Prioritise your financial goals
Bengaluru's Sahoo needs to revamp his insurance portfolio and streamline his investments.
Sukanta Sahoo is a software engineer and lives with his homemak er wife and a three-year-old child in Bengaluru. He has a net worth of `7.5 lakh and brings in a salary of `65,000 a month, of which he invests `19,000. His goals include saving for contingencies, child's education and wedding, retirement, and building a house. However, he will have to put off the wedding and house goals for now due to lack of surplus.
Financial Planner Pankaaj Maalde suggests he put together his emergency corpus of `2.6 lakh by allocating his cash, fixed deposit and insurance surrender value. This amount should be invested in an ultra shortterm debt fund. He can then prepare for his child's higher education in 15 years, for which he needs `50 lakh. To meet this goal, Sahoo will have to start an SIP of `8,500 in equity funds and no other resource has been allocated to this goal.
For retirement in 23 years, he will need `3.5 crore. Maalde suggests he allocate his PPF and EPF corpuses, continuing to deposit `1,000 in the former. He should also use the insurance maturity value and equity mutual fund corpus for this goal. In addition, he will need to start an SIP of `12,500 in equity funds for the given term. Since this doesn't leave him with any surplus, he will have to put off the goal of his kid's wedding till a rise in income. For this, he will need `85 lakh in 22 years and needs to start an SIP of `5,500 in equity funds.
As for insurance, Maalde suggets Sahoo surrender two of his four traditional plans as well as the Ulip. He can retain two plans but must buy a term plan worth `1 crore. He also needs to pick a health plan of `10 lakh with a deductible of `3 lakh. He must also buy a `25 lakh critical illness plan and an accident disability plan of the same amount. The revamp will help bring down his total premium cost.
