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Lt Col Jit Bahadur Chettri, a 39-year-old Indian Army officer, is posted in a remote area in North-East India. His wife Ritu is also an officer in the Army Education Corps. They have two sons, Sparsh (9) and Utkarsh (7). Chettri represents that rare breed of officers who are financially well-aware of the need to meet their financial goals comfortably.

When Lt Col Chettri approached us for financial planning this year, his family already had a well-diversified investment portfolio. With a gross monthly pay of around Rs 1.8 lakh and the family spread over two locations, the couple had kept monthly expenses well under control at Rs 48,000, including a Rs 15,000-support to their parents.

Since they had already accumulated more than Rs 10 lakh combined in their DSOPF (Defence Services Officers’ Provident Fund), they had sensibly pared their further monthly contributions to Rs 12,000.

They had Rs 8,000 of monthly SIPs in equity mutual funds where they had accumulated Rs 5 lakh. They had a good real-estate portfolio worth Rs 1.80 crore, consisting of four residential houses and land, including a house where they finally wish to settle down. For this, they had home loans totalling Rs 68 lakh, with EMIs of Rs 66,000, which were being comfortably paid.

We found their net worth to be a healthy Rs 1.30 crore after considering all the assets and liabilities. However, they had a multitude of insurance policies where they were paying premium of Rs 60,000 per year. There were some policies taken by their parents for them over a period of time of which they had no details.

In their SWOT analysis, we found their balanced exposure to debt, maintenance of some (though less) contingency funds, high net worth and investing in real estate at an early age, to be their strengths.

Among the weaknesses, we listed purchase of expensive traditional insurance policies, overexposure to real estate, low exposure to equity instruments, nonmonitoring of equity mutual funds and no structured planning for financial goals.

We listed twelve life-time financial goals for them, relating to their children, retirement expenses (exceeding their projected government pensions), regular replacement of their two cars, regular vacations, purchase of commercial property and home renovation. According to our calculations, they were likely to meet almost all their goals except the last two. However, there was no cushion in these calculations and there were plenty of wastages which, if controlled, could easily give them a better financial life within the same resources.

After extensive interaction with them, we prepared their financial plan with the following major course-corrections:

·         Comprehensive will to be made for both at the earliest

·         Three months’ worth of expenses as contingency fund at all times

·         Making two traditional insurance policies paid-up while surrendering a ULIP

·         Taking online term insurance plan for Rs 30 lakh for himself and Rs 10 lakh for wife
After undertaking risk-profiling, suggestion was given to invest Rs 34,000 per month through SIPs in a good mutual fund portfolio and to increase the contribution by 10% each year
Purchase gold up to 5% of his portfolio regularly

Contribute a regular amount to charity — online or offline

Happy Investing!!

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