Family finance: Salaried Pendse has enough time to reach financial goals

Yatin Pendse, 35, lives with his homemaker wife and one-year old child, in his own house, in Pune. He gets a monthly salary of Rs 80,000, and his portfolio includes property worth Rs 70 lakh, cash of Rs 3 lakh, debt worth Rs 10.1 lakh in the form of EPF, PPF and fixed deposit, and equity worth Rs 10 lakh in the form of mutual funds.

He has no loans and after considering his household expenses, contribution to his parents, insurance premium and investment, he is left with a surplus of Rs 22,800. His goals include building an emergency corpus, saving for his spouse’s business, child’s education and wedding, taking a vacation, and retirement.

Portfolio

Cash flow

The financial planning team from Fincart suggests that Pendse build a contingency corpus of Rs 2.5 lakh, which is equal to six months’ expenses. He can allocate his cash for the same and put it in a liquid fund. Since Pendse’s wife wants to start her own business in two years, he wants to save Rs 5.6 lakh for the same. For this, he will have to assign his remaining cash and fixed deposit and and start an SIP of Rs 19,178 in an equity savings fund.

To fund his child’s school admission in three years, Pendse has estimated a need Rs 3.3 lakh. For this, he can start an SIP of Rs 8,191 in an equity savings fund. For the child’s higher education in 17 years, he will need Rs 75.8 lakh and can meet this goal by allocating his mutual fund corpus of Rs 10 lakh. For the child’s wedding, he needs Rs 40.4 lakh in 23 years and can start an SIP of Rs 2,864 in a diversified equity fund after two years when the business goal is completed. For his retirement in 25 years, he will need Rs 3.01 crore. He will have to allocate his EPF and PPF corpuses for this goal, and start an SIP of Rs 9,852 in a diversified equity fund. Due to lack of surplus, he can start with Rs 8,400 and increase it after two years. He should also put in Rs 500 a month in the PPF. He is also advised to put off his vacation goal for now.

How to invest for goals

For life insurance, Kumar has two term plans of Rs 1 crore. Fincart advises him to close both the plans and, instead, buy one term plan of Rs 1.5 crore, which will cost him Rs 1,417 a month. For health insurance, he has a Rs 5 lakh family floater plan provided by his employer. Fincart suggests he also buy an independent family floater plan of Rs 5 lakh and a top-up plan of Rs 20 lakh with a deductible of Rs 5 lakh. The premium for this will amount to Rs 1,406 a month.

Insurance portfolio

Financial plan by FINCART

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