income of Rs. 8 L. He has accumulated about Rs 7 Lakhs in savings and has Rs 2 Lakhs in his PF account.
Rahul has now 2 dependants and this is the time for him to start looking to buy a house for himself. Additionally he must plan for his daughter’s future along with consolidating his retirement plans.
At this stage the need for cover for Rahul will be around Rs. 50 Lakhs so that his wife and daughter can maintain the same lifestyle in any unfortunate case of his sudden demise. A term insurance for this amount will require an annual premium of Rs. 15000/-
A comprehensive family insurance of Rs. 500000 will require an annual premium of Rs. 5000 approximately providing all the requisite facilities.
Purchase of House
This is the perfect time for Rahul to buy a house. With an annual income of Rs. 8 lakhs he can easily get a home loan of 5 x 7 (annual Income) = Rs 35 Lakhs. However Rahul should go for a house of about Rs. 25 Lakhs for which his contribution will be about Rs. 5 Lakhs as down payment that can be drawn from the savings he has made so far. The remaining Rs. 20 Lakhs can be taken as a home loan with an EMI of about Rs. 21000.
Planning for the daughter’s future should be on the top of the agenda for Rahul now. This includes cost of higher education which is about 16 years away now and will require about Rs. 15 Lakhs as an approximate expense for any private college. Thus Rahul must start saving accordingly from this time onwards on a regular basis. Marriage of the daughter is a situation far ahead and the actual cost can vary drastically but it does require some disciplined savings from now onwards.
Rahul has Rs 2 Lakhs in PF for which he maybe contributing Rs. 20000 annually and it will grow to about Rs. 28 lakhs in the next 25 years at an 8% growth rate. However for life till about 80 years he shall need Rs 1.3