Shravan I. is a 32-year-old software engineer from Tamil Nadu and gets a monthly salary of Rs 89,500. He stays with his homemaker wife Radhika, age 29, in a rented house.
After considering his household expenses, rent and insurance premium, he is left with a surplus of Rs 32,308. His portfolio, worth Rs 1.8 crore, comprises real estate in the form of three plots of land worth Rs 60 lakh, debt worth Rs 40.6 lakh and equity worth Rs 83 lakh. His goals include building a contingency corpus, buying a car and a house, taking a vacation, saving for his future child’s education and wedding, and his retirement.
Financial Planner Pankaaj Maalde suggests he build an emergency corpus of Rs 3.6 lakh for the couple and a medical buffer of Rs 3.5 lakh for his parents. This can be done by allocating a portion of his cash, fixed deposit and P2P loan, which should be invested in an ultra short duration fund. Shravan wants to buy a car worth Rs 8.5 lakh after three years and can amass the amount by starting an SIP of Rs 30,000 in an equity savings fund.
For his goal of taking a Rs 3.5 lakh vacation in five years, he can invest his cash holding of Rs 2 lakh in a short duration fund. No existing resource has been allocated to both these goals. Shravan also wants to buy a house worth Rs 70 lakh in five years, for which he can sell his plots to get the desired amount.
How to invest for goals
Annual return assumed to be 12% for equity and 8% for debt funds. Inflation assumed to be 7%.
For the education of his future child in 18 years, Shravan has estimated a need of Rs 1.7 crore. For this, he can assign a portion of his mutual fund corpus, which will help amass the required amount in the specified time. For the child’s wedding in 25 years, he wants Rs 2.7 crore, and can allocate the remaining mutual fund corpus for this goal. For retirement, he will need Rs 8.3 crore in 23 years as he wants to retire at 55 years. For this, he can assign his PPF, EPF, PMS and remaining mutual fund corpus. No fresh investment is needed for this goal.
Premiums are indicative and could vary for different insurers.
Shravan has no life insurance, and a Rs 7.5 lakh family floater plan for health insurance, which has been provided by his employer. Maalde suggests he buy a Rs 1 crore term plan, which will cost him Rs 833 a month in premium. For health insurance, he should buy a Rs 10 lakh family floater plan, which will cost him Rs 1,000 a month in premium. He should also purchase a Rs 25 lakh accident disability plan at a monthly premium of Rs 333. This should take care of his insurance needs.