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Personal Finance

Capitalmind Plan: Creating Your Personalized Financial Plan

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Capitalmind Wealth (our Wealth Management Service) uses our own financial planning software to help plan out long term goals and the strategy to get there. This post talks about how you can do this too, for yourself, and for free!

Capitalmind Plan is available at https://plan.capitalmindwealth.com

We often talk about investing and planning for the future. But how do you even start? We have one interesting mechanism for you:

  • You will have life goals – to retire, education of the children, regular holidays and what not.
  • To get a grip on these goals, you’ll have to know how much each of them needs in terms of money at what date.
  • Oh and inflation can complicate life. What’s 100,000 today is not the same in 20 years when you retire.
  • We can help you find out how much money you’ll need for each of your goals
  • And then, how do you get there?
  • Take your current savings, allocate them into each goal and save for each of the goals going forward.

Goals are like oil and water. Don’t mix them! Each goal can be saved for, and tracked, individually.

Here’s how we can help. We’ll build a financial plan from scratch!

DIY: Plan your Financial Goals Yourself

Start here! 

Click on https://plan.capitalmindwealth.com to get started.

Here we provide you with all the options that are part of the planning tool above while also allowing you to configure it based on your requirement.

The planning page is like a blank slate upon which you can insert the desired goals and the algorithmic engine behind it will quickly let you know how much you will need to save to achieve the same.

Capitalmind Plan: Creating Your Personalized Financial Plan

 

For this example, I shall assume that we are making a plan with these assumptions. 

Our Assumptions

You are a 35 year old individual with 1 Child and having 40 Lakhs in savings. Your long term goals are:

  • to Retire without cutting into your lifestyle – and you spend Rs. 100,000 per month today. 
  • ensure you can send your Son to the US for a 2 year Masters Degree in 14 years and
  • to Purchase a house costing around 75 Lakhs today, in 10 years
  • Vacations : we shall show you how by saving a certain amount, you can fund your vacations for decades into the future.

We’ll assume about 5-6% inflation in most of our expenses. 

Start by clicking on “Edit” on the left panel and enter a few details such as age, your total savings and the equity and debt return assumptions.

Basic Information

Now that we have the basic details we require, let us move to the goals. Clicking on “New” in left panel shall open up a pop up box that lists all the Goals. In our example, we have 4 goals and we start with a goal that is sure to come – retirement.

Goals

Plan for Retirement

Retirement is not about not working at all. It’s about a point in life when you don’t work because you need the money.

How much do you need to retire? The answer can vary vastly but it’s simple:

  • I spend Rs. X per month
  • When I retire, I will spend Rs. Y (higher than Rs. X due to inflation)
  • I need a corpus that can earn me this Rs. Y per month in a relatively safe way.
  • But wait, I know this Rs. Y will keep increasing every year due to inflation. Can we include that?
  • I want to plan till the age of, say, 90. Let the corpus go to zero at that time.
  • So, what do I need.

We only need Rs. X. How much do you spend per month? The rest is automatically calculated.

Since this X will be used to calculate what you shall spend in the future post retirement, your monthly expense should not include one-off expenses or expenses that will no longer be incurred during your retirement – kids fees for example. So subtract all that and enter your real monthly expenses. 

We assume you will want to retire at the age of 60 and plan till age 90 – but don’t worry, all this is changeable later.

In this example, we assume you spend 40K monthly on recurring stuff. The next decision is when you wish to retire. This number is important on two counts.

First, it tells us how long you will be able to save. Secondly, it will also allow us to calculate how much you need for the period of your retired life. 

In addition, you can select the Asset Allocation mix during the period of earnings / investment, Asset Allocation mix during your retired life as well as Inflation you expect. These are set by default to what we believe is optimal for the goals but can be changed as per your expectations.

Capitalmind Plan: Creating Your Personalized Financial Plan

(You can choose from the set, or click “Custom” and enter an equity ratio as you desire. But don’t get too picky about this – 58% versus 60% is meaningless in the long term.)

Some ground rules:

  • Go “All in” only if you have more than 10 years to the goal
  • For goals between 5 and 10 years, you want to use “Grow” (80% equity) or “Regular” (60% Equity)
  • If you are risk averse, please use ZERO percent equity (custom mode) or a low equity allocation.
  • For goals less than three years, do not use more than 20% equity allocation.

The chart below is your retirement plan. The break point in the graph is the corpus you need at Retirement i.e Rs 8.35 cr.

The graph further to the break point continues to inflate in value till the age of 75. This is because for a few years post retirement, return on corpus would be more than the yearly withdrawals. After the age of 75, the withdrawals will deplete the corpus till savings exhaust by the age of 90.

Capitalmind Plan: Creating Your Personalized Financial Plan

The dotted line depicts the monthly SIP. This also inflates by 5% every year.

In addition , on the top you’ll see the Savings Allocation (this is about how much of your current savings you allocate to this goal) and the Monthly SIP. You can edit the savings allocation while the Monthly investment is auto-calculated based on the goal.

In this example, we are assuming initial allocation of Rs 5 lakh to Retirement goal. Now, 5 lakh in itself cannot grow to Rs 8.35 cr in 25 years. Therefore, the system auto calculates the monthly SIP required for this goal i.e Rs 30,190.

Capitalmind Plan: Creating Your Personalized Financial Plan

Right above that is the summary, but the plan isn’t yet done, so ignore this for the time being.

Capitalmind Plan: Creating Your Personalized Financial Plan

Adding the Education Goal for your Child

Let’s add our next goal – education of the Kid. The kid is currently 7 years old and will enter into his post graduation when he completes 21. So, that gives us 14 years to invest. One year of US post graduation degree cost currently comes to around 35 Lakhs per year. We shall take that as the input.

Plan for Education Goal

 

Again, the break point in the graph depicts the education corpus required after 14 years. This is completely exhausted in two years of fee payment.

Note that we added a “Regular” asset allocation, because we want to keep lower risk on the child’s education goal. If you increase the equity percentage, you will see a lower SIP per month to be invested.

Purchasing the House: Medium Term Goal

Our next important goal is saving for the house. We haven’t yet decided on when we shall purchase, but for calculation purpose put that number as 10 years from now. We can add this goal by using the Purchase Goal option

The break point in the graph depicts the future value of purchase. In our example, an item worth Rs 70 lakh today will cost Rs 1.14 cr after 10 years with 5% inflation.

Goal for Purchase

 

Planning for Vacations: Short Term Saving

Finally, vacation. We wish to have a vacation that costs say around 2 Lakhs today every year from when I hit the age of 40 which is 5 years from now till 70.

Vacation Planning Goal

So, we have now finished with our Goals. Let’s look at what the Algorithm is throwing up. You can view the plan here

https://plan.capitalmindwealth.com/shared/e7f8ccb7-37dd-4c99-9239-6c9170cb7785

This is how it should look:

Plan - First cut

 

The current Goal summary asks for a monthly investment of 1.14 Lakhs per month and one which grows at the rate of Inflation. But we haven’t allocated all the money that we have saved, we still have 20.00 Lakhs left to allocate. 

We shall allocate the same to the purchase goal since we started it off with Zero Lumpsum (nil allocation).

The Final Plan:

This completes our Plan. We can start off with a SIP of 92.50K but this will not keep growing as the dotted line on the chart shows. As you reach goals, the same will keep dropping and the last few years of SIP will only be towards your retirement.

https://plan.capitalmindwealth.com/shared/e7f8ccb7-37dd-4c99-9239-6c9170cb7785

 

Final Plan

This means that you can actually save an even larger amount as you grow older and one that maybe required for other purposes you may have. Remember, Medical Expenses tend to shoot up post retirement and we will need to save for that. Alternatively, as your goals complete, you can chose to increase SIPs to your Retirement goal and possibly retire a year or two earlier than planned! 

We hope this post and our tool will help you plan for your future and get an overall understanding of how to invest towards your financial goals.

Do note that Financial Planning is not just about hard numbers. It consists of a lot of moving parts and hence necessary to keep rejigging based on our changed goals and approach. We provide this service for you at a cost that is lowest in the Industry. Connect with us. 

Want our Help in Planning?

We at Capitalmind Wealth believe you should not have to do even this much. We therefore assist you in planning all your life goals here. 

Enter the goals you wish to plan for and we shall write to you with a customised plan.

It is that easy.