Name: Vishal (42),Jai (10)
Reside in: Kalyan,Near Mumbai
Profession: Design consultant
Net annual income
(Rs 7.80 lakh)
Status & goals
Vishal is a design consultant associated with a few architecture firms on a project basis and lives alone with his son (Jai) in their self occupied flat in Kalyan. His wife,Seema died last year due to cancer,after suffering for two years. Vishal wants to spend more time with his son and therefore works on only selective projects. He wants to work on a financial plan in order to create an educational and marriage corpus for his son as well as a decent retirement corpus at age 65
A plan to provide guidance on the corpus size required for all his goals and to find out how much he needs to invest to achieve them
Net monthly surplus
Savings account : R 1 lakh
Bank Fixed deposit : R 5 lakh
Equity Mutual Funds : R 1lakh
Emergency fund: Sufficient amount maintained in savings account and fixed deposits to meet emergency needs.
Life insurance: Vishal has a cover of R 55 lakh from a mix of endowment and term insurance policies
Health Insurance: Family floater policy of R 7.5 lakh which he has taken last year
Investments: Very low savings as bulk of the investments were used for Seemas cancer treatment.
Emergency fund: Amount in savings account is sufficient for 3 months of contingency. He should also keep R 1 lakh additional from his big FD separately into a flexi FD account for any other contingent event.
Express tip: In the absence of one spouse,keeping adequate amount in liquid asset enables quick removal of the same when any emergency event befalls on the family
Life Insurance: The present insurance cover of Vishal is adequate enough to take care of Jais educational and marriage expenses along with his living expenses (in the event of Vishals death). He should continue with his term and endowment policies.
Express tip: Single parents should have adequate life insurance cover and also nominate their children along with an appropriate guardian so that the death proceeds are managed prudently for the childs benefit.
Health Insurance: Existing health cover is adequate enough. Vishal can continue with the same.
Express tip: At times,certain illness can drain the familys financial resources and also lead to debt situations.
Having an adequate health insurance can reduce the need to utilising your investments for medical situation.
Accident Insurance: A personal accident policy of R 50 lakh with Rs 5 lakh as TTD benefit is recommended for Vishal and it should cost R 7,000 pa.
Express tip: Permanent disability due to accident terminates your chances of working and earning an income. It can also result in recurrent medical expenses related to that disability. Its highly suggested to prioritise personal accident cover for all income earning individuals.
Planning for Goals
Sons education (2020 to 2024): For this goal allocate an sip of R 6,000 each in two large cap equity mutual funds and another R 10,000 per month in two dynamic bond debt funds. Total investment suggested per month is R 22,000.
Rate of return assumed 12% in equity funds and 8% post tax in debt funds.
Express tip: A balanced investment portfolio of equity and debt can provide steady returns over long term along with reducing risk.
Sons Marriage (2029): Invest R 3,500 per month in a balanced mutual fund for this goal. This investment is to be done only after Vishals retirement allocation is taken care of.
Rate of return assumed 10% post tax.
Express tip: Balanced mutual funds provide stability and inflation beating returns over long term and reduces the need of rebalancing of portfolio.
Retirement Planning (2035): The existing investment of fixed deposits and equity mutual funds should provide a corpus of R 58.5 lakh at retirement. To cover up the shortfall a monthly investment of R 21,000 is suggested. From this monthly amount R 10,000 is to be invested in 2 multi-cap mutual funds,R 6,000 in dynamic bond funds and the rest in gold mutual funds. At present after allocating for sons educational goal,only R 13,000 remains which can be invested in the above mentioned funds. On annual increase in income,additional amounts will need to be invested gradually.
Rate of return assumed 12% in equity funds,8% in dynamic bond funds,and 8% in gold funds.
Express tip: To beat the inflation monster,equity and gold should be part of any long term investment portfolio