Prashanth and Sushma stay with their three-year-old child in Kallige, Karnataka. They are both engineers and get a combined monthly salary of Rs 1 lakh. They have a house worth Rs 60 lakh and are repaying a Rs 2 lakh home loan with an EMI of Rs 9,000.
After considering household expenses, EMI, insurance and investment, they are left with a surplus of Rs 43,924. This should be put to work immediately to achieve their goals, which include building an emergency corpus, setting up a business, buying a house, saving for their child’s education and retirement.
The financial planning team from Fincart suggests that they build the emergency corpus of Rs 1.86 lakh, which is equal to six months’ expenses, by allocating cash and starting an SIP of Rs 5,328 for one year. This should be invested in a liquid or a short duration debt fund.
Next, the couple wants to set up a business in four years, for which they want Rs 18.9 lakh. To achieve this goal, they will have to start an SIP of Rs 34,258 in a short duration fund. For their child’s higher education in 15 years, the couple wants to amass Rs 41.7 lakh and can achieve the goal by starting an SIP of Rs 8,777 in an equity fund.
The couple also wants to buy a house worth Rs 53.7 lakh in 10 years, by making a down payment of Rs 21.4 lakh. For the remaining amount, they can take a loan and the EMI can be furnished from the surplus. For this goal, they can assign their recurring deposit, stocks and insurance value. Besides, they will have to start an SIP of Rs 25,177 in a diversified equity fund.
Due to lack of surplus, they can start only with Rs 8,400 and raise the amount with the increase in income. For retirement in 25 years, the couple will need Rs 2.1 crore, and can assign their EPF, PPF, NPS and pension plan. They also need to start an SIP of Rs 3,910 in an equity fund.
For life insurance, Prashanth has a term plan of Rs 60 lakh and a traditional plan of Rs 40,000. Fincart suggests he end the term plan and buy a new Rs 1 crore plan, for Rs 1,512 a month. He should continue with the traditional plan as a debt component of his portfolio.
For health insurance, the couple has a Rs 3 lakh family floater plan, and Prashanth has bought a Rs 3 lakh plan each for his parents. He should end the family floater plan and buy a Rs 5 lakh plan, besides a Rs 20 lakh top-up plan. This will cost Rs 1,360 a month in premium. He should also continue his parents’ plan.