Denson and Renju Davis stay with their two children, aged eight and four, in Thiruvananthapuram. Both are employed and bring in a combined monthly salary of Rs 1.2 lakh, which is boosted by the rental income of Rs 14,000 a month. With household expenses of Rs 59,417, house rent of Rs 22,000, insurance premium of Rs 6,500, and home loan EMI of Rs 15,000, they are left with a surplus of Rs 31,083.
Their portfolio comprises a house worth Rs 55 lakh, debt investments worth Rs 19.8 lakh, Rs 1.35 lakh in equity, and Rs 1.25 lakh cash. Their goals include saving for emergencies, kids’ education and weddings, buying another house and a car, and retirement. However, they will have to put off the goals of car, house and kids’ weddings till a rise in income.
Portfolio
The financial planning team from Fincart suggests they start building an emergency corpus of Rs 3.03 lakh by allocating their cash and fixed deposit. This should be invested in an ultra short-term fund. For their daughter’s education expenses in 11 years, the couple will need Rs 38.9 lakh. This can be amassed by allocating their fixed deposit, stocks and insurance proceeds. This will take care of the goal and will not require any fresh investment. For the son’s education in 14 years, they will need Rs 56.9 lakh, which can be built by starting an SIP of Rs 13,774 in an equity fund.
Cash flow For retirement, they will need Rs 4.9 crore in 26 years. To achieve this goal, they can allocate their EPF corpus and start an SIP of Rs 21,227 in an equity fund. But due to lack of surplus, they will have to start with an investment of Rs 15,000 and raise this amount with an increase in income.
How to invest for goals For life insurance, the couple has two traditional plans worth Rs 10 lakh, for which they are paying a monthly premium of Rs 5,667. They are also covered by their company for Rs 50 lakh. Fincart suggests that since both the plans are close to maturity, the couple should retain these as a debt component of their portfolio and invest the maturity proceeds to achieve the goal of their daughter’s education. Denson should also buy a Rs 2 crore term plan at Rs 1,700 a month.
Insurance portfolio As for medical insurance, the couple has a family floater plan of Rs 8 lakh. Fincart suggests that they retain this plan, but also purchase a top-up plan of Rs 20 lakh, which will come for a monthly premium of Rs 469.
Financial plan by FINCART
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