financial planning: Family finance: Due to lack of investment surplus, Sharma will have to stagger money goals

Nikhil Sharma, 38, stays with his homemaker wife and six-year-old child in a rented house, in Pune. Sharma is salaried and brings in Rs 1.36 lakh a month. His portfolio comprises equity worth Rs 4.1 lakh in the form of stocks and mutual funds, debt worth Rs 35 lakh in the form of PPF, EPF and fixed deposit, and Rs 2.3 lakh in cash. After considering the household expenses, rent, investments and insurance premium, Sharma is left with a surplus of Rs 21,489. His goals include building an emergency corpus, buying a car and a house, saving for his child’s education and wedding, and his retirement. However, due to lack of sufficient surplus, Sharma will have to put off several of his goals, including buying a car and a house, and the child’s wedding till a rise in income.

Portfolio

Cash flow

Financial Planner Pankaaj Maalde suggests they start by building an emergency corpus of Rs 5.4 lakh, equal to six months’ expenses, by allocating their cash and insurance value. This should be invested in a liquid fund. Next, they want to save Rs 79 lakh for their child’s education in 12 years. For this, they can start an SIP of Rs 25,000 in diversified equity funds. For the child’s wedding in 19 years, they will need Rs 54 lakh, and will need to start an SIP of Rs 7,500 in diversified equity funds. However, due to lack of surplus, they will have to wait for a rise in income to start investing. For retirement in 22 years, Sharma will need Rs 7.1 crore and can allocate his PPF, EPF and NPS corpus, along with his fixed deposit, stocks and mutual fund corpus. He should also continue to contribute Rs 5,000 a month to the NPS and Rs 500 to the PPF annually to reach the goal. He will also need to start an SIP of Rs 21,000 in diversified equity funds for the specified period.

How to invest for goals

For life insurance, Sharma has taken two term plans of Rs 2.03 crore, and one traditional plan of Rs 10 lakh, for which he is paying a monthly premium of Rs 7,186. Maalde suggests he continue with the term plans and surrender the traditional plan. As for health insurance, Sharma’s employer provides a Rs 3 lakh cover and Sharma has bought an independent top-up plan of Rs 10 lakh as well as a Rs 3 lakh basic plan and a Rs 10 lakh top-up plan for his parents. Maalde suggests that Sharma buy an independent family floater plan of Rs 3 lakh for himself, his wife and child. Maalde also recommends that Sharma buy a Rs 50 lakh accident disability plan for himself, which will cost him Rs 667 in monthly premium.

Insurance portfolio

Financial plan by Pankaaj Maalde Certified Financial Planner


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