Ketan and Prachi Shah from Ahmedabad get a combined monthly salary of Rs 1.64 lakh and are left with a surplus of Rs 25,066. Their portfolio is equity-oriented, but Financial Planner Pankaaj Maalde suggests they reduce the number of mutual funds to make it more manageable, besides shifting from stocks to mutual funds.
They have also taken two loans (car and personal) of Rs 2.8 lakh, for which they are paying EMIs of Rs 9,600. Maalde suggests they repay the expensive personal loan at the earliest by using the surrender value of a low-return traditional plan.
As for their goals, they can build the emergency fund of Rs 2.58 lakh by allocating cash, as well as Rs 1.25 lakh of the Rs 2.75 lakh surrender value of the traditional insurance plan. For the remaining Rs 1.23 lakh, they should use the surplus of Rs 7,083 and invest the amount in a short-duration debt fund.
To buy an office worth Rs 75 lakh in five years, the couple can start an SIP of Rs 40,000 in a balanced fund for four years. This will help build Rs 30 lakh, and for the remaining Rs 45 lakh, they can take a loan. The estimated EMI of Rs 43,426 at 10% for 20 years can be easily sourced from the surplus. To amass Rs 67.5 lakh for their future child’s education in 19 years, the couple can allocate stocks worth Rs 7.8 lakh. They should also start an SIP of Rs 1,000 in a diversified equity fund.
To build Rs 1.08 crore for the kid’s wedding in 26 years, they can assign the gold holding and start an SIP of Rs 4,000 in a diversified equity fund, and Rs 1,500 in the gold bond scheme. For retirement in 29 years, they will need Rs 14.4 crore and can assign the PPF, EPF, NPS and insurance surrender value. They should also start an SIP of Rs 24,000 in a diversified equity fund, and invest Rs 500 a month in the NPS and Rs 500 a year in the PPF.
How to invest for goals
For life insurance, Ketan has a term plan of Rs 2 crore and a traditional plan of Rs 10 lakh. This is sufficient for Ketan but he should buy a Rs 1 crore term plan for Prachi, which will cost Rs 834 a month. He should also surrender the traditional plan. For health insurance, Ketan and Prachi are covered for Rs 15 lakh and Ketan’s parents for Rs 6 lakh. They don’t need any more cover, but Ketan should buy a Rs 25 lakh critical illness plan and Rs 50 lakh accident disability plan for himself, and Rs 25 lakh accident disability plan for Prachi at Rs 1,500 a month in premium.
Financial plan by Pankaaj Maalde Certified Financial Planner
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