Suman,36, and Swarnali Sarkar 31, are both employed and bring in a combined monthly income of Rs 1.55 lakh. They live in Kolkata in their own house with their three-year-old child. They own two houses worth Rs 50 lakh, which have been merged into one, and have taken two loans which are currently worth Rs 36 lakh. They are paying combined EMIs of Rs 38,401 for these.
Their portfolio, which is worth Rs 71.8 lakh, comprises Rs 50 lakh of real estate, Rs 2 lakh cash, equity in the form of mutual funds worth Rs 10.3 lakh, and debt worth Rs 9.5 lakh in the form of EPF, PPF and insurance maturity value.
Their goals include building an emergency corpus, buying a car and a house, taking a vacation, saving for the child’s education and wedding, and retirement. However, lack of surplus means that they will have to defer the goals of buying a car and house, as well as taking vacation, till a further rise in their incomes.
Financial Planner Pankaaj Maalde suggests that the couple first build an emergency corpus of Rs 3.4 lakh, which is equal to three months’ expenses, and a medical buffer of Rs 2.5 lakh for the parents. For this they can allocate their cash and insurance value. They also want to build a corpus of Rs 55 lakh for their child’s higher education in 15 years. For this, they can start an SIP of Rs 11,000 in a diversified equity fund. For the child’s wedding in 24 years, they want Rs 1.2 crore.
How to invest for goals
Annual return assumed to be 12% for equity and 7% for debt funds. Inflation assumed to be 7%.
The goal can be met by starting an SIP of Rs 8,000 in a diversified equity fund and Rs 2,000 in the gold bond scheme. Finally, for retirement in 24 years, they will need Rs 6 crore. For this, they can allocate the EPF, PPF and mutual fund corpuses. In addition, they should start an SIP of Rs 20,000 in a diversified equity fund, besides putting in Rs 500 a year in the PPF.
Premiums are indicative and could vary for different insurers.
For life insurance, Suman has a term plan of Rs 50 lakh and seven traditional plans worth Rs 25 lakh. Maalde suggests he continue with the term plan, surrender four of the traditional plans and continue with three as a debt component of their portfolio. He should also buy two term plans—Rs 1 crore for himself and Rs 75 lakh for his wife—which will cost Rs 1,667 a month.
For health insurance, he has a floater plan of Rs 5 lakh from his employer and Rs 5 lakh independent plan for himself. He is advised to buy a Rs 5 lakh plan for his wife at Rs 583 a month. He should also dispense with the Rs 10 lakh accident disability plan and buy Rs 25 lakh plans for himself and his wife at Rs 583 a month.