Case 041Lump-sum allocationCore

In a one-hour assessment you must produce a one-page proposal for a salaried couple with Rs 3 crore of savings, a Rs 90 lakh home loan at 8.6% and a child due next year. Build the page.

The situation

The Dsouza-Kamat couple, both 34, work in Mumbai, one in software and one in a hospital. Together they take home Rs 3.2 lakh a month and spend about Rs 1.2 lakh, plus a home loan EMI of about Rs 78,675. They have Rs 3 crore saved, mostly in a savings account and fixed deposits, from years of high saving and a sold inherited plot.

The home loan has Rs 90 lakh outstanding at 8.6% with 20 years left. Their first child is due next year and one of them may take a year off after the birth. Neither has personal life cover. In the assessment you have one hour and one page.

Your task

Produce the one-page proposal: what they need, in what order, how the Rs 3 crore is split, what happens this month, and what could go wrong.

Quick check

What belongs at the top of the page, before any allocation?

Worked solution

Try it on paper, then open one step at a time.

30-second answerThe answer to give first

Lead with needs, in order: a reserve, term cover for both, health cover and baby costs, a decision on the loan, then long-term growth. The Rs 3 crore splits into a Rs 18.0 lakh reserve, Rs 6.0 lakh for the baby, a Rs 30.0 lakh loan prepayment, and Rs 2.46 crore of long-term money at 65% equity. The page ends with this month's actions and the risks that would change the plan.

Step 1What is the assessor actually marking?

A doctor who writes a prescription before asking where it hurts fails the exam even if the medicine is good. A proposal is marked on whether it answers this family's situation, in order, before it names a single product. So the page opens with two lines of situation and a ranked list of needs, and every rupee in the allocation traces back to one of those needs. In an hour, a clear page with the right order beats a long one with fund names.

Step 2How do you size the reserve and the baby money?

The reserve has to survive one income pausing after the birth. Nine months of spending plus EMI is about Rs 17.9 lakh, rounded to Rs 18.0 lakh in a liquid fund. Money needed on a known date in the next year, the delivery and first-year costs, sits apart from the reserve in short deposits, about Rs 6.0 lakh after checking what their health cover pays for maternity. Cover comes before investing: term cover for both, since either income matters, and the baby added to health cover at birth.

Step 3Should they prepay the home loan?

Prepaying earns a certain 8.6% before tax, which no debt fund promises. Putting Rs 30 lakh against the loan and keeping the EMI unchanged cuts the remaining term from 240 months to about 111, and saves about Rs 72 lakh of interest in nominal terms. They keep the rest invested, because at 34 the long-term money can target more than 8.6%, and prepaying everything would leave them asset-rich in bricks and short of liquidity. Any tax deduction on home loan interest lowers the loan's true cost, so confirm it under their tax regime.

The page itself: situation, needs, allocation, actions, risksDsouza-Kamat household: proposal, one pagedraft for discussion1 SituationBoth 34, salaried, take-home Rs 3.2 lakh a month, spend Rs 1.2 lakh plus EMI Rs 78,675.Rs 3 crore saved. Home loan Rs 90 lakh at 8.6%, 20 years left. First child due next year.2 Needs, in order1. Reserve2. Term cover, both3. Health cover + baby4. Loan decision5. Long-term growth3 Allocation of the Rs 3 croreEmergency reserve, liquid fundRs 18.0 lakh9 months of spending and EMIBaby and first-year costsRs 6.0 lakhshort deposits, by due dateHome loan prepaymentRs 30.0 lakha certain 8.6%, pre-taxLong-term equityRs 159.9 lakh65% of the long-term moneyLong-term debtRs 86.1 lakh35% of the long-term money4 This monthTerm cover for both; add the baby to health cover at birth;prepay Rs 30 lakh, keep the EMI; start the transfer plan.5 Risks we will reviewOne income pauses after the birth: the reserve covers it.Equity falls early: the long-term money can wait 10+ years.Illustrative figures; product choice follows once the needs are agreed.
The one-page proposal runs situation, needs in order, the Rs 3 crore split into a Rs 18.0 lakh reserve, Rs 6.0 lakh for the baby, a Rs 30.0 lakh prepayment and Rs 2.46 crore of long-term money, then this month's actions and the risks to review.
BucketRs lakhWhy
Emergency reserve, liquid fund18.09 months of spending and EMI
Baby and first-year costs6.0short deposits, by due date
Home loan prepayment30.0a certain 8.6%, pre-tax
Long-term equity159.965% of the long-term money
Long-term debt86.135% of the long-term money
Total300.0
The Rs 3 crore split: protection and near-term money first, Rs 24.0 lakh; the loan prepayment, Rs 30.0 lakh; and the remaining Rs 2.46 crore invested 65% in equity and 35% in debt for goals ten or more years away.
Step 4How do you close the page?

With actions dated this month and the risks that would change the plan. A proposal without a next step is an essay; one without risks is a sales sheet. Here the two risks worth naming are one income pausing longer than a year, which the reserve covers for nine months, and an early equity fall, which the long-term money can wait out. Staging the equity over six to twelve months is a line in the actions, not a paragraph.

Where candidates lose it

Candidates under time pressure fill the page with products: two flexi-cap funds, a debt fund, a tax-saver. The assessor sees a page that could belong to any client and marks it down, however good the funds.

The second miss is ignoring the loan or the baby, the two facts that make this case different. A proposal that never mentions the 8.6% loan or the income pause has not read the brief.

What the interviewer asks next

  • Why not prepay the whole Rs 90 lakh and be debt-free?
  • How much term cover would you suggest for each of them, and how would you size it?
  • One of them wants to put Rs 50 lakh into a plot of land. Where does that fit on the page?

Company names and figures are illustrative.