Family finance: Singhs need to align investments with money goals


Ajit and Mugdha Singh are IT professionals and bring in a salary of Rs 1.65 lakh a month. They stay with their one-year old child in Thane. They have a house worth Rs 90 lakh, for which they have taken a loan of Rs 66.5 lakh and are paying an EMI of Rs 50,000. Their other investments include equity worth Rs 16.2 lakh in the form of mutual funds and stocks, debt worth Rs 16 lakh in the form of EPF, PPF, POMIS and Sukanya scheme, and Rs 2 lakh in cash. Their goals include building an emergency corpus, saving for their child’s education and wedding, buying a car and a house, and retirement. For now, the couple will have to forgo their goals of buying a car and a house due to lack of investible surplus.

Portfolio

Portfolio



Cash flow

Cash flow



Financial Planner Pankaaj Maalde has calculated an emergency corpus of Rs 3.67 lakh for the couple, which is equal to three months’ expenses. For this they will have to assign their cash and save the remaining Rs 1.67 lakh before starting with their investments. This should be invested in an ultra short-term or arbitrage fund, and raised to a corpus worth six months’ expenses at the earliest.

How to invest for goals

How to invest for goals



The couple wants to save Rs 79 lakh for their child’s education in 17 years. For this, they will have to start an SIP of Rs 12,000 in diversified equity mutual funds. For the child’s wedding in 24 years, they will need Rs 76 lakh and can allocate their Sukanya scheme corpus for the same. They will have to continue to invest Rs 5,000 per month in the Sukanya scheme and another Rs 2,000 in diversified equity funds to reach the goal. For retirement in 18 years, they will need Rs 4.4 crore, and can allocate their stocks, mutual funds, EPF and PPF. They will have to continue investing Rs 500 a year in the PPF besides starting an SIP of Rs 15,000 in a diversified equity fund and Rs 8,000 in the NPS. Maalde also advises them to shift from stocks to diversified equity funds.

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Insurance portfolio

Insurance portfolio



For life insurance, they have four traditional plans. Maalde suggests they surrender two of these and another plan that is maturing this year can be used to bolster the contingency fund. They will also need to buy a term plan of Rs 1.5 crore for Ajit and Rs 1 crore for Mugdha at Rs 2,500 a month. For health, both have plans worth Rs 22 lakh from their employers. Maalde suggests they confirm that the plans will continue till retirement or on leaving their jobs and, if not, they should buy a fresh plan. They should also pick Rs 25 lakh accidental disability plans for each at Rs 500 a month.

Financial plan by Pankaaj Maalde Certified Financial Planner

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