Put surplus to better use
By increasing investments and linking these to
goals, Chennai-based Sankaran can have a smooth journey.
Sankaran UK is an IT professional and
lives in a house inherited from his parents, in Chennai. His wife is a homemaker
and the couple has a two-year-old child. He gets a monthly salary of 83,000 and
after considering expenses, insurance premium and investment, he is left with a
surplus of 23,940. He should invest this money instead of letting it idle and
link it to his goals. These include saving for a contingency fund, vacation,
child’s education and wedding, and retirement. He also wants to start investing
for another child, but Financial Planner Pankaaj Maalde suggests he put it off
due to lack of investible surplus. Sankaran’s portfolio comprises equity worth 2.89
lakh as stocks and 1.04 lakh in the form of mutual funds; debt in the form of
EPF (4.87 lakh) and fixed deposit (2 lakh); and cash of 50,000.
Sankaran can build the emergency fund
of 3.18 lakh, which is equal to three months’ expenses, by allocating his cash
and fixed deposit. This should be invested in a liquid or short-duration debt
fund. He should try to increase this amount at the earliest. For his child’s
education corpus of 59 lakh in 16 years, he can start an SIP of 10,000 in a
diversified equity fund. For the kid’s wedding, he will need 1.4 crore in 23
years. Though he needs to start an SIP of 10,000, the low surplus means he can
start an SIP of 6,000 in a diversified equity fund and 1,500 in the gold bond
scheme. He can raise this amount after a rise in salary. For retirement,
Sankaran will need ₹4.8 crore in 27 years and can assign
his stocks, mutual funds and EPF corpus. He will also need to start an SIP of 12,000
in a diversified equity fund. As for the goal of 5 lakh vacation in six years,
Maalde suggests he allocate his insurance maturity value to this goal.
For life insurance, Sankaran has two
traditional plans of 30 lakh, one of which he has converted to a paid-up plan
and has stopped paying the premium. He is advised to surrender it and continue
with the other plan. He also has a term plan of 1.5 crore and should continue
with it. For health insurance, Sankaran has a 3 lakh cover from his employer
and has taken a 2 lakh top-up plan. He should buy a family floater plan of 10
lakh, which will cost 1,167 a month and should give up the topup plan from his
employer. He should also pick a 25 lakh accident disability plan for a monthly
premium of 333.
