Focus on main goals only
With limited
resources, Gandhinagar-based Patel should align his existing investments to
goals.
Haresh Patel, 46, stays with his
homemaker wife, two children aged 17 and 12, and his mother, in his own house
in Gandhinagar, Gujarat. He is self-employed and earns 50,000 a month. After considering household
expenses and insurance premium, he is left with a surplus of 324. The two things that work in Patel’s favour are
that he has his own house and does not have any liabilities in the form of
loans.
Patel’s portfolio comprises a house
worth 1.2 crore and a plot of land worth 9 lakh; equity in the form of mutual
funds of 69 lakh and stocks worth 57,000; debt as 30 lakh fixed deposit and
debt funds of 1 lakh, and cash of 25,000. His goals include building an
emergency fund, saving for the education of his children and retirement, buying
a car and taking a vacation. Financial Planner Pankaaj Maalde suggests he focus
on his primary goals and put off the goals of buying a car and taking a
vacation for now.
Patel will require an emergency fund
of 3 lakh, which is equal to six months’ expenses. Maalde suggests that he also
keep a medical buffer of 3 lakh for his mother. To build this amount, he can
allocate his debt fund (1 lakh) and fixed deposit (5 lakh). To amass 27 lakh
for his older child’s higher education in a year’s time, he should allocate his
fixed deposit of 25 lakh. For the younger child’s education expenses of 37.5
lakh in six years, he should assign his stocks and 20 lakh of his mutual fund
corpus. This will yield the desired amount in the specified period and no fresh
investment is required. Finally, for retirement in 14 years, he will need 2.65
crore and will have to allot his plot of land and the remaining mutual fund
corpus for it. No additional investment will be required for this goal. He
will, however, have to put on hold his goals of car and vacation till a further
rise in income.
For life insurance, Patel has a
traditional plan of 15 lakh, and Maalde suggests he surrender this. Instead, he
should buy a 1 crore term plan, which will cost 1,667 a month. For health
insurance, he has a 8 lakh family floater plan, but Maalde advises him to
replace it with a 10 lakh plan at a premium of 2,000 a month. He should also
buy a 25 lakh critical illness plan and 50 lakh accident disability plan for
himself, which will cost 1,500 a month.
