Anup Shirke, with his wife Yamini, and children, Yogesh and Vedant, at Ambarnath, Thane.
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Limited
income a barrier to achieving all goals
The Shirkes must maintain a high savings rate and hike the equity exposure to meet the important goals. AMIT KUMAR Alow income may deter ambitious goals,but should it discourage financial planning By no means,since a disciplined approach and prioritisation of goals can go a long way in securing your financial future.The Shirkes are an apt example.A monthly income of 37,500 may not seem enough for a family of four,but the Shirkes score well on savings.By squirrelling away nearly 40% of their salary,despite servicing a home loan,they have laid a firm foundation on which they can build a strong financial edifice,provided they follow the suggestions of Pankaaj Maalde of Apnapaisa.com. Anup Shirke,a 33-year-old assistant manager at a broking firm,lives at Ambarnath,Thane,with his wife Yamini,a fashion designer,and two sons,Yogesh,7,and Vedant,4.After accounting for their expenses,which include a home loan EMI of 3,000,insurance premium of 2,666 and mutual fund SIPs of 2,500,the couple is left with 14,335.This surplus will suffice for a majority of the goals,though some will have to wait till their income rises. To begin with,the Shirkes must build a contingency fund worth six months of basic expenses to secure themselves against a temporary loss of income.Maalde suggests a corpus of 1.23 lakh,for which their existing bank fixed deposit of 75,000 and savings account balance of 12,000 should be allocated.To cover the shortfall,they should direct the entire surplus towards this goal and start investing for other goals only after three months. The couple also needs adequate protection.The Shirkes have been lackadaisical about insurance and,despite paying a monthly premium of 2,665,have a cover of only 5.5 lakh.Anup explains,These plans were recommended by a friend who works with the LIC, he says.Maalde suggests that the couple buy two online term plans of 35 lakh and 20 lakh for a term of 30 years.This will cost them around 9,000 per annum.Of the four LIC traditional insurance plans (LIC Jeevan Saral,two child plans of LIC Jeevan Chaya,Bima Gold),the first three must be surrendered because the returns are unlikely to beat inflation after considering their present surrender value,future premiums payable and expected maturity value.However,the last (Bima Gold) plan should be continued. The couple has also taken a huge risk by not buying health insurance.They are advised to take individual health plans of 3 lakh for each member of the family.Maalde recommends Apollo Munichs Easy Health Standard Plan,which will cost them about 13,350 per annum.Additionally,they should buy individual topup plans of 5 lakh,with deductibles of 3 lakh for each,which will cost them 3,650 per annum.They should also buy an accidental disability and critical illness plan worth 15 lakh.The new health insurance portfolio will cost them 2,134 per month,but since they are surrendering their traditional plans,the overall increase will be only 626. The Shirkes have a home loan of 2.18 lakh,for which they pay an EMI of 3,000 per month.At 10.75%,the couple is paying a high rate of interest and,hence,should switch to another lender offering 10% per annum.This move will save them 800 per month. For their sons education,the couple want to build a corpus of 23.3 lakh in the next 11 years for their son Yogesh,and 29.4 lakh in 14 years for their younger son Vedant.For Yogesh,they must add 4,850 to their existing SIPs of 2,500,in the ratio of 90% in equity and 10% in the PPF.For Vedant,a monthly SIP of 5,550 in the same ratio will take care of this requirement. The next important goal for the Shirkes is building a retirement corpus of 2.85 crore.The EPF balance,including further contribution,will give them a corpus of around 35 lakh.Their existing MF investment,both in gold and equity,have also been allocated towards this goal.The direct equity investment requires in-depth research and analysis and,therefore,the Shirkes should sell the portfolio and invest in the recommended mutual fund schemes. For the shortfall,they need to start a monthly investment of 6,000.At present the available surplus is only 4,000 per month and,hence,they are advised to invest this in the ratio of 90% in equity and 10% in the PPF.They should increase the investment by 2,000 per month when their income rises. However,one major goal of the Shirkes that will not be achieved because of the limited income is building a corpus for their sons weddings.They want to build a corpus of 25 lakh for each of their sons,and for this,they need to invest 2,000 and 1,600 per month in equity funds.This,however,will have to wait till their income rises sufficiently. Financial plan by Pankaaj Maalde, CFP,www.apnapaisa.com |
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