FINANCIAL planning is all about converting dreams into reality. Anybody in this world who has dreams needs a financial plan.

Let us take the case of Sachin Vaghmare, a 28-year-old mechanical engineer who works for a private limited company in Mumbai. Sachin has a secure job and is doing well, but he is worried about the rising cost of food and housing. Sachin now wants to plan his finances in such a way that his future actions are better oriented towards achieving his dreams.

His profile:
Monthly income: Rs 30,000 expected to grow by 10 per cent every year
Other benefits from employer: Free medical insurance
Housing: Presently lives in a rented house
Expenses: Rs 10,000 per month; will increase by 5 per cent every year

His priorities:
1. Sister's wedding soon: Needs a personal loan of Rs 1 lakh
2. New plot and house in 5 years: Current cost of plot is Rs 10 lakh and that of constructing a house is Rs 15 lakh
3. Retirement: Wants to maintain same standard of living; plans to work till 65 years
4. Vacations: Visits to native place twice in a year; Rs 10,000 per trip likely to increase by 5 per cent every year
5. Dream car within 4 years: Future cost is Rs 3 lakh

His current investments:
1. Three ULIPs for a sum assured of Rs 5 lakh and the total premium is Rs 42,000 in a year. The ULIPs were started 3 years ago.
2. He has deposited Rs 15,000 in the bank.

Also read: Does my portfolio look alright?

Illustration: Vaibhav Shirke

Next page: Financial diagnosis and solutions

The author, Khushalchand N. Devera is a Certified Financial Planner at VNL Financial Planners & can be reached at khushal.rakesh@gmail.com

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e-mail: Khushal Devera

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