Financial Plan of a Small UAE based Family

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Our selected family & Financial Standing

Four family members:

husband, Wife, and their two children of

school going age.

Family’s Balance Sheet Balance Sheet   AED

Assets   670,000Apartment 500,000Car   50,000Furniture 80,000Equity Securities   20,000Cash 20,000     Liabilities 300,000LT Debt   300,000

Net Worth    Savings   370,000

Family’s Cash Flow Statement

Cash Flow Statement   AED

Cash income   45,000

Cash expense on kitchen (10,000)

Cash expense on utilities   (5,000)

Cash expense on education & accessories (7,000)

Cash expense on entertainment   (3,000)

Cash expense on EMI (10,000)

Net cash flows   10,000

Opening Cash 10,000

Ending Cash   20,000

Expenses

Monthly expenses on kitchen and related items are around AED 10,000. Furthermore, monthly expenses on utilities are around AED 5,000 while the family makes entertainment expenses of around AED 3,000. Expenses on clothing, accessories and child education are around AED 7,000.

Assets

The family holds furniture and accessories of around AED 80,000.

The family also owns a car worth AED 50,000.

Their current cash is around AED 20,000 while they own equity shares of AED 20,000 as well.

Save

Furthermore, the family has mortgaged the apartment where they are living. Mortgage’s monthly installment is around AED 10,000.

However, the family manages to save around AED 10,000 per month.

Final Thought

The family appears quite realistic in terms of their financial plans and requirements as they have planned things which seem achievable given their saving rate.

Furthermore, the plan also seems adjustable to any possible fluctuations in income going forward.

Short Term

The family can easily achieve its short term target of enhancing equity investments and raising cash holdings.

Medium Term Furthermore, in the medium term they can

easily upgrade the furniture and car; here, proceeds from sale of old car and furniture could also help.

Long Term

On the long term side, the family can achieve its long term targets of debt repayment and children education easily.

Recommendations The family is following a strategy to invest 30% of it’s

saving in bank deposits which are offering reasonable rates coupled with facility of easy withdrawal of money.

Since the family has to use the cash in bank account to meet emergency or planned financial needs without affecting equity investments and insurance policies thus we seem it is the reasonable choice.

For the same purpose, the family can go for other bank options, which are HSBS, Doha bank, and Dubai Islamic Bank.

Recommendations Currently the family is using mortgage

financing being the only borrowing product.

Since the rates on mortgage moves along with prevailing interest rates thus switching the product is not recommended.

Since switching could cause processing costs which could eat the benefit earned through change in rate offered by other banks like HSBS, Doha Bank, and Dubai Islamic Bank.

Recommendations The family has availed life insurance and health

insurance from leading insurers; they divert 20% of monthly saving towards paying premium on insurance policies.

We find the product feasible for the family as it could mitigate the risk during life time while also provides with ample amount during old ages to husband and wife.

In Dubai Islamic Bank, HSBS, and Doha Bank, these services are available, but just switching for this thing is not recommended.

Recommendations The family is expected to invest 50% of their saving in

equity shares up to the age of 40 years; while after that they will redeem the cash and invest in balanced asset allocation mutual funds which would provide them with regular income and handsome capital gains.

The income from these mutual funds coupled with hefty amount received from insurance policies and reinvested would act as the source of income during retired life.

This ratio will vary if the family changes the bank, like if he goes in HSBS, Doha bank, and Dubai Islamic Bank, these all banks are different policies for this.

Thank You!