Early start will help goals
Mumbai-based Sawant will not face hurdles if he
staggers the goals and invests accordingly.
Akshay Sawant is a software developer
and stays with his parents in Mumbai. He brings a monthly salary of 67,000 and
after considering household expenses, insurance premium and investment, he is
left with a surplus of 24,750. He has invested in mutual funds, PPF and EPF,
and has a net worth of 5.8 lakh. His goals include saving for emergencies, his
own wedding, a house and a car, his future child’s education and wedding, and
retirement. Financial Planner Pankaaj Maalde suggests he put off his car goal
for now due to lack of surplus and proceed with the others in the following
manner.
He can start by building an emergency
corpus of 1.5 lakh, which is equal to six months’ expenses. This can be done by
using his cash holding and investing in an ultra short-term fund. Next, he
wants to save 4 lakh for his own wedding in about a year’s time. For this goal,
he can allocate his fixed deposit of 2 lakh and can start an SIP of 17,000 in
an ultra short-term fund for the specified period. As for the house worth 50
lakh he wants to buy in a year’s time, Maalde suggests he push back the goal to
five years. To build a down payment of 10 lakh, he can start a SIP of 18,500 in
an equity savings fund for three years and a recurring deposit in the last
year. For the remaining amount, he will have to take a loan and can source the
EMI from the surplus and rise in his income.
For his future child’s education and
wedding, Sawant wants to save 97 lakh and 62 lakh in 20 years and 27 years,
respectively. He can start SIPs of 10,000 and 3,500 in equity funds for these
goals. For retirement, he can assign his PPF and EPF corpuses, as well as his
mutual fund corpus. Besides, he will have to start an SIP of 8,500 in a
diversified equity fund.
For life insurance, Sawant has a term
plan of 1 crore and two traditional plans, and is paying a premium of 60,000 a
year. Maalde suggests he surrender the traditional plans. He also has a health
plan of 6 lakh provided by his employer and has purchased a 5 lakh plan for
himself. He is advised to continue with these plans. He should buy a 25 lakh
critical illness plan as well as a 25 lakh accident disability plan for himself
at a cost of 834 a month.
