On track to reach goals
Modest
goals in line with surplus mean that the Punebased Patils will be able to
achieve these with ease.
Ramdas Patil is a software professional, who stays with his homemaker
wife, Gouri, and three-year-old son, in a rented house in Pune. He gets a
monthly salary of 62,000 and, combined with a rental income of 6,000 a month,
the total income comes to 68,000. His goals include building an emergency
corpus, buying a house, saving for his child's education, and his retirement.
Though he owns a house, Patil is staying on rent and is also paying a home loan
EMI of 11,000. His portfolio, worth 41.12 lakh, comprises equity, with 10 lakh
in mutual funds and 1.45 lakh in stocks; debt in the form of PPF (5 lakh) and
EPF (2 lakh), and cash of 1 lakh.
Financial Planner Pankaaj Maalde suggests he set up his contingency
corpus of 1.32 lakh at the earliest. This is equal to three months worth of
expenses and can be amassed by allocating the cash holding. It should be
invested in an ultra short-term fund and raised to six months worth of expenses
with the rise in salary.
Next, Patil wants to amass 55 lakh for his child's higher education in
15 years. For this, he will have to assign two of his mutual funds and continue
with an SIP of 5,000 in an equity fund. He also wants to buy another house
worth 35 lakh in two years. However, it will not be feasible for him to amass
the down payment or source the EMI. So Maalde suggests he sell his existing
house to buy the new house by making a down payment of 23 lakh and taking a
home loan of 12 lakh. At an interest rate of 8.5%, the EMI will come to around 9,700,
which can be sourced from the surplus.
Finally, for retirement, he will need 5.5 crore in 29 years. He can
assign one of his mutual funds, besides the EPF and PPF corpuses for this goal.
This is likely to yield around 2.2 crore, and for the remaining amount, he will
have to start an SIP of 12,000 in a diversified equity fund. He should also
continue to put in 1,000 a year in the PPF.
As for insurance, Patil has one term plan of 80 lakh, which is
sufficient for him and he doesn't need to purchase any more life insurance.
Since his wife is not earning, she doesn't need any life cover. Patil also has
a 3 lakh health cover provided by his employer, but Maalde suggests he buy an
independent family floater plan of 10 lakh at a cost of 1,167 a month. Besides,
he should buy a 25 lakh critical illness plan and a 25 lakh accident disability
cover for himself, which will come at a cost of 833 a month.
