Early start, high savings offer an advantage
The high income, savings and long time
frame of investment means that the Bansals can achieve their goals. However,
they must ensure risk coverage by buying adequate life and health insurance.
It's a sign of growing awareness that
more and more women are beginning to take interest in home finances,
traditionally regarded as the male bastion. So, even as they contribute to the
household income, women become proactive partners in all financial decisions,
from goal making to investing.It's in keeping with this encouraging trend that
we were approached by Chandni Bansal, who was concerned about meeting the
financial goals, especially that of buying a house. Seeking financial guidance
at an early stage is the right decision since it provides enough time for the
money to grow and correct any investing mistakes. Even though Gurgaon-based
Bansals currently have a low net worth of `2.75 lakh, Pankaaj Maalde of
Apnapaisa.com will formulate a plan that will ensure a smooth financial journey
for them.
Existing financial status
Chandni,
27, and Rishabh Bansal, 31, are a salaried couple living in a rented
accommodation in Gurgaon. Together, they bring in a salary of `90,000 per
month.Of this amount, they spend nearly `29,000 on household expenses and house
rent. They also give `7,000 to Rishabh's mother, while a big chunk of `25,000
goes towards the EMI payment for a personal loan. The balance amount for this
loan is `4 lakh. They also recently started investments of `10,000 every month
in mutual funds through SIPs. This means that they are left with a surplus of
`19,000 a month.
As
for Bansals' financial goals, these are simple and expected. They want to have
a contingency fund in place, buy a house, plan for their retirement, as well as
the education and marriage needs of their future child. However, they are
completely focused on purchasing a house at the earliest and Maalde prepares a
plan geared towards this need.
Insurance coverage
To
start with the couple's insurance assessment, Maalde discovered that they have
totally ignored the coverage of risk.They have no life insurance and the only
health cover is the one provided by their employers. Accordingly, Maalde
suggests that Rishabh buy an online term plan worth `75 lakh, and Chandni, a
cover of `50 lakh for a term of 30 years. Given that they are young, these two
plans will only cost them `12,500 per annum.
As
for their health covers, Maalde suggests they buy a family floater plan worth
`10 lakh, which will cost them `12,000 a year. Besides, they should buy a
separate health insurance of `5 lakh for Rishabh's mother by opening an account
in a PSU bank which offers good group health policy to account holders. This
will cost around `7,100 a year. Both Chandni and Rishabh should also buy
accidental disability and critical illness plans worth `25 lakh each. These
will result in a premium of `18,400 per annum. Together, all the insurance
policies will result in a monthly premium of `4,167, which can be funded from their
investible surplus.
Road map for the future
Before
deciding on the future course of action, Maalde suggests that the couple repay
their personal loan of `4 lakh completely since it is very expensive. For this,
they can use the cash in their savings bank account and the fixed deposit. This
will also free `25,000, which can boost their investible surplus sufficiently
and be used to meet their goals.
To
start with their objectives, the first involves building a contingency corpus
of `1.2 lakh, which equals their three months' expenses. For this, they can
allocate their stock invesment of `45,000 and add to it another month's boosted
surplus after repaying the loan. Now, they can start planning for their other
goals, the priority being buying a house. The couple wants to buy a house worth
`80 lakh in three years, and for this they want to accumulate `20 lakh to make
the down payment. To do so, they will have to start investing `48,500 in mutual
funds via SIPs. In the first year, they will have to invest `38,500 in an
incomegilt fund and the balance `10,000 in an ELSS scheme for tax planning. In
the second year, they should replace the incomegilt fund with arbitrage fund,
and in the final year, put the `38,500 a month in an ultra short-term fund. As
there is a lock-in period of three years in ELSS schemes, they will have to use
the NSC investment and contingency fund judiciously to build the down payment.
Any increase in income will be an advantage. This strategy will also have to be
reviewed after a year according to market conditions and tax laws. After three
years, they will also have to take a loan of `60 lakh, for which the EMI will
be nearly `53,100. This can be easily funded from their surplus.
For
their retirement, the couple has estimated a need of `6 crore in 29 years. For
this, they can allocate their PPF and EPF corpus, which will amount to `1.34
crore.To fund the shortfall, they will have to start an SIP of `13,000 a month.
They can start this after three years when they have made the down payment for the
house. They can also add the rental of `12,000 they will save on shifting into
their own house.
As
for the education and marriage goals of their future child, they can review the
situation after the baby is born and can plan for the goals with the increase
in their income. Please send your feedback to etwealth@indiatimes.com
