Family finance: Early start to savings will help 26-year-old Sarkar meet financial goals easily

Amolendu Sarkar is a 26-year-old accountant who is single and stays in Delhi. He earns Rs 51,500 a month and has bought a house worth Rs 30 lakh. For this, he has taken a loan of Rs 22 lakh and is paying an EMI of Rs 21,000. After household expenses, his own education outgo and investment, Sarkar is left with a surplus of Rs 5,500. His goals include building an emergency corpus, buying a car and taking a vacation, saving for his future child’s education and wedding, and his retirement. Due to lack of surplus, Financial Planner Fincart suggests Sarkar put off some goals for now.

Sarkar can start by building an emergency corpus of Rs 1.9 lakh, which is equal to six months’ expenses. He can do so by allocating his cash and starting an SIP of Rs 9,284 in a debt fund for a year. Next, he wants to buy a car worth Rs 5.3 lakh in five years. For this he can allocate a part of his mutual funds and start an SIP of Rs 4,103 in a hybrid fund. However, due to lack of surplus, he can start with Rs 1,500 and increase the amount after one year when the emergency corpus is built. Sarkar also wants to take a vacation worth Rs 6.03 lakh after 12 years. For this he can allocate his stocks and remaining mutual funds and start an SIP of Rs 2,652 in a hybrid fund after a year.

Portfolio

Cash flow

Sarkar also wants to save for his future child’s education and wedding, but since these goals are 23 and 30 years away, he can start investing for these after his wedding and a rise in income. To amass Rs 1.7 crore for his child’s education in 23 years, he will have to start an SIP of Rs 14,406 in an equity fund. For the child’s wedding, he needs Rs 57.4 lakh and will have to start an SIP of Rs 2,059 in an equity fund.


How to invest for goals

Finally, for his retirement in 34 years, Sarkar will need Rs 7.2 crore, and can allocate his EPF to this goal. He will also have to start an SIP of Rs 13,613 in an equity fund and can start doing so after building his emergency fund, buying the car, and an increase in income after five years.

Insurance portfolio

Sarkar does not have life or health insurance. Though he does not have any liabilities currently, he would do well to buy insurance since he has a home loan. Fincart suggests he buy a term plan of Rs 1 crore, for which he will pay a premium of Rs 827 a month. For health insurance, he should buy a basic plan of Rs 5 lakh and a top-up plan of Rs 20 lakh, for which he will pay a monthly premium of Rs 862. After he is married, he can buy a family floater plan to include his spouse.

Financial plan by FINCART

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