Sample Financial plan #10 – the final investment plan

This is the last post on the sample financial plan for Ravi and Madhuri. We need to try and rejig the investment plan that required 13 lacs investment in equity every year. Even though, most financial planners and available calculators follow this method, the obvious flaws in this approach are not difficult to see. An uniform level of investment over a period of 20 years or more, when your income is going to increase significantly over the years makes little sense.

By now all the readers would have got the basic logic of how equity investments work well in the long term. I will therefore, only write about the suggested investment plan, rather than explain how I arrived at it. Note that I have chosen the most obvious method even though more complicated ones are possible.

  • Start with an investment of 5.4 lacs in equity in the year 2015. This is the amount available today.
  • Increase the investment amount by 10 % every year. This should not be difficult as we have already front-loaded some expenses like schooling and Ravi’s compensation will increase by 10 % every year. Madhuri’s income will probably increase too, but we have not taken that into consideration.
  • After 11 years the EMI for Housing loan will stop and that amount will get diverted to equity investment. So from 2026 to 2040 ( year of last goal) an additional 5 lacs will go into equity investment.
  • All the goal amounts in the different years will be mobilized by redemption of the equity portfolio. If for some reason, the markets are doing exceptionally bad then the money would be taken from debt ( PPF ) and paid back at a later date.
  • With the above plan and 12 % CAGR on equity all the goals of the family that we had identified will be realized.
  • Note that we have not said anything about the existing apartment in Hyderabad. Ravi can probably sell it when he moves to Kerala. Madhuri’s earning has also been taken at the existing level of 30000 Rs per month only. This will obviously increase as time goes by and can cater for some of the other indulgences the family may have.
  • Finally, though the couple have achieved financial independence by 2035, Ravi will be having a venture of his own and the earning from there can be used for other purposes if any.

The point of this series has been to show people that with a little thought and planning, it is possible to create a financial plan that will support all the important life goals of a family. It can be done without being excessively frugal or feeling constrained about all indulgences like a vacation etc. Ravi and Madhuri are not rich by any means, though they belong to upper middle-class and are reasonably well off.

The success of the plan will be in the correct formulation and regular reviews of it. With the posts available to you, I am sure you will now be able to make a financial plan on your own.

Keep reading the future posts where I will discuss about constructing a portfolio and other aspects of personal finance.


3 thoughts on “Sample Financial plan #10 – the final investment plan

  1. Hello Roy Sir,

    I really appreciate this series and it helps me understand goal based investing.
    My questions is pertaining to my situation, i do not have clear goals like the couple in this series. My only goal is to have a net worth of 1 Mill USD and take retirement and devote time to give back to the society.
    If we could discuss merits of single goal vs multiple goals, i will appreciate it.



    • Hi Ravi, thank you for your comment and appreciation. Yes, goals can be single also and financial independence is a worthwhile goal to have. My next lot of posts will be on this, follow the same 🙂


  2. Hi Sir,

    My earlier studies over the financial planning / independence were mostly full of jargons , I used to get always tired / diverted feeling that only financial planners can do these calculations ………. but your series were really an eye opener in simple terms for the common man…………… now , I am able to view my requirements long / short clearly …….

    Thanks for efforts and selfless guidance…………………….eagerly anticipating further series………


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