Family finance: Sharma needs to link financial goals to investments

Kaushal Sharma stays with his homemaker wife and two children, aged four and seven years, in his own house in Gurugram. Sharma brings in a monthly salary of Rs 1.45 lakh and his portfolio comprises real estate worth Rs 97 lakh, equity worth Rs 34.6. lakh in the form of mutual funds, and debt worth Rs 57.5 lakh in the form of EPF, PPF, NPS, debt funds, Sukanya Scheme and gold. He holds Rs 50,000 in cash and his goals include building an emergency corpus, saving for his children’s education and weddings, and retirement.

Portfolio

Cash flow

Financial Planner Pankaaj Maalde has calculated an emergency corpus of Rs 6.84 lakh, which is equal to six months’ expenses. For this, Sharma will have to allocate his cash and a portion of his debt funds, and this should be invested in an ultra short-term or money market fund.

How to invest for goals

Sharma wants to save Rs 63 lakh for his older child’s education in 11 years. For this, he will have to allocate 33% of his equity funds and start an SIP of Rs 9,000 in a diversified equity fund. For the younger child’s education in 14 years, he will need Rs 77 lakh. He can allocate 33% of his equity funds and start an SIP of Rs 5,000 in a diversified equity fund. For the older child’s wedding in 18 years, he needs Rs 84.5 lakh and can allocate a portion of Sukanya Scheme and gold investment. He will also have to start an SIP of Rs 8,500, but due to lack of surplus, he can start with Rs 2,500 in gold bond/ETF. Similarly, for the younger daughter’s wedding, he will need Rs 1 crore in 21 years. He can assign the remain portion of gold and Sukanya corpus and start an SIP of Rs 9,000, but due to lack of surplus, he can start with Rs 2,500 in gold bond/ETF.

For retirement in 20 years, Sharma will need Rs 5 crore, and can allocate his remaining equity funds, EPF, PPF and NPS corpus. He will have to continue investing Rs 500 a year in the PPF, besides starting an SIP of Rs 12,000 in a diversified equity fund to reach the goal.

Insurance portfolio

For life insurance, he has Rs 2 crore of term plan and doesn’t need any more cover. For health, he has Rs 10 lakh of family floater plan from his employer and has bought a Rs 10 lakh plan himself. Maalde advises he buy a Rs 15 lakh top-up with a deductible of Rs 5 lakh, which will cost him Rs 625 a month. He also has a critical illness plan of Rs 20 lakh and a Rs 40 lakh accidental disability plan as riders to his life insurance. Maalde suggests he continue with the plans.

Financial plan by Pankaaj Maalde Certified Financial Planner


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