Arvind’s Net Worth

Prof. Arvind is working as a faculty in OB Area in one of the Private B-School

located in Northeast India. He is 42 years of age and working with this institute
for past 7 years. Prior to this, he was working with a govt. owned B-School
located in North India for a very brief period. After working for about 13 years,
now he got used to this profession. He intends to continue with this stress free
profession till his retirement. He is likely to retire at the age of 65 years. During
the past four generation in his family, the longest-lived person was his greater
grandfather. He lived up to 64 years. The shortest-lived person was his grand
father, who died at the age of 40 years. There was a consistent issue of cardiac
problems among his family members. Prof. Arvind has not done any detailed
medical check-up so far.

Since Prof. Arvind is working in academic profession, he was not paid super high
salary like his counterparts working in commercial businesses. He was able to
manage his financial requirements through his salary income. His salary and
benefit details as on May 2018 is given in Exhibit 1. He was also able to create
some investments in various asset classes over a period of time. The details of his
investment and liabilities are given in Exhibit 2.

In June 2018, Arvind’s employer revised his salary by implementing 7 th Pay

Commission salary structure. The details of his revised salary are provided in
Exhibit 3. His disposable income was about 60 percent of his salary income. Since
his family is a 3-member group, he was able to save about half of it and plan for
his investments.

He was interested in knowing the impact of pay revision on his PF corpus. To

make good of the impact, he was also willing to open a PPF account in his and his
family members’ name. He was wondering, if he could persuade his employer to
contribute for him in NPS? One of his friends who work in an insurance firm had
an opinion that he is not sufficiently covered through Term Insurance. He was
also insisting him to write Term Insurance on the other two family members,
who are not employed. He was curious to know about his total net worth at the
time of his retirement. He was also wondering if his investment planning was
correct?

Exhibit 1: Before Tax Salary and Other Benefit Details of Mr. Arvind as on 30 May
2018
 Basic Salary: Rs. 76,250 p.m.
 DA: 142% of Basic
 Interim Pay: 25% of (Basic + DA)
 PF Contribution by Employer / Employee / VPF: 12% of (Basic + DA + Interim
Pay)
 The Basic, DA, and Interim pay were growing at 3%, 18%, and 10% p.a.
respectively
 The PF contribution has grown at a rate of 14% p.a.
 LTA once in 2 Years: Basic + DA + Interim Pay
 Gratuity: 1/2 month salary for every year served
 No. of Working Days per Week: 5.5 Days
  Earned Leave: 30 Days p.a. (can be accumulated upto 180 Days)
 Casual leave: 12 Days p.a.
 Medical Leave: 30 Days p.a. (can be accumulated upto 60 Days)
 Medical Reimbursement Allowance for family: Rs. 40,000 p.a.
 Variable Earnings: 25 to 30 lakhs p.a.
 Health Insurance for family: Rs. 5 Lakh p.a.
 Next Designation: Professor (There is no much salary difference between
Professor and Associate Professor)

Exhibit 2: Details of Investment and Liabilities (Returns are Tax Adjusted)

 Current position of PF corpus: 56 lakhs (Return of 8.65% p.a.)
 Equity market Investment: Rs. 16 lakhs (Return of ~10% p.a.)
 FDRs (in Sweep Account): Rs. 7 lakhs (Return of ~ 5.5% p.a.)
 Fixed Income Investment: Rs. 10 Lakhs (Return of ~ 6% p.a.)
 ULIP Investment: Rs. 15 Lakhs (Return of ~ 5.5% p.a.)
 Life Insurance (Traditional Fund): Rs. 10 Lakhs (Return of ~ 5% p.a.)
 Bullion Investment: Rs. 20 Lakhs (Return of ~ 5.2% p.a.)
 Real Estate Investment: Rs. 50 Lakhs (Return of ~ 8% p.a.)
 Ancestral Asset: Rs. 1 Crore (Return of ~ 2% p.a.)
 Term Insurance Coverage: Rs. 1 Crore
 Top up Health Insurance for family: Rs. 15 Lakhs p.a.
 Automobile loan: Rs. 7 lakhs (9.5% interest rate p.a.)
 Loans for Electrical and Electronic Gadgets: Rs. 4 Lakhs (0% p.a.)
 Currently in discussion for Rs. 70 lakhs of Housing Loan (8.25% interest rate
p.a.)

Exhibit 3: Before Tax Salary and Other Benefit Details of Mr. Arvind as on 31 June
2018
 Basic Salary: Rs. 1,61,800 p.m.
 DA: 7% of Basic
 Special Allowance: 25% of Basic
 PF Contribution by Employer / Employee / VPF: 12% of (Basic + DA)
 The Basic, DA, and Special Allowance will now grow at rate of 3%, 18%, and 3%
p.a. respectively
 The PF contribution is likely to grow at a rate of 12% p.a.
 Yearly LTA: Basic+ DA
 Gratuity: 1/2 month salary for every year served
 No. of Working Days per Week: 5 Days
 Earned Leave: 30 Days p.a. (can be accumulated upto 180 Days)
 Casual leave: 12 Days p.a.
 Medical Leave: 30 Days p.a. (can be accumulated upto 60 Days)
 Medical Reimbursement Allowance for family: Rs. 50,000 p.a.
 Variable Earnings: 30 to 35 lakhs p.a.
 Health Insurance: Rs. 5 Lakh p.a.