Stagger goals and cover
risks
The couple will have to wait for a rise in income
to start investing for all their financial goals.
V.V. Reddy, 39, is a
professor and lives with his homemaker wife and two children, aged 10 and six.
They stay in a rented house at Ananthapuramu, in Andhra Pradesh. While Reddy
brings in a salary of 49,300, his wife is likely to start earning soon. They
have a portfolio of 7.2 lakh, which includes 1.45 lakh of cash, 4.5 lakh of PPF
as debt, and 1.25 lakh of equity in the form of stocks and mutual funds. They
also have two ancestral properties worth 1.2 crore and 75 lakh. Their goals
include building a contingency corpus, buying a car and taking a vacation,
saving for their kids’ education and weddings, and their retirement. The couple
will have to put off their car and vacation goals for now due to lack of
surplus.
Financial Planner Pankaaj Maalde
suggests they build the emergency corpus of 2.04 lakh, equal to six months’
expenses, by allocating their cash of 1.45 lakh. For the remaining amount, they
should save the surplus for five months before investing for other goals. This
amount should be invested in an ultra short duration fund.
For the education of their children
in eight and 12 years, they will need 17 lakh and 22.5 lakh, respectively. For
the older child, they will have to start an SIP of 11,500 in an aggressive
hybrid fund. For the younger child, they can allocate their stocks and mutual
funds. Besides, they will have to start an SIP of 5,500 in a diversified equity
fund, but due to lack of surplus, they can begin with 3,500 and increase after
a rise in income. For the kids’ weddings in 15 and 19 years, they want 27.5
lakh and 36 lakh, respectively. They will have to start SIPs of 5,500 and 4,000
in diversified equity funds, but due to lack of surplus, they should do so as
and when the funds are available. For retirement in 21 years, they need 2.15
crore and will have to allocate their PPF corpus. They will also have to start
an SIP of 17,000 in a diversified equity fund when their surplus increases.
Reddy should continue to invest 500 a year in the PPF.
The couple has no life insurance, and
for health insurance, they have a 5.5 lakh family floater plan. Maalde suggests
Reddy take a term plan of 75 lakh for 1,167 a month. For health insurance, they
should continue with the existing plan, but Reddy should purchase an accident
disability plan of 25 lakh, which will come for a premium of 250 a month. This
will take care of their insurance needs.
