Invest more to reach goals
The couple needs to reduce debt and will have to
put off some goals till a further increase in income.
Raj and Bhavna Bhalla stay with their twin sons in Bengaluru. Both are
employed and bring in a combined monthly income of 1.97 lakh. After considering
household expenses of 78,833, children’s education expense of 20,000, insurance
premium of 2,000, investment of 32,500, and loan EMIs of 61,947, they are left
with a surplus of 2,212. Their portfolio comprises a house worth 50 lakh, for
which they are paying two loan EMIs of 35,000. They also have a vehicle loan
and a personal loan, for which the EMIs are 22,057 and 4,890, respectively. As
for debt investments, they have 1 lakh in the PPF and 7 lakh in the EPF. Equity
includes a mutual fund corpus of 5.26 lakh, while 50,000 is held as cash. Their
goals include saving for emergencies, twins’ education, buying another house
and a car, taking a vacation, and retirement. However, they will have to put
off several of these goals due to lack of investible surplus.
Financial Planner Pankaaj Maalde suggests they start by repaying their
expensive personal loan with their cash holding. They should also combine the
two home loans and take a single loan, which will bring down the EMI. Next,
they should build an emergency corpus of 4.6 lakh by starting an SIP of 10,000
in an ultra shortterm fund for four years.
The couple also wants to save 52 lakh each for their kids’ education in
11 years. This can be amassed by allocating their mutual fund corpus and
continuing with their SIPs of 16,000 each for the kids. For retirement, they
will have to assign their EPF and PPF corpuses, besides starting an SIP of 30,000
in a diversified equity fund. However, due to lack of surplus, they will have
to start investing for this goal after a rise in income, or the completion of
education goals, or after the repayment of their loans. They will also have to
put off the goals of buying a house and car, as well as vacation till a rise in
income.
For life insurance, Raj and Bhavna have a term plan of 50 lakh each, but
Maalde suggests that they buy 1 crore each of term plans at 2,500 a month. As
for medical insurance, though they are covered by their employers, Maalde
advises they pick a family floater plan of 10 lakh for a monthly premium of 1,667.
The couple also need to buy 25 lakh critical illness plans and 25 lakh accident
disability plans for each of them at a monthly premium of 1,833 a month.
