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    Family finance: Kumar should buy adequate insurance, step up investment to achieve his goals

    Synopsis

    Besides investing in line with his goals, Bengaluru-based Kumar should buy adequate insurance.

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    Kumar's goals include building an emergency corpus, saving for his children’s education and weddings, and retirement.
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    Navin Kumar, 48 years, is a consultant based in Bengaluru and earns Rs 2.5 lakh a month. This amount is supplemented by Rs 8,000 a month of rental income. He has two houses, one of which is self-occupied, and is repaying two home loans of Rs 28.27 lakh. He stays with his homemaker wife and two children, aged 14 and 11.

    His portfolio, worth Rs 1.65 crore, includes real estate of Rs 1.08 crore, cash worth Rs 10 lakh, equity worth Rs 11 lakh in the form of mutual funds and stocks, and debt worth Rs 36.64 lakh in the form of EPF, PPF, debt scheme, gold and insurance value. His goals include building an emergency corpus, saving for his children’s education and weddings, and retirement.

    Portfolio

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    Cash flow

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    Financial Planner Pankaaj Maalde suggests Kumar build his emergency corpus of Rs 8.9 lakh, worth six months’ expenses, by allocating his cash and debt plan corpus. This should be invested in a short duration debt fund. Next, Kumar wants to save Rs 19 lakh for his older child’s education in four years. He can amass this amount by allocating his cash as well as insurance maturity and surrender value. These will help build the required corpus without any need for fresh investment.

    For the second child’s education in seven years, Kumar wants to amass Rs 48 lakh and will have to start an SIP of Rs 40,000 in a hybrid equity fund. For the weddings of his kids in 11 and 14 years, Kumar has estimated a need of Rs 31.5 lakh and Rs 38.5 lakh, respectively. However, he doesn’t have enough surplus for these goals and should start investing after a rise in his income.

    How to invest for goals

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    For retirement in 12 years, Kumar will need Rs 4.8 crore. For this, he can assign his EPF, PPF, real estate, stocks and mutual funds. In addition to these, he will have to start an SIP of Rs 65,000 in a diversified equity fund. He should also continue investing Rs 500 a year in the PPF till he retires.

    Insurance portfolio

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    For life insurance, Kumar has five traditional plans of Rs 19.8 lakh, for which he is paying a monthly premium of Rs 8,610. Maalde suggests he surrender two plans and continue with the other three. Since his life cover is inadequate, he should buy a Rs 2.5 crore term plan for Rs 3,750 a month. For health insurance, Kumar has a Rs 10 lakh family floater plan. Maalde suggests he buy a top-up plan of Rs 15 lakh with a Rs 5 lakh deductible, which will cost Rs 1,000 a month. He is also advised to buy Rs 50 lakh accident disability plan for a monthly premium of Rs 667.

    Financial plan by Pankaaj Maalde Certified Financial Planner

    Write to us for expert advice

    Looking for a professional to analyse your investment portfolio? Write to us at etwealth@timesgroup.com with ‘Family Finances’ as the subject. Our experts will study your portfolio and offer objective advice on where and how much you need to invest to reach your goals.

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