Pankaj’s family future plan

Equity Mutual funds

Rs 2.4 lakh

ULIPs Rs 2.18 lakh

Three of them,of which two are long term payment.Term plan– Rs 40 lakh with additional accident cover of Rs 40 lakh

FDs Rs 15,000

PF Rs 10,000

Cash at Bank

Negligible

Monthly cash flow
Salary

Rs 1.42 lakh

Expenses

Rs 54,000 (like groceries,provisions,utility bills,entertainment etc. on a monthly basis)

Monthly SIP (already committed)

Rs 34,000

Surplus PM

Rs 54,000

Financial Goals

Buying House

Current cost

Rs 50 lakh

6 months from now

Avni’s education (in 2028)

Current cost

Rs 10 lakh

Future Cost 38.8 lakh

Monthly Commitment 6,000

Avni’s marriage (in 2034)

Current cost

Rs 20 lakh

Future Cost Rs 1.25 cr

Monthly Commitment 8,500

Buying Car (in 2016)

Current cost

Rs 9 lakh

Future Cost 13.4 lakh

Monthly Commitment 17,000

holidays (every year)

Current cost

Rs 75,000

Monthly Commitment 6,000

Retirement Planning

(2042)

Rs 5,00,000

Future Cost 9.81 cr

Monthly Commitment 25,000

Assumptions

Inflation

8% Per Annum

Life expectancy

85 years

Return

12% Per Annum expected from investments of over 10 year periods

Recommendations
Emergency Fund

Rs 4.5 lakh

Should create a corpus.

Immediately shift Rs 1 lakh from his equity portfolio to liquid funds.

Grow the corpus gradually by adding Rs 23,000 every month to a liquid fund / FD

Express Tip

Since Pankaj is the sole earning member,he should build an emergency corpus for 5 months.

Life Insurance

Rs 40 lakh

Term plan – with accident cover of Rs 40 lakh

ULIPs – Three of them,of which two are long term payments

Recommendation –

Should not discontinue premium payment in long term ULIPs,provided they are performing

As per Human Life Value computation he should be insured for Rs 2.7 cr

Considering his current cover of Rs 48.25 lakh,he should purchase a term plan for Rs 2.2 cr

This additional term cover (online policies) should cost him around Rs 22,000 p.a.

Express Tip

Since his family completely relies on him for finances,he should buy additional cover of Rs 2.2 crore immediately.

Health Insurance

Rs 4 lakh

Family floater

Recommendation – Next year he should increase it to Rs 5 lakh cover

Express Tip

He has a family floater plan. He should buy individual health policy for each member.

Home purchase

He should defer his home purchase as the there are no funds for down payment of Rs 10 lakh

PPF account

Open a PPF account and deposit money to earn long-term tax free income

Express Tip

He should look at investing in SIPs in equity diversified mutual funds to build retirement corpus.

Holiday fund

He can start by putting away

Rs 6,000 per month in a short term debt fund

Long term Goals

Ideally,he should start saving for his long term goals. His home can happen at a later date when he is well settled as far as his emergency fund and long term goals are well in place.

He should build his long term goals like retirement and Avni’s post-graduation and marriage with equity related products with a touch of Gold ETFs which he can redeem at the time of her marriage to purchase jewellery

These goals are best achieved by regular and systematic investment

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