Need to curb expenses
The Chennai-based couple may not
achieve all the goals if they don't increase the surplus soon.
S. Balasubramaniam stays in Chennai with his
homemaker wife and a three-year-old son.
He brings in `50,000 a month as salary, of which
`30,000 is spent on household expenses, `15,000 is given to his parents, and
`1,000 invested.After other sundry expenses, he is left with a surplus of only
`167. However, he has a long list of goals, including saving for emergencies,
child's education and wedding, buying a car and a house, starting a business,
and for retirement. According to Financial Planner Pankaaj Maalde, it will be
difficult for Balasubramaniam to reach his goals with such low surplus unless
he decides to curb his household expenses.
He can begin by building an emergency corpus of
`2.94 lakh, which is equal to his six months' expenses. He can assign his cash
worth `2 lakh and surrender value of insurance plans to build this corpus, and
it should be invested in an ultra short-term fund. Next, he should focus on his
retire ment, for which he will need `4.25 crore in 27 years. For this, he can
assign his EPF corpus worth `4 lakh, which will yield about `80 lakh in the
given time. For the remaining amount, he will need to start an SIP of `14,000
in a diversified equity fund. Since he only has `1,000 that he is currently
investing in mutual funds, he will have to start with this and increase it with
the rise in income. For all the other goals--kid's education and wedding,
buying a car and house, and saving for business--he will have to wait for a
rise in income before he can start investing. He is advised to prioritise his
retirement and child's education when he does begin investing.
As for life insurance, Balasubramaniam has two
traditional plans that offer a cover of `5.5 lakh. Maalde suggests he surrender
these and buy an online term plan of `1 crore at `833 a month. For health, he
has a cover of `2.6 lakh provided by his employer, but should buy a `10 lakh
family floater plan, which will cost `1,250 a month. He is also advised to buy
an accident disability plan of `25 lakh at a cost of `334 a month.
