Early start to help
planning
Aligning investments with goals and adding debt to
their portfolio will help the couple ease their journey.
Jay Tank, 25, is self-employed and
earns about 1 lakh a month. He lives with his homemaker wife and parents in
their house, in Navsari, Gujarat. Given the early start to financial planning,
his portfolio is meagre. It comprises cash of 82,000, and equity in the form of
mutual funds worth 1.75 lakh and stocks worth 1.02 lakh. In fact, his net worth
is currently in the negative due to a car loan of 9 lakh, for which Tank is
paying an EMI of 14,500. His goals include building an emergency corpus, saving
for his future children’s education and weddings, buying a car, taking a
vacation, and creating a retirement corpus.
Financial Planner Pankaaj Maalde
suggests he start by building an emergency corpus of 3.6 lakh, which is equal
to his six months’ expenses. He can allocate his cash of 82,000, and for the
remaining amount, he can start saving the surplus of 39,000 for seven months.
This amount should be invested in a short duration debt fund. He can start
investing for other goals only after building the contingency fund.
For the higher education expenses of
his first child in 22 years and second child in 25 years , he has estimated a
need of 1.1 crore and 1.3 crore, respectively. He can amass it by starting SIPs
of 8,500 and 7,500 in diversified equity funds for the two goals. As for the
kids’ weddings in 29 and 32 years, respectively, Tank will need 1.8 crore and 2.2
crore. For the first goal, he can start an SIP of 5,000 in a diversified equity
fund and 1,000 in the gold bond scheme. For the second goal, he can start an
SIP of 4,000 in a diversified equity fund and 1,000 in the gold bond scheme. As
for retirement, for which he will need 9.4 crore in 35 years, he can assign his
stocks and mutual fund corpus. He will also have to start an SIP of 10,000 in a
diversified equity fund and 2,000 in the PPF to build the desired corpus in the
specified time frame.
For life insurance, Tank has a 50
lakh term plan with a 50 lakh accident disability rider. Maalde suggests he
continue this plan, but also buy a 1 crore term plan, which will come for a
premium of 1,000 a month. For health insurance, Tank has an independent family
floater plan of 5 lakh, but Maalde suggests he buy a top-up plan of 15 lakh
with a deductible of 5 lakh. This will cost him 500 a month in premium.
