All primary goals on track
An early start, combined with aggressive saving,
means that Ray shall not face any financial hiccups.
Aritro Ray works in the private
sector and gets a monthly salary of 1.65 lakh. He stays in his own house with
his homemaker wife, in Bengaluru. After considering household expenses of 62,333,
home loan EMI of 44,000, insurance premium of 4,833, and investments of 30,000,
Ray is a left with a surplus of 23,834. His portfolio comprises a house worth 75
lakh, cash of 4.3 lakh, debt in the form of EPF (2.8 lakh), fixed deposit (2
lakh), PPF (1.85 lakh) and debt funds (75,000), while equity comprises mutual
funds (6.5 lakh) and stocks (10,000). Ray’s goals include saving for
emergencies, future child’s education and wedding, and retirement.
Financial Planner Pankaaj Maalde
suggests Ray first build an emergency corpus of 6.78 lakh, which is equal to
six months’ expenses. He can do so by assigning his cash, fixed deposit and
debt funds to this goal. The amount should be invested in an ultra short-term
fund. Since the couple is planning a child in about a year’s time, they want to
save for the goals of education and wedding too. Ray wants to save 61 lakh for
the kid’s education in about 18 years, and 1.35 crore for the wedding in 25
years. For the education expenses, he will have to start an SIP of 8,000 in an
equity fund. For the wedding goal, he will have to start an SIP of 9,000 in an
equity fund and 1,000 in the gold bond scheme.
For retirement, Ray will require 9
crore in 28 years based on his current expenses. Maalde suggests he allocate
his stocks, mutual funds, PPF and EPF corpuses to this goal, and these will
yield 2.3 crore. For the shortfall, he will have to start an SIP of 25,000 in a
diversified equity fund for the given duration.
As for life insurance, Ray has a term
plan of 2 crore, with a 75 lakh critical illness rider. This cover is adequate
and he doesn’t require any more insurance. Since his wife is not employed, she
doesn’t require any life cover. As for health insurance, Ray has a cover of 5
lakh provided by his employer, but has no independent medical cover of his own.
Maalde suggests he buy a 10 lakh family floater plan, which will cost him 1,167
in monthly premiums. Since Ray has a 75 lakh critical illness plan, Maalde
suggests he does not buy any more, but should purchase a 50 lakh accident
disability plan for himself. This plan will come for a monthly premium of 583.
