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Eary start, high surplus to help meet all goals
Despite the strong bias towards debt,
the Vakils will be able to navigate their financial journey without much
problem, thanks to their high income and surplus, as well as their long-term
goals.
Financial planners would be starved of business if everyone were to
start planning their finances at an early age. For, this is the magic mantra
that can banish most of the financial worries given the power of monetary compounding. Of course, investors would still have skewed asset allocations,
relying unabashedly on real estate and gold, as well as poor risk coverage, but
they would be more likely to meet their goals with ease.In this sense, the
Mumbai-based Vakils are on a sure footing and their portfolio does not offer
much challenge to financial planner Pankaaj Maalde of Apnapaisa.com, who charts
out a financial road map for them.
Existing financial status
Bhavin Vakil is 29 years old and is a
deputy manager in a firm, while his 29-yearold wife, Deepika, also works for a
private company. The two stay in their own house in Mumbai, which is worth `80
lakh. They have an outstanding home loan of `7.5 lakh and pay an EMI of
`20,000, which is likely to end in another three years. The couple does not
have any children and is planning one after a couple of years. Bhavin's parents
(61 and 56 years old), both of whom are doctors, also stay with them. While his
father is planning to retire in a year, his mother will do so in another three
years.
Bhavin brings in a monthly salary of
`70,000, while Deepika earns `35,000 a month, bringing the total income to
`1.05 lakh. Their monthly outgo includes household expenses worth `25,000, home
loan EMI of `20,000, insurance premium of `3,767, and `12,000 that they give
Bhavin's parents every month. This leaves them with a monthly investible
surplus of `39,233. This money is required to fund the following goals:
building a contingency fund, planning for their future child's education and
marriage, going on a vacation and funding their retirement kitty. Since they
have fulfilled a major goal, that of buying a house, they shall be easily able
to meet the other financial objectives easily.
Insurance coverage
Beginning with their insurance
portfolio, Maalde finds that while the Vakils have given some thought to life
insurance, they have completely ignored health insur ance because they only
have a cover provided by their employers. This is a mistake made by most
investors and needs to be rectified by the Vakils by buying a medical cover at
the earliest.
Bhavin has two traditional life
insurance policies, for which he pays an annual premium of `29,200 and which
offer him a cover of `31 lakh. Since this is too low for him and the returns
will not be able to beat inflation, Maalde suggests he surrender them and buy
an online term plan worth `1 crore for 30 years. Deepika should also insure
herself for `50 lakh for 30 years. The annual premium for both will amount to
`12,000.
As for health insurance, Maalde
recommends a family floater plan worth `15 lakh for the couple. Bhavin should
also purchase an accident disability policy and a critical illness plan worth
`50 lakh each. Deepika, on the other hand, should buy these two plans worth `25
lakh each.The total premium for all these policies will amount to `3,500 per
month. So the total premium amounts to `4,500 a month and can be funded through
the investible surplus and the premium he saves on surrendering his two life
insurance policies.
Road map for the future
To begin with, the Vakils need to have
a contingency corpus of `2.04 lakh, which is equal to their three months'
expenses.For this, they can allocate their cash hold ing of `25,000, fixed
deposit of `50,000 and surrender value of insurance of `1.5 lakh.These will
help build their emergency corpus with ease.
After this, they want to prepare for
their future child's education and marriage. For the former goal, they have
estimated an amount of `93 lakh in 20 years, when the kid is 18 years old. For
this Maalde has allocated no existing resources and wants the Vakils to start
an SIP of `10,000 a month in an equity mutual fund. This will help them achieve
the goal in the given time frame.
As for the child's marriage in 26
years, Maalde advises that they allocate their gold investment of `60,000 to
the goal. Besides this, they will have to start a fresh SIP of `2,000 in an
equity fund and `1,000 in a gold fund. This will help them amass `74 lakh for
the wedding expenses in the specified time period.
Now the Vakils are left with the goal
of planning for their retirement. Maalde suggests that they allocate their
equity investment as well as their PPFEPF corpus to the goal. In addition to
this, they should start a monthly SIP of `22,000 in an equity mutual fund. They
should also continue investing `2,000 a month till they retire at 55 years of
age. This will help them amass `6 crore by the time they quit working in 25
years.
The Vakils also have another goal of a
foreign vacation in about five years' time, which will cost them `5 lakh. Since
they do not have any surplus left for the goal, they can push back the goal and
start investing for it after three years when they have repaid their home loan.
These investment guidelines will help them navigate their financial journey
comfortably. Financial plan by Pankaaj
Maalde, Head, Financial Planning, Apnapaisa.com
