General

Family finance: Why Nair's financial goals will need to be staggered – Economic Times

Kiran Nair currently works abroad but intends to return to India eventually and continue working from here. His present monthly salary is Rs 70,000. He has a house worth Rs 26 lakh, for which he has taken a loan of Rs 15 lakh and is paying an EMI of Rs 13,233. Besides real estate, he has cash of Rs 30,000 and no other investments as he has used up his savings to pay off liabilities. He now wants to start making investments and save for his financial goals. The goals include building an emergency corpus, saving for his wedding, buying a house, and saving for his retirement.

Financial Planner Pankaaj Maalde suggests that Nair first build an emergency corpus of Rs 2.52 lakh, which is equal to his six months’ expenses. For this, he can allocate his cash of Rs 30,000 and will have to save his surplus of Rs 15,000 every month till the contingency corpus is built. This amount should be invested in a money market fund.

Portfolio


Cash flow

Cash flow

After building the emergency corpus, Nair can start saving Rs 5 lakh for his wedding in two years. After a year or so when the emergency corpus has been created, he can start saving Rs 15,000 a month for his wedding goal. He can also push this goal to be able to muster enough funds or use his Ulip corpus after surrendering it, if needed. Maalde suggests he avoid taking loans for the wedding to reduce liabilities.

How to invest for goals

How to invest for goals



Next, he wants to buy a house worth Rs 79 lakh in another 10 years’ time. For this, he can allocate his current house. Since he does not have any surplus to start saving for this goal, he should wait for a rise in income to build the necessary corpus.

Insurance portfolio

Insurance



For retirement in 27 years, he will need Rs 3.2 crore. Since he does not have any other investment to allocate to this goal, he will have to start an SIP of Rs 13,000 in a diversified equity mutual fund to be able to build the retirement corpus.

For life insurance, he has one traditional plan of Rs 2 lakh and a Ulip of Rs 3.6 lakh. Maalde suggests he retain the traditional plan and review the Ulip after the lock-in period, and if needed, surrender it to use the funds for his wedding. He also needs to buy a term plan of Rs 75 lakh at a premium of Rs 833 a month. For health insurance, he does not have any plan and should buy a Rs 10 lakh medical cover, which will cost him Rs 1,000 a month. He can increase the cover after getting married.

Financial plan by Pankaaj Maalde Certified Financial Planner

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