Family finance: Why Rawats should link their investments with money goals

Manish and Rashmi Rawat are both working and live with their newborn child in their own house, in Greater Noida. The couple brings in a combined monthly income of Rs 1.5 lakh and after considering expenses and investment, is left with a surplus of Rs 37,917.

They have a portfolio of Rs 1.02 crore and their goals include building an emergency corpus, buying a car and another house, saving for their child’s education and wedding, and their own retirement.

Financial Planner Pankaaj Maalde suggests they drop their goal of buying another house as their portfolio is already skewed towards real estate and they currently don’t have enough surplus to invest for this goal.


Portfolio

Cash flow

Maalde suggests that the couple first build a contingency corpus of Rs 2.46 lakh, which is equal to three months’ expenses, as well as a medical buffer of Rs 2.5 lakh for Manish’s parents. For this, they can allocate their cash and fixed deposit and invest it in a liquid fund. For the child’s education goal in 18 years, the couple needs Rs 1.3 crore. For this, they will have to start an SIP of Rs 18,000 in a diversified equity fund.

For the child’s wedding in 25 years, they have estimated a need of Rs 80 lakh and will have to start an SIP of Rs 5,000 in a diversified equity fund. Finally, for retirement, the couple will need Rs 9.6 crore in 25 years. For this, they can assign their EPF, PPF and NPS corpuses, as well as the equity fund corpus and one house.

Besides allocating the existing resources, they will have to start an SIP of Rs 30,000 in a diversified equity fund. The couple also wants to buy a car worth Rs 15 lakh in present value after five years. Since they have a surplus of Rs 15,000, Maalde suggests they start an SIP in an equity savings fund and review the situation after three years. If they can’t build the required corpus, they can lower the goal value.

How to invest for goals

For life insurance, the couple has two traditional plans of Rs 43 lakh and Manish has a term plan of Rs 1 crore. Maalde suggests they surrender the two traditional plans and buy a Rs 1 crore term plan for Rashmi. This will cost Rs 1,083 a month in premium. The couple has no health insurance, so Maalde suggests they immediately buy a Rs 10 lakh family floater plan, which will cost Rs 1,250 a month. Both Manish and Rashmi should also buy Rs 25 lakh accident disability plans each, which will come for a monthly premium of Rs 667.

Insurance portfolio

Financial plan by Pankaaj Maalde Certified Financial Planner

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