This is about another couple aged about 50.

Far more tragic than the 32 year old couple about whom I had shared earlier.

This couple has 3 children. One has trained to be a pilot (and wondering where to find a job), one kid doing MBA (from the chotiwala institute spending Rs. 15 lakhs, funded by a loan guaranteed by the father) and the third daughter is planning to do an MBA after her graduation.

Not bad. Except that after all the EMI of his house, car, etc. he has a poor take home pay  – has a nice big house, some fixed deposits, a nice big loan of course, a car loan, and of course the kid’s educational loan.

Other than all this he has a Net worth of Rs. 1.3 crores – in bank fixed deposits against which the loan has been taken. Brilliant.

Sorry when I said net worth I meant liquid assets. He has loans more than that – but of course the house is worth more than all the loans put together. He has about Rs. 48L in Provident fund over and above this.

His potential big expenses – his own parent’s health (he is a single son and sister is unlikely to pool in), marriage expenses of 3 daughters (he says it is not much, but knowing him let me assume 2000 meals @ Rs. 1200 a meal is Rs. 24L!!), his own retirement.

Want solutions please…

 

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  1. Nice case.
    1. Unnecessary expense for 2 MBA grads. What do you get from an MBA? OK, a personal one. I am not probing.

    2. Lot of money left idle at one hand, and on the other, lot of loans. Use money judiciously. Use 1.3 crores and close all loans. At least EMI will come down drastically.

    3. Get his dependent sister to look out for a job. You can’t support everyone in the family.

    4. Don’t touch the PF. Let it be there for retirement.

    5. Invest incoming cash with little commonsense.

    6. Sell the house if needed and go for a smaller one or a rented one temporarily.

  2. My Observation:
    1 Children education is good no issues in this.
    2 1.3 crores is handsome corpus to pay all your debt asap. End enjoy debt free life. Remaining corpus can be invested in Mutual Fund through STP. just keep a six months expenses in the FD or Liquid Fund for emergency.
    3 PF is good.

  3. Basis what we know

    1. He is still paying the EMIs for the house. Continue it so he gets the asset secure.

    2. Invest heavily from now on into equity since he already has enough debt products, but only for 5 more years, since retirement is around the corner.

    3. Part of Children’s future earnings to be put into their own “marriage funds”.

    4. Total liquid net worth to be at 1.8cr (1.3+0.48)
    Leaving aside 1 cr for retirement, 80L should be enough for the three weddings 25L x 3.

    Basis what we DON’T KNOW

    1. No details on monthly expense. So have no solution there.
    Assuming 10L a year, 1 cr. in a debt fund will cover this.

    2. Can consider selling the house and moving to a cheaper house/buy/rent, BUT we do not know how far his parents are.

  4. 1) Fix Asset Allocation – 50% Debt , 5% Commodity and 45% equity. Increase debt portion as years go by.
    2) Move PF to NPS which, cash out 60% at 60 to pay off the remaining EMI. The rest should be in annuities to take care of part of monthly expense post retirement
    3) Plan to work until 65 , has no choice
    4) Education loans to be paid by kids
    5) Sell house at 55 and move to suburb. Use to pay part of the loan
    6) Shun expensive marriages, let kids find their own husbands and clearly explain how much he is worth

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