Career transition unlikely to impact financial goals
An early start and phased investment is bound to take care of the Bhavsars future financial concerns.
AMIT KUMAR
Dont go by the negative net worth of Bhavsars.This family of three has a reasonably high monthly income of 75,000,low liability and limited expenses.The best bit Bhushan Bhavsar is only 28 and has nearly three decades of investing ahead of him.The situation is brimming with optimism as far as the Bhavsars financial future is concerned.Yet,there is a twist in this tale.Bhushan is contemplating a career transition and wants to start his own venture within a year.This means that not only will his regular income be put on hold for some time,but he will also have to pump all his investible surplus in the business for the next 12 months.To address all of Bhavsars financial concerns,Pankaaj Maalde,chief financial planner of Apnapaisa.com,has split their planning into two partsfirst,where Bhushan prepares to invest for his business,and second,where he invests for his other financial goals.
An early start and phased investment is bound to take care of the Bhavsars future financial concerns.
AMIT KUMAR
Dont go by the negative net worth of Bhavsars.This family of three has a reasonably high monthly income of 75,000,low liability and limited expenses.The best bit Bhushan Bhavsar is only 28 and has nearly three decades of investing ahead of him.The situation is brimming with optimism as far as the Bhavsars financial future is concerned.Yet,there is a twist in this tale.Bhushan is contemplating a career transition and wants to start his own venture within a year.This means that not only will his regular income be put on hold for some time,but he will also have to pump all his investible surplus in the business for the next 12 months.To address all of Bhavsars financial concerns,Pankaaj Maalde,chief financial planner of Apnapaisa.com,has split their planning into two partsfirst,where Bhushan prepares to invest for his business,and second,where he invests for his other financial goals.
Bhushan currently works in a pharmaceutical company and lives with his wife,Manjiri,27,and son Shaurya,4,in Mumbai.After accounting for all the expenses,the Bhavsars are left with a surplus of 36,233,which is about 48% of the total income.Despite such a high rate of saving,the Bhavsars dont have a single investment in mutual funds for long-term wealth creation.As investment,they put in 10,000 per month in direct equity and have gold ETFs worth 55,000.Bhushan explains,I do not know much about equity and,hence,apart from scattered investments,I have refrained from putting any money in it, he says.
Despite the low savings,the Bhavsars can work towards the first part of
their financial plan,which involves accumulating funds for Bhushans business
initiative.He wants a corpus of 10 lakh,of which 4 lakh will be used as seed
capital for the business.Though they cant pile up the remaining 6 lakh,they can
start working towards it by building a contingency fund.Manjiri also plans to
start working in order to help tide over the impending uncertainty and can
contribute to this amount.Meanwhile,Bhushan is confident about his business
plan and expects an annual income of 40 lakh per year within a few years.
For building the seed capital,the Bhavsars should transfer their monthly
savings of 33,000 per month to a recurring deposit for 12 months,which will
help them accumulate a little more than 4 lakh.They should also build a
contingency fund worth at least three months expenses,which will be about 1.23
lakh.They should sell their existing equity of 10,000 and gold investment of
55,000 and allocate these to the contingency fund.Additionally,the savings bank
account balance of 50,000 should also be kept for this purpose.Still,they will
fall short by 8,000.This deficit can be taken care of by Manjiris income when
she starts working.
Since Bhushan has decided to start his business,we have postponed his investment for other goals by two years.This is because most of the money during this period will be pumped into the venture and the business needs to be given at least one year before it can start generating money.
Since Bhushan has decided to start his business,we have postponed his investment for other goals by two years.This is because most of the money during this period will be pumped into the venture and the business needs to be given at least one year before it can start generating money.
The Bhavsars want to build a corpus of 23.5 lakh for their sons
education,when Shaurya turns 18.To meet this goal,they should start a monthly
SIP of 6,200 after two years as there is no surplus available now.This should
be invested in a 90:10 ratio in equity and debt parts.Similarly,for their retirement,the
Bhavsars will require a corpus of 10 crore to take care of their expenses after
retirement up to the age of 80.In order to meet this target,they must start a
monthly SIP of 17,800 after two years in the ratio of 90: 10 in equity and debt
parts of mutual funds.
It is also important for the Bhavsars to take care of their insurance
needs at this stage.Though the family has a medical cover of 2 lakh from the
Star Health insurance,Maalde suggests that they increase the cover to 3 lakh
and move to a family floater plan from Apollo Munich,which doesnt have the
sublimits that are there in the Star Health plan.Maalde also advises the family
to buy a topup plan of 5 lakh,with a deductible of 3 lakh,under Apollo Munichs
Optima Plus for each member of the family.This will cost the Bhavsars about
9,200 per annum.Maalde also suggests Bhushan buy an accident disability
insurance from Apollo Munich worth 50 lakh and a 50 lakh critical illness plan
from Aviva Life.This will cost around 16,300 per annum.
The bigger concern for Bhavsars is the complete lack of life
insurance.This can prove to be disastrous for their financial future
and,hence,they should immediately purchase a life insurance cover for Bhushan
worth 1 crore.They can buy an online plan,which is likely to cost them about
8,000 per annum.Also,Manjiri is likely to start working from next year onwards
and could bring an additional income of 25,000 per month.Once she does so,she
should also get an online life insurance for herself.
BHAVSARS GOOD MOVES ...
Having a high rate of savings.
BHAVSARS GOOD MOVES ...
Having a high rate of savings.
Incurring few liabilities.
AND THE BAD ONES
Buying inadequate health and life cover.
AND THE BAD ONES
Buying inadequate health and life cover.
Maintaining a low exposure to equity.
Financial plan by
Pankaaj Maalde,CFP,Head,Financial Planning,Apnapaisa.com
