On track to meet all goals
Aggressive saving
by Pune-based Patil means that he will be able to meet his primary goals with
ease.
Ram Patil is a software engineer, who
lives with his homemaker wife and two children, aged five and one, in a rented
house, in Pune. He gets a monthly salary of 75,000 and his net worth is 57.07
lakh. His portfolio includes cash of 1 lakh, debt worth 35.8 lakh in the form
of fixed deposits, PPF and EPF, and equity worth 20.2 lakh in the form of
mutual funds and stocks. After considering household expenses, insurance
premium and investment, he is left with a surplus of 1,833. His goals include
building an emergency corpus, buying a house, saving for children’s education,
buying a car, and retirement.
Financial Planner Pankaaj Maalde
suggests that Patil begin by building a contingency corpus of 3.4 lakh, which
is equal to six months’ expenses. He can allocate his cash holding of 1 lakh
for this goal and invest it in a liquid fund. For the remaining amount, he will
have to save till the corpus is built. He should start his home loan EMI only
after the emergency fund is ready. To buy a house worth 55 lakh in two years,
he should make a down payment of 25 lakh by using his fixed deposit. For the
remaining 30 lakh, he should take a home loan for 25 years, and at 8%, his EMI
will be 23,350, which can be sourced from the surplus.
To fund his older child’s education
in 13 years, Patil has estimated a need 48 lakh. For this, he can allocate 25%
of his mutual fund corpus and start an SIP of 7,500 in a diversified equity
fund. For the younger child’s education in 17 years, Patil will need 63 lakh.
For this, he can allocate another 25% of his mutual fund corpus and start an
SIP of 4,500 in a diversified equity fund. For retirement, Patil will need 4.5
crore in 26 years. He will have to allocate his stocks, mutual funds, EPF and
PPF to meet this goal. He should also continue investing 500 in the PPF and 6,000
in a diversified equity fund.
Patil has a term life insurance of 80
lakh, for which he is paying a monthly premium of 917. He does not need any
more life cover and Maalde suggests he continue with this. For health
insurance, he has a 3 lakh plan provided by his employer and Maalde advises him
to buy another 10 lakh family floater plan. This will cost him 1,167 a month in
premium. He should also buy a 25 lakh accident disability plan for himself, which
will cost him 333 a month in premium.
