High savings to help meet
goals
Ahmedabad-based Shahs have not only covered their
risks, but have done well to start investing early.
Ketan and Prachi Shah from Ahmedabad
get a combined monthly salary of 1.64 lakh and are left with a surplus of 25,066.
Their portfolio is equity-oriented, but Financial Planner Pankaaj Maalde
suggests they reduce the number of mutual funds to make it more manageable,
besides shifting from stocks to mutual funds. They have also taken two loans
(car and personal) of 2.8 lakh, for which they are paying EMIs of 9,600. Maalde
suggests they repay the expensive personal loan at the earliest by using the
surrender value of a low-return traditional plan.
As for their goals, they can build
the emergency fund of 2.58 lakh by allocating cash, as well as 1.25 lakh of the
2.75 lakh surrender value of the traditional insurance plan. For the remaining 1.23
lakh, they should use the surplus of 7,083 and invest the amount in a
short-duration debt fund. To buy an office worth 75 lakh in five years, the
couple can start an SIP of 40,000 in a balanced fund for four years. This will
help build 30 lakh, and for the remaining 45 lakh, they can take a loan. The
estimated EMI of 43,426 at 10% for 20 years can be easily sourced from the
surplus. To amass 67.5 lakh for their future child’s education in 19 years, the
couple can allocate stocks worth 7.8 lakh. They should also start an SIP of 1,000
in a diversified equity fund. To build 1.08 crore for the kid’s wedding in 26
years, they can assign the gold holding and start an SIP of 4,000 in a
diversified equity fund, and 1,500 in the gold bond scheme. For retirement in
29 years, they will need 14.4 crore and can assign the PPF, EPF, NPS and
insurance surrender value. They should also start an SIP of 24,000 in a
diversified equity fund, and invest 500 a month in the NPS and 500 a year in
the PPF.
For life insurance, Ketan has a term
plan of 2 crore and a traditional plan of 10 lakh. This is sufficient for Ketan
but he should buy a 1 crore term plan for Prachi, which will cost 834 a month.
He should also surrender the traditional plan. For health insurance, Ketan and
Prachi are covered for 15 lakh and Ketan’s parents for 6 lakh. They don’t need
any more cover, but Ketan should buy a 25 lakh critical illness plan and 50
lakh accident disability plan for himself, and 25 lakh accident disability plan
for Prachi at 1,500 a month in premium.
