Early start with
savings to help achieve goals
Pune-based
Kulkarnis should be able to rectify their financial flaws and meet their goals
easily.
Financial
security in later life is determined to a large extent by how early you start
saving and investing. So, Pune-based Abhijit Kulkarni can expect a smooth
financial journey since he has been financially active and, at 35, has a net
worth of `40.5 lakh. He has bought a house, listed out his goals and has been
saving aggressively, even though the portfolio is skewed towards debt.Financial
planner Pankaaj Maalde believes that with minor rectifications the family
should be able to get back on track and on schedule to meet the primary life
goals.
Existing financial status
Abhijit
works with a private firm and lives with his homemaker wife, Akanksha, 28, and
three-year-old daughter, Advika. He brings in a monthly salary of `81,167, of
which `24,500 goes in household expenses. He also shells out `3,500 for his
daughter's education, `9,833 as insurance premium and `18,513 as an EMI for a
home loan of `18 lakh that he has taken. He is also investing `11,500 in debt
instruments. This leaves him with an investible surplus of `13,321, which needs
to be used judiciously to meet all the goals. Though Akanksha is currently not
working, she plans to pick up a job soon and the additional income can be added
to to the investible surplus later.
The goals
include building an emergency corpus, saving for the education and wedding of
their daughter and for their own retirement. The couple also wants to purchase
another house, but due to paucity of investible surplus at this stage will have
to put it off for a few years.
Abhijit's
current portfolio includes `4.85 lakh in EPF, `60,000 in stocks and `1.25 lakh
in a recurring deposit. Before Maalde prepares a blueprint for the financial
plan, he will assess the insurance needs.
Insurance portfolio
Abhijit
has two traditional plans and a Ulip that combinedly cover him for `27 lakh and
for which he pays an annual premium of `1.18 lakh. Maalde suggests that he
retain one plan and the Ulip, but surrender the remaining traditional plan as
its returns are unlikely to beat inflation in the long run. He should also
consider purchasing an online term plan of `1 crore, which will cost him
`12,000 a year in premium. Akanksha should also purchase a term plan when she
starts working.
As for
health insurance, Abhijit's employer provides him with a `3 lakh family floater
plan. However, Maalde suggests that he buy an independent `10 lakh plan, which
will cost him `19,000 a year. He should also buy a critical illness plan and an
accident disability plan, each worth `25 lakh. These will cost him another
`12,000 per annum. The cost of additional plans can be taken care of from the
investible surplus.
Road map for the future
Abhijit
needs to maintain an emergency corpus of `1.66 lakh, which is equal to three
months of his expenses. For this, he can allocate his recurring deposit of
`1.25 lakh and save his surplus for three months to make up for the shortfall.
This amount should be invested in an ultra short-term debt fund for easy
accessibility and higher rate of return.
Now,
Abhijit can plan for his other goals, which include building corpuses for his
daughter's education and wedding. For her education in 15 years, he has
estimated that he will require `63 lakh. To build this amount, he will have to
start an SIP of `11,500 in an equity mutual fund for the specified period. As
for her wedding in 22 years, he wants to accumulate a sum of `54 lakh. For this
he will have to start an SIP of `3,000 in an equity diversified fund and `1,500
in a gold fund. This will help amass the required sum in the given time. No
existing resources have been allocated for these two goals.
Finally,
for the couple's retirement in 25 years, they need to have a corpus of `4.65
crore. To achieve this goal, Abhijit will have to assign his EPF corpus, stock
value and Ulip maturity value. This is likely to yield `2.56 crore in the given
time. For the remaining amount, he will have to start an SIP of `9,500 in an
equity fund. At an assumed rate of return of 13% for equity funds, the couple
will amass the desired amount.
As for
their goal of buying another house, they will have to wait till there is a rise
in income or till Akanksha finds a job and starts bringing in more funds.
