Assignment for Principles of Personal Finance
2700 words group assignment
Q1. Prepare a personal financial plan on the following case based on the mentioned parameters:
Mr. Samuel is 56 years old and working as Vice President with a public sector bank. He draws a salary of Rs.50, 000 per month and will retire after 4 years. His expenses are Rs. 25,000 per month. His wife is 50 years old and is a homemaker. His two sons aged 25 and 23 are employed in very good establishments. Both are unmarried. He lives in his own flat in Mumbai. He plans to build a house on a plot of land bought by him near Mumbai after retirement so that he can generate a regular income from this house after retirement.
His present investments are as follows:
Gold bars (worth) Rs.800,000
Term Insurance Plan Rs.7000 per annum
Mutual funds (diversified equity) Rs.10,00,000 (present value)
Other deposits Rs.500,000 (bank FD invested 4 years ago)
5 years Tax savings FD @9 percent p.a compounded quarterly
Direct stocks Rs.250000 (present value)
PPF Rs.800000 (present value, started 11 years ago)
Expected retirement corpus Rs.25,00,000
Savings account balance Rs.1,25,000
He also contributes Rs.50,000 every year towards PPF.
Following are the liabilities:
Housing loan Rs.500,000 has to be paid by next year.
He doesn't have any medical insurance from the employer so he is planning to buy a cover for self and spouse which will require an outlay of Rs.18000 per annum.
He will get a pension of Rs.20,000 per month which will take care of his annual living expenses after retirement.
He has approached you for the following goals:
- To provide for elder son's marriage after 1 year-required amount Rs.7,50,000.
- To provide for younger son's marriage after 4 years-required amount Rs.900,000
- To build a house on a plot of land after retirement-required sum is Rs.12,00,000
Please find below the format of the assignment:
1. Executive Summary
It will provide concise information about the individual's current financial situation, recommendations and potential outcomes.
2. Statement of Current Situation
Current financial situation, financial concerns and risk profile of the individuals.
3. Objectives
Financial objectives of the individuals will be mentioned.
4. Assumptions
A financial plan has to address both the individual's present situation and expected future situation. For example, the inflation may increase, salary income increase, return on investments, taxation rates, life expectancy and increase or decrease in expenses.
5. Financial Planning Strategy
1) Risk Management
2) Asset Allocation
3) Tax efficiency
The areas that need attention are:
- Income Tax
- Capital Gains Tax
Please elaborate on the tax liability and deductions that can be availed by Mr. Samuel.
6. Summary of recommendations