Kumars need to stagger some of their money goals till income increases
Manish Kumar, 38, lives with his homemaker wife, three-year-old child and mother, in his own house, in Ahmedabad. He gets a monthly salary of Rs 1.1 lakh, and his portfolio includes property worth Rs 80 lakh, cash of Rs 4 lakh, and debt worth Rs 20 lakh in the form of EPF and insurance surrender value. He also has a home loan and car loan for which he is paying EMIs of Rs 53,542. His goals include building an emergency corpus, saving for his children’s (including another child in future) education and weddings, and retirement.
Financial Planner Pankaaj Maalde suggests that before starting investment, Kumar repay his car loan with a portion of his cash and insurance surrender value. He should also move to a lower interest rate for his home loan to bring down the EMI to Rs 40,220. He can then build a contingency corpus of Rs 4.9 lakh, which is equal to six months’ expenses. He can allocate his cash of Rs 3 lakh and start saving for the remaining Rs 1.9 lakh from his surplus before investing for other goals. This will take a year and the entire amount should be put in a liquid fund.
To fund his child’s education in 15 years, Kumar has estimated a need Rs 41.5 lakh. For this, he can start an SIP of Rs 8,000 in a diversified equity fund. For the child’s wedding in 22 years, Kumar will need Rs 53 lakh and will have to start an SIP of Rs 4,000 in a diversified equity fund. However, due to lack of surplus, he will have to put off investment till a rise in his income. For his retirement in 22 years, he will need Rs 3.6 crore. He will have to allocate his EPF corpus of Rs 15 lakh for this goal. He will also have to start an SIP of Rs 15,000 in a diversified equity fund, and invest Rs 5,000 in the NPS. Kumar also wants to start saving for the education and wedding of another child, for which he will need Rs 54 lakh and Rs 70 lakh, when the child is 18 and 25 years, respectively. However, due to lack of surplus, he can invest after a rise in income.
For life insurance, Kumar has two traditional plans worth Rs 6 lakh. Maalde advises him to surrender these and buy a term plan of Rs 1.5 crore, which will cost him Rs 1,333 a month. For health insurance, he has a Rs 2 lakh plan from his employer and Maalde suggests he buy an independent family floater plan of Rs 10 lakh, which will cost him Rs 1,167 a month. He should also buy an accident disability plan of Rs 25 lakh for Rs 333 a month.
