Accumulated savings and increase in equity exposure will help the Ryalis meet their primary goals.
B.B. Ryali works in a private firm and gets a salary of Rs 1.08 lakh a month. He stays with his wife, two children aged 15 and 20 years, and a sister. He is provided company accommodation, but has his own house which brings a rental income of Rs 12,000 a month.
He is also paying an EMI of Rs 19,000 for a home loan of Rs 16.5 lakh. His goals include building an emergency corpus, taking a vacation, buying a house, saving for his kids’ education and wedding, and retirement.
The financial planning team of Fincart suggests Ryali build the emergency corpus of Rs 3.7 lakh by assigning his cash and a portion of fixed deposit. He will also need to start an SIP of Rs 7,468 in an ultra short-term fund. Next, Ryali wants to buy a house worth Rs 1.05 crore in seven years. For this, he can make a down payment of Rs 63.15 lakh and allocate his property for this.
It will yield Rs 48.7 lakh in the given period and, for the rest, he will have to start an SIP of Rs 12,037 in an equity fund. For the balance, he will have to take a loan, which will result in an EMI of Rs 36,537 at 8.5% interest. This can be furnished by the rise in salary and redirecting the SIP being used to build the emergency fund after a year. As for vacation worth Rs 6.3 lakh in four years, he will need to start an SIP of Rs 11,194 in a balanced fund. Due to lack of surplus, he can start with Rs 5,000 for now.
For his daughter’s education in two years, Ryali will need Rs 8.4 lakh and this can be funded with the help of fixed deposit, which should be invested in an arbitrage fund. For her wedding in 12 years, he will need Rs 40.2 lakh and this too can be fully funded by using the existing mutual fund corpus and insurance surrender value.
How to invest for goals
For the son’s wedding in seven years, the remaining fixed deposit and mutual fund corpus should suffice. For retirement in 13 years, Ryali will need Rs 2.13 crore and this can be funded by the EPF, PPF and insurance corpus. He will also need to start an SIP of Rs 1,673 in an equity fund and continue to put Rs 500 a year in the PPF.
As for life insurance, Ryali has three traditional plans worth Rs 16 lakh and Fincart suggests he surrender all. Instead, he should buy a term plan worth Rs 2 crore at Rs 3,652 a month. As for health insurance, the couple has a Rs 6 lakh family floater plan. Fincart advises him to continue with this and also buy a top-up plan of Rs 20 lakh at a premium of Rs 550 a month.
Financial plan by FINCART
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