Amit and Sneha stay in Bengaluru with their two kids, aged three and six months. Both are employed and get a combined monthly salary of Rs 94,142. After considering all their expenses and investment, the couple is left with a surplus of Rs 12,182. Their portfolio includes Rs 1.1 crore of real estate, with one self-occupied house and another as investment. They have taken two home loans of nearly Rs 60 lakh, and are paying EMIs of Rs 38,900. Besides, they have Rs 55,000 in cash, Rs 1.7 lakh of equity mutual funds, and debt worth Rs 7.9 lakh in the form of EPF, PPF, fixed deposit and insurance value. Their goals include building a contingency corpus, buying a car and a house, taking a vacation, saving for their kids’ education and weddings, and their retirement. The couple will have to put off their goals of buying a car and taking a vacation for now due to lack of surplus.
The financial planning team from Fincart suggests they build the emergency corpus of Rs 2.5 lakh, equal to four months’ expenses, by allocating their cash, fixed deposit and annual bonus of Rs 1 lakh. This amount should be invested in an ultra short duration fund. For the education of their children in 14 and 18 years, the couple has estimated a need of Rs 37.9 lakh and Rs 83.3 lakh, respectively. For the older child, they can allocate their mutual fund corpus and insurance surrender value.
In addition, they will have to start an SIP of Rs 2,845 in a diversified equity fund. For the younger child, they will have to start an SIP of Rs 11,717 in a diversified equity fund. For the children’s weddings in 23 and 25 years, the couple wants Rs 38.1 lakh and Rs 42.9 lakh, respectively. They will have to start SIPs of Rs 2,860 and Rs 2,521 in diversified equity funds, respectively. For retirement, the couple will need Rs 2.5 crore in 25 years and will have to allocate their EPF and PPF corpuses. They will also have to start an SIP of Rs 5,871 in a diversified equity fund and continue to invest Rs 500 a year in the PPF.
For life insurance, the couple has four traditional plans and are advised to surrender all. Fincart suggests Amit take a term plan of Rs 2.7 crore at a cost of Rs 2,330 a month. For health insurance, the couple has a Rs 5 lakh cover by the employer. They should also buy a Rs 5 lakh family floater plan and a Rs 20 lakh top-up plan, which will cost Rs 1,662 a month. This should take care of their insurance needs.