Sample Financial plan #4 – the big picture on investment needs

In the last post we saw how Ravi and Madhuri have worked out a time line for all their financial goals. The next logical step is to understand how much money they need in which years for the combined goals. The assumption here is that their regular expenses will be funded from their ongoing income and investments will be made and redeemed when needed for the goals to be achieved. They therefore need to understand how much to invest in what kind of assets.

Let us first look at the combined need for all goals at different points in time. We will start with the goals that are farthest away and then work backwards closer to the present day. From the information available in the last post, we will see that Ravi and Madhuri will need the following in the different years.

  • 1.93 crores in 2040. for the marriages of both their children.
  • 6.41 crores in 2035 for relocating to Kerala and Financial independence.
  • 40 lacs in 2035 for Naina’s post graduation.
  • 92 lacs in 2033 for Ankit’s post graduation.
  • 17 lacs in 2033 for family vacation outside India.
  • 40 lacs in 2032 for Naina’s graduation.
  • 57 lacs in 2029 for Ankit’s graduation.
  • 13.5 lacs in 2029 for family vacation outside India.
  • 10.75 lacs in 2025 for family vacation outside India.
  • 8.5 lacs in 2021 for family vacation outside India.
  • 9.37 lacs in 2020 for purchase of Madhuri’s car.
  • 11.91 lacs in 2017 for replacement of Ravi’s car.

Combination of these goals for specific years will now give us the total amounts needed for them.

  • Year 2040 – 1.93 crores
  • Year 2035 – 6.81 crores
  • Year 2033 – 1.09 crores
  • Year 2032 – 40 lacs
  • Year 2029 – 70.5 lacs
  • Year 2025 – 10.75 lacs
  • Year 2021 – 8.5 lacs
  • Year 2020 – 9.37 lacs
  • Year 2017 – 11.91 lacs

The way Ravi and Madhuri plan their investments, should yield the above amounts in the corresponding years for their goal achievements. They are already having some investments and assets which can obviously be used. In general the goals can be met by any of the following methods.

  1. Growth of their current investments and redemption from the same.
  2. Selling any asset such as current car and use proceeds to meet the goal amounts partly or fully.
  3. Make fresh investments now onward and grow them to reach the desired figures in the given time frame.

For a person starting from scratch both 1 and 2 are virtually non-existent. However, for Ravi / Madhuri and many others who are already having some investments and other assets, we will need to take all 3 into account.

In the next post we will look into mechanisms of how the amounts needed in the different years can be planned for.

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