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Plan Ahead To Secure Your Future

Plan Ahead To Secure Your Future

The Gupta family should move away from gold and high-interest loans, and invest more in equity mutual funds, says Mumbai-based Financial Planner Pankaaj Maalde.

Aishwarya Gupta, a 30-year-old marketing professional, lives in Noida with wife Garima Singh (29), a teacher, and his dependent mother, Ekta. The couple does not have kids but will be planning for a baby in the next three yeaRs. Together, they bring a net monthly salary of Rs80,000 and expect it to rise 15 per cent annually. Their assets include Rs1.10 lakh in EPF balance, fixed deposits of Rs50,000, an investment of Rs57,000 in equity and balanced mutual funds, Rs5 lakh in gold, a bank balance of Rs1 lakh and Gupta's ancestral property worth Rs1 crore, which might be sold to purchase a property in Delhi-NCR. They have also taken a car loan and pay an EMI of Rs11,334. Gupta has purchased a term plan of Rs1 crore for which he pays an annual premium of Rs11,880. The couple wants to build an education fund and a marriage fund of Rs20 lakh each for the child. Both plan to retire at 60 and need to build a retirement corpus of Rs5.65 crore. Their short-term goal is to put together Rs5 lakh to go on a dream vacation within three yeaRs.

While developing a financial plan, we assume that dual income will continue until retirement and the rise in expenses after the baby's birth will be met from salary hike. The plan requires regular reviews to ensure that returns are in sync with future goals.

Plan It Now

Contingency: The duo should keep a contingency fund that will cover their expenses for six months. Their savings bank balance of Rs1 lakh, an amount of Rs1.50 lakh from gold investment and fixed deposits of Rs50,000 have been allocated for this purpose. The amount should be invested in ultra short-term funds for ready availability.

Life insurance: As mentioned before, Gupta has bought a term plan of Rs1 crore and the existing cover should be continued. As per need-based theory, his spouse also requires an insurance cover of Rs50 lakh and she should buy an online term plan for 30 yeaRs, which will cost around Rs6,000 a year.

Health and disability cover: Gupta's company provides a health cover of Rs2 lakh for both spouses. They should purchase a separate health plan without any delay as it is often difficult to get a new policy when one is older or it may not cover their existing medical conditions or may cover those after a long waiting period. A family floater plan for Rs10 lakh sum assured should be ideal in this case and will cost around Rs14,000 a year. Besides, they should buy a health cover of Rs3 lakh for Gupta's mother and the annual premium will be around Rs12,000. The duo should also get accident disability coveRs of Rs25 lakh each and the cost will be around Rs7,000 per annum. These will further ensure tax benefits.

Auto loan: Car loan at a high interest rate should be closed at the earliest. An amount of Rs3.50 lakh can be realised for the same by selling the rest of the gold investment. It will also free up the EMI amount, which can be used to build the desired corpus for future goals.

Get Future Ready

Retirement: The couple will require a corpus of Rs5.65 crore to fund their household expenses after retirement, assuming monthly cost at Rs30,000 in current value and factoring in 7 per cent inflation. Their current equity mutual fund balance of Rs57,000 and EPF balance of Rs1.10 lakh have been allocated towards this goal. Moreover, they should increase their monthly investment from Rs5,500 to Rs14,000 and put it in diveRsified equity mutual funds via SIP to build the desired corpus. They can also consider investing in ELSS for tax planning if required (see table Retirement Funding).

Funding for the Child: The couple will have to start a monthly SIP of Rs9,000 in a diveRsified equity scheme to amass Rs20 lakh in today's value (future value will be Rs67.50 lakh) for their child's graduation. A marriage fund of Rs20 lakh in today's value (future value will be Rs 1.08 crore) will be required when the son/daughter turns 25. For this, they have to start another monthly SIP of Rs6,000. They should begin this after a salary hike in future.

Dream vacation: As there is no surplus available to fund this goal, they should start investing after salary hike.

As told to Renu Yadav

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Published on: Apr 15, 2019, 10:25 AM IST
Posted by: Renu Yadav, Apr 15, 2019, 10:25 AM IST