Stagger goals for easy reach
An
early start and limited surplus mean that Joshi must invest for goals in line
with the rise in income.
Kiran Joshi is a 26-year-old software engineer, who stays with her
mother and has already started with her financial planning. She brings in a
monthly salary of 55,000 and after household expenses, insurance premium and
investment, she is left with a surplus of 9,666. She has already bought a house
worth 45 lakh, for which her outstanding home loan is 27.85 lakh and she is
paying an EMI of 25,000. Her portfolio comprises a mutual fund corpus of 1.78
lakh, while the debt corpus of 2.5 lakh includes PPF (1 lakh), EPF (50,000),
NPS (50,000) and fixed deposit (50,000). She also has 50,000 in cash. Her goals
include saving for emergencies, her own wedding and retirement, and she also
wants to contribute a fixed amount to her mother.
Financial Planner Pankaaj Maalde suggests Joshi first build the
emergency corpus of 1.35 lakh, which is worth three months’ expenses. She can
allocate her cash and fixed deposit for this and invest the amount in an ultra
short-term fund. She should also increase the amount to six months’ worth of
expenses at the earliest. As for her wedding in another two years, she wants to
amass 4 lakh. However, she may have to scale down this goal to around 3 lakh.
She should put in 10,000 in an ultra short-term fund and add to it the entire
rise in income. She should also avoid taking a personal loan for this goal.
For retirement in 34 years, Joshi will need 5.85 crore. To meet this
goal, she should allocate her PPF, EPF, NPS and mutual fund corpus. Besides,
she will have to start an SIP of 14,667 in an equity fund, but due to lack of
surplus, she can continue to invest 4,167 in the NPS and increase the amount
after completing the wedding goal. She also wants to contribute 5,000 a month
to her mother, but can start doing this only after her wedding.
For life insurance, Joshi has a 50 lakh term plan, and also has a 1 lakh
traditional plan. Maalde suggests she retain the latter as the debt component
of her portfolio, while she doesn’t need to buy more life cover as she is
adequately covered. As for health insurance, she is covered by her employer for
2 lakh and has bought a 5 lakh cover for her mother. Maalde suggests she buy a 5
lakh cover for herself at an annual premium of 7,000. After a sufficient rise
in income, she should also consider buying a 25 lakh accident disability plan
at an annual premium of 4,000.
