Early start to help with plan
Despite the current
low surplus, Rewari-based Kumar will be able to meet his goals in a staggered
manner.
Virender Kumar, 31, is an IT
professional, who lives with his homemaker wife, three-monthold child and
parents, in their house in Rewari, Haryana. He brings in a salary of 23,000 a
month, but due to shared expenses and no rent, his household expenses are not
too high. His portfolio is only worth 6.25 lakh and includes cash of 50,000,
equity worth 1.65 lakh in the form of mutual funds, and debt worth 4.1 lakh in
the form of fixed deposit and EPF corpus. His goals include building an
emergency corpus, buying a house, saving for his child’s education and wedding,
and retirement.
Financial Planner Pankaaj Maalde
suggests Kumar start by building the emergency corpus of ₹69,000, which is equal to six months’ expenses, by
allocating his cash and insurance value. This should be invested in an
ultra-short duration fund.
Kumar wants to save 34 lakh for his
child’s education in 18 years and 54 lakh for the wedding in 25 years. To
achieve the former, he will have to start an SIP of 4,500 in a diversified
equity fund, and for the latter, he will need to start an SIP of 2,500 in a
diversified equity fund and 500 in the gold bond scheme. For retirement, Kumar
will need 1.8 crore in 29 years, and can assign his mutual fund and EPF
corpuses. In addition, he will have to start an SIP of 4,000 in a diversified
equity fund.
Kumar also wants to buy a house worth
60 lakh in 10 years. Maalde suggests he pay 40% of the amount as down payment
and take a loan for the rest. He should assign his fixed deposit for this goal
and shift it to a short duration fund. He can then start a systematic transfer
plan (STP) to a diversified equity fund for the next two years. After this, he
should continue to invest till he amasses the down payment. He can then take a
home loan for 20 years, which will result in an EMI of 31,250 at 8.5% interest.
If his income grows sufficiently in 10 years, he will be able to source the EMI
and fulfil this goal.
For life insurance, Kumar has a
traditional plan of 3 lakh, and Maalde suggests he surrender it. Instead, he
should buy a 40 lakh term plan, which will cost him 417 a month in premium. For
health insurance, he has a cover of 80,000 for each of the three family
members. Maalde advises he buy a 5 lakh family floater plan, which will cost
him 1,000 a month. He should also buy an accident disability cover after an
increase in his salary.
