Financial Plan published in Economic Times Wealth on 24.07.2017

Link goals to investment

Aggressive saving and investing should help the Pune-based Shendes to reach their goals easily.

 Sachiin and Kalpana Shende live with their 14-year-old son in a rented house in Pune. Sachiin brings in a monthly salary of `1.46 lakh, and combined with a rental income of `8,000 from a house he bought three years ago, the total income adds up to `1.54 lakh. After monthly expenses of `51,167 and an investment of `12,000, he is left with a surplus of `28,750. He also has two loans for a home and a car, for which he is paying EMIs of `40,700. His goals include saving for contingencies, child's education and wedding, buying a house, and retirement. Financial Planner Pankaaj Maalde suggests Sachiin start by repaying the car loan of `4 lakh from his cash holding, which will free the EMI of `10,000.

Sachiin can begin by building a contingency corpus of `5.58 lakh by allocating `1 lakh of cash and `5 lakh from his fixed deposit.This amount should be invested in an ultra short-term debt fund. Next, he wants to save `13 lakh for his son's education in four years, for which he can start an SIP of `23,000 in an equity fund for the first two years and then shift to an arbitrage fund. For the son's wedding in 11 years, Sachiin will need `21 lakh, and he can amass this amount by starting an SIP of `8,500 in an equity diversified fund.

For retirement in 16 years, Sachiin will need `2.3 crore and he can allocate his stocks, mutual funds and EPF corpus to it.Besides, he will need to start an SIP of `21,000 in an equity fund. As for the house worth `70 lakh that he wants to buy in another year's time, he can sell his existing house worth `60 lakh and take a loan for the remaining amount. Combined with the existing loan, he will have a liability of `38 lakh and an EMI of about `37,420.

Sachiin has two traditional plans and two Ulips. Maalde suggests he retain only one traditional plan and surrender the others. He should buy a term plan of `1.5 crore, which will cost `2,500. He has a health plan of `4.5 lakh, but should increase this to `10 lakh at the earliest. He has an accident disability plan of `25 lakh, and should pick a critical illness plan worth `25 lakh as well.