Express Clinic

Jan 14 2013, 03:00 IST
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SummaryA comprehensive financial plan securing all goals ó kidís education, daughterís marriage, retirement, international vacation, investment and insurance planning

Name: Rajeev (36), Hema (34), Savi (6) and Rahul (4)

Resides in Gurgaon, Haryana

Net annual income

(Rs 15.24 lakh)

Needed

A comprehensive financial plan securing all goals ó kidís education, daughterís marriage, retirement, international vacation, investment and insurance planning.

Net monthly surplus

Rs 72,000

Current Investments:

Fixed Deposits : R 2,50,000

Recurring Deposits : R 1,60,000

PPF : R 2,65,000

EPF : R 3,60,000

Equity Mutual Funds : R 3,00,000

Gold : R 5,00,000

Plot at Hometown : R 8,00,000

Insurance (Surrender Value): R 1,80,000

Findings

Emergency fund: Adequate emergency fund in the form of recurring deposits.

Life insurance: Total life coverage of R 13 lakh with annual premium of R 50,000 towards four traditional policies and ULIPs

Health Insurance: Company provided family floater of R 5 lakh.

Investments: Exposure to debt, mutual funds and real estate, but no direct stock investments.

Liabilities: Nil

Recommendations

Emergency Fund: Amount in recurring deposits can meet up to 3 months of expenses.

Express TIP: Salaried people should maintain at least 3 months of emergency expenses as a measure of last resort to face temporary uncertainties in life.

Life Insurance: Rajeev needs life cover of R 1 crore. A term plan for 25 years will cost him approximately R 15,000 per year. He should take one and discontinue the existing policies. It will result in additional cash flow of R 35,000 per year which can be channelised towards his financial goals.

Health Insurance: Rajeev should take a family floater of at least R 10 lakh which will cost him approximately R 20,000 annually.

Express tip: Despite having employer-provided health insurance benefit, one should have a personal comprehensive family health cover.

Accident Insurance: A personal accident policy of R 50 lakh is recommended for Rajeev costing approximately R 6,000 annually.

Express tip: Disability is a neglected area of financial life. Itís important to have disability protection along with life and health insurance as permanent /partial disability can jeopardise your regular future income.

Planning for Goals

Saviís Graduation (2023 to 2026): Existing PPF will fetch R 6.40 lakh. For the remaining gap, SIP of R 4,000 pm should be started in diversified equity mutual funds.

Rate of return assumed 12% in diversified equity mutual funds.

Saviís Post-Graduation (2026 to 2028): To achieve this goal, Rajeev should start investing R 8,500 pm in diversified equity mutual funds through SIP route.

Rate of return assumed 12% in diversified equity mutual funds.

Express tip: Diversified Equity Mutual Funds provide high returns over long-term with increasing tenor reducing the risk correspondingly.

Saviís Marriage (2031): Existing Mutual Funds will fetch R 27 lakh leaving a gap of 47

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