Ramesh Shahapurkar, 34, is in a private job and brings a salary of Rs 69,600 a month. He stays in his own house in Goa, with his homemaker wife, and two children, aged six and two.
After considering household expenses of Rs 15,850, Rs 1,000 for children’s education, Rs 10,000 as contribution to his parents, insurance premium of Rs 3,300, home loan EMI (for a Rs 6.3 lakh home loan) of Rs 7,287, and investment of Rs 32,000, he is left with a negligible surplus of Rs 163. His goals include building a contingency corpus, buying a car, saving for the education and weddings of his children, and retirement.
Financial Planner Pankaaj Maalde suggests that Shahapurkar start by building an emergency corpus of Rs 5.9 lakh, which includes a medical buffer amount of Rs 3.5 lakh for his parents. He can allocate his fixed deposit to this goal and invest the amount in an ultra short-term fund. For his children’s education, Shahapurkar needs Rs 36 lakh and Rs 47 lakh in 12 and 16 years, respectively.
The former can be achieved by assigning Rs 2 lakh of mutual fund corpus and starting an SIP of Rs 9,000 in an equity fund. For the latter, he can again allocate Rs 2 lakh of mutual fund corpus and start an SIP of Rs 6,000 in an equity fund. For the kids’ weddings, he has estimated a need of Rs 18 lakh and Rs 24 lakh in 19 and 23 years, respectively. To achieve the former, he will have to start an SIP of Rs 2,000 in an equity fund and Rs 500 in the gold bond scheme. Similarly, for the latter, he should start an SIP of Rs 1,500 in an equity fund and Rs 500 in the gold bond scheme.
For retirement, he will need Rs 3 crore in 26 years and can amass it by allocating his PPF and EPF corpuses, stocks and mutual funds. He will also have to start an SIP of Rs 5,000 in a diversified equity fund. As for buying a car worth Rs 5 lakh in two years, Maalde suggests he push the goal to five years and start an SIP of Rs 5,000 in an equity savings fund and raise this amount with the increase in income.
Shahapurkar’s life insurance comprises a Rs 50 lakh term plan. Maalde suggests he buy another Rs 50 lakh cover at Rs 750 a month.
How to invest for goals
Annual return assumed to be 12% for equity. Inflation assumed to be 7%.
As for health insurance, he has a Rs 3 lakh family floater plan for his family and Rs 1 lakh cover for his parents. Maalde suggests he raise the family cover to Rs 10 lakh and parents’ cover to Rs 3 lakh at a cost of Rs 2,917 a month. He should also pick a Rs 25 lakh critical illness cover and a Rs 25 lakh accident disability plan for Rs 1,000 a month.
Insurance portfolio
Premiums are indicative and could vary for different insurers.
Financial plan by Pankaaj Maalde, Certified Financial Planner
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