Stagger goals, reduce debt
Ahmedabad-based
Mahajans will have to put off some goals, but will reach them after a salary
hike.
Prasad and Pallavi Mahajan bring in a
combined monthly salary of 1.12 lakh. They stay with their two children, aged
seven and three, in their own house, in Ahmedabad. Their portfolio includes
real estate worth 27 lakh, cash of ₹25,000, equity
worth 2 lakh in the form of mutual funds, and debt worth 5.5 lakh in the form
of EPF, PPF and NPS. They currently have a high debt of 30.1 lakh, which
includes home (17.5 lakh), car (2.8 lakh) and personal (9.8 lakh) loans. They
are paying an EMI of 57,180 for these. Their goals include building an
emergency corpus, saving for their kids’ education and weddings, and their own
retirement.
Financial Planner Pankaaj Maalde
suggests they start by rescheduling their debt because of expensive personal
and car loans. They can do this by reworking their home loan or taking a top-up
loan of 30 lakh. At 9% interest, it will result in an EMI of 25,200, and they
can repay the personal and car loans with the additional loan amount. This will
free up 31,980 which can be used to meet goals.
The couple can build the contingency
corpus of 4.26 lakh, which is equal to six months’ expenses, by allocating
their cash and saving the entire surplus for 10 months. This should be invested
in an ultra-short duration fund. They can start investing for their goals only
after the emergency corpus has been built. The Mahajans want to save 42 lakh
and 55 lakh for the kids’ education in 11 and 15 years, respectively. They can
do this by starting SIPs of 15,500 and 11,000 in diversified equity funds. For
their kids’ weddings in 18 and 22 years, they will need 34 lakh and 44 lakh,
respectively, but will have to wait for a rise in income to start investing for
these. For retirement, they will need4.2 crore in 25 years, and can assign their
EPF, PPF, NPS and mutual fund corpuses. In addition, they will have to start an
SIP of 13,000 in a diversified equity fund, and invest 500 a year in the PPF.
For life insurance, Prasad has a term
plan of 50 lakh. Maalde suggests he continue with it and buy an additional 1
crore term plan, which will cost 1,250 a month. For health insurance, they have
a family floater plan of 5 lakh and critical illness cover of 10 lakh. Prasad
also has a 20 lakh accident disability plan. Maalde advises he buy a 15 lakh
top-up family floater plan, with a deductible of 5 lakh, which will cost 833 a
month.
