/center]
Instruments[/b]
Corpus (Rs)[/b]
Public Provident Fund (PPF)*
50,000
Fixed Deposits (FD)*
120,000
Cash
100,000
Gold Jewellery
100,000
Total Assets[/b]
370,000[/b]
* PPF will mature after 11 years and FD will mature after 5 years[/center]
Observations[/b]
Ms. Sinha cannot maintain the same lifestyle given her current circumstances.
Her investments were in conventional fixed income instruments.
Her loans i.e. car loan EMIs and home loan EMIs took away more than 50% of her salary.
Before separation, she was dependent on her husband for her personal expenses.
She was not familiar with different investment avenues.
[/list]
The course of action[/b]
After discussing with Ms. Sinha, we got to know her short term goals & long term goals. Her Short term goal was to buy a house. The long-term goals were buying car, saving for her child's education and her retirement.
The table displayed below summarises her financial goals and time horizon.
Financial goals[/b]
Time horizon
(years)[/b]
Future cost
(Rs)[/b]
Buying a house
5
675,000*
Son's Education
12
3,000,000
Retirement
28
11,200,000
* Comprises of down-payment (35,00,000 X 15%) + 150,000 of stamp duty & registration[/center]
Assumptions[/b]
To maintain at least Rs 100,000 in bank account to meet any contingency.
Not to consider Interest Income as a part of her monthly income
Assumed that her salary will grow by 10% p.a. and inflation will increase by 6% p.a.
The current house will be either transferred in the name of her ex-husband or sold. Assumed that there was no profit generated from this transaction.
Assume her life expectancy to be 75 years.
Assumed return of 7% p.a. post-tax on investments in fixed deposits and equity.
[/list]
Solution[/b]
Separation not only leads to emotional distress but also it makes a women financially handicapped in case when she is not working and was depending.Therefore, to secure one’s life financially, it is important for women to have a financial plan.
The below case study deals with a person i.e. Ms. Saara Sinha , who was divorced and required assistance in financial planning.
Facts of the case[/b]
Ms. Saara Sinha is 31 years old and is working as an Assistant Manager with Mahindra with post-tax salary of Rs 30,000 per month (p.m.).
She has a 7 years old son.
She had taken a car loan for 5 years @ 12%; the EMI for this comes to Rs 8,500.
She had taken a joint home loan for 2BHK apartment with her ex-husband for 20 years; the EMI for this comes to Rs 25,000.
Her total monthly expenses are Rs 24,500 p.m.
[/list]
Current Portfolio[/b][/center]
Instruments[/b]
Corpus (Rs)[/b]
Public Provident Fund (PPF)*
50,000
Fixed Deposits (FD)*
120,000
Cash
100,000
Gold Jewellery
100,000
Total Assets[/b]
370,000[/b]
* PPF will mature after 11 years and FD will mature after 5 years[/center]
Observations[/b]
Ms. Sinha cannot maintain the same lifestyle given her current circumstances.
Her investments were in conventional fixed income instruments.
Her loans i.e. car loan EMIs and home loan EMIs took away more than 50% of her salary.
Before separation, she was dependent on her husband for her personal expenses.
She was not familiar with different investment avenues.
[/list]
The course of action[/b]
After discussing with Ms. Sinha, we got to know her short term goals & long term goals. Her Short term goal was to buy a house. The long-term goals were buying car, saving for her child's education and her retirement.
The table displayed below summarises her financial goals and time horizon.
Financial goals[/b]
Time horizon
(years)[/b]
Future cost
(Rs)[/b]
Buying a house
5
675,000*
Son's Education
12
3,000,000
Retirement
28
11,200,000
* Comprises of down-payment (35,00,000 X 15%) + 150,000 of stamp duty & registration[/center]
Assumptions[/b]
To maintain at least Rs 100,000 in bank account to meet any contingency.
Not to consider Interest Income as a part of her monthly income
Assumed that her salary will grow by 10% p.a. and inflation will increase by 6% p.a.
The current house will be either transferred in the name of her ex-husband or sold. Assumed that there was no profit generated from this transaction.
Assume her life expectancy to be 75 years.
Assumed return of 7% p.a. post-tax on investments in fixed deposits and equity.
[/list]
Solution[/b]
