All major goals within reach
Aggressive saving
and investment means Pune-based Agarwals will have a smooth financial journey.
Sahil Agarwal, an IT consultant,
stays with his homemaker wife and one-year-old child, in Pune. He stays on
rent, even though he has his own house, which provides a rental income of 12,000
a month. Combined with Agarwal’s monthly salary of 91,000, his total income
comes to 1.03 lakh. The household expenses amount to 57,000, insurance premium
accounts for 4,583, and 25,000 is put into investments. This leaves Agarwal
with a surplus of 16,417. His portfolio comprises a house worth 70 lakh, cash
of 2 lakh, gold worth 75,000, debt in the form of fixed deposit (10 lakh), PPF
(25.7 lakh) and EPF (3.8 lakh), and equity as stocks (9.65 lakh) and mutual
funds (2.3 lakh). His goals include saving for emergencies, child’s education
and wedding, and retirement.
Financial Planner Pankaaj Maalde
suggests Agarwal first build the emergency corpus of 3.8 lakh, which is equal
to six months’ expenses. He can do so by allocating a part of his fixed
deposit, 4 lakh of the total 10 lakh, for this goal. This should be invested in
an ultra short-term fund.
As for his child’s goals, Agarwal
wants to save 63 lakh for his education in 17 years, and 97.5 lakh for his
wedding in 24 years. For the former, no existing resource has been allocated
and he will have to start an SIP of 10,000 in an equity fund. For the wedding
goal, he will have to start an SIP of 5,000 in an equity fund and 1,000 in the
gold bond scheme. For his retirement, Agarwal will require 7.15 crore in 24
years. Maalde suggests he allocate his stocks, mutual funds, PPF and EPF
corpuses to this goal. Besides these, he will have to start an SIP of 10,000 in
a diversified equity fund for the given duration to amass the requisite amount.
As for life insurance, Agarwal has a
term plan of 75 lakh and a traditional plan of 7 lakh, for which he is paying
an annual premium of 40,000. Maalde suggests he surrender the traditional plan
as the returns are unlikely to beat inflation. As per the need-based theory, he
needs a life cover of 1.5 crore, so he should pick an online term plan of 75
lakh for 12,000 a year. Since his wife is not employed, she doesn’t require
life cover. As for health insurance, Agarwal has a 10 lakh family floater plan,
but Maalde suggests he raise this to 20 lakh at a cost of 2,500 a month. He
should also pick a 25 lakh critical illness plan and 50 lakh accident
disability plan for himself at 1,333 a month.
