* Name: Anupam Shah
* Job: Private employee
* Age: 40 years
* Dependants: 1
* Income: Rs 6 lakh/year
- Name changed to protect identity
Anupam Shah, 32 years, and his wife, 30 years, are newly married. Both are finance professionals and work with public sector banks. They live in a joint family with Anupam’s parents.
Financial goals at current costs
* They have planned for their first child a year from now and want to provide education uptil post graduation. This will cost Rs 35 lakh, if provided for in India.
* Home loan will be serviced until retirement as their banks provide a low interest home loan. The home will cost Rs 30 lakh with 10 per cent own funding while the rest are borrowed.
* They want to buy a car immediately, if possible. The car costs Rs 4 lakh.
* Taking their parents on a European holiday, if possible. This will cost Rs 5 lakh.
* Meet medical needs of their parents, whenever required. This can be met from the yearly savings.
* Both of them have decided to pursue higher qualification in the next few years in order to raise their bar and aspire higher in their career. This could easily take away about Rs 5 lakh.
* Post-retirement lifestyle with Rs 3 lakh of living expenses per annum for 20 years would mean creating a corpus of about Rs 60 lakh.
These goals at present costs work out to Rs 1.39 crore.
Savings and investments
They have fixed deposits worth Rs 2.4 lakh, savings bank deposits worth Rs 65,000; tax saving equity mutual funds worth Rs 1.5 lakh, money back insurance plans worth Rs 2.3 lakh; term insurance for Rs 5 lakh.
They enjoy a personal accident cover of Rs 2 lakh per head and medical insurance coverage of Rs 3 lakh each both provided by their respective employers.
The current net worth is Rs 6.85 lakh.
Recommendations:
* Most goals, except buying home, are not pressing needs. It is suggested that buying a car may be contemplated a year or two later as current cash flows are not comfortable.
* Foreign holiday may be undertaken, as and when bonuses from employers are received so as to
minimise debt burden by borrowing travel loans.
* The yearly savings from salaries for the couple is placed at Rs 2.05 lakh. The contingency funds are low and do not provide sufficient comfort.
* The money back insurance plans need to be re-looked as they will become taxable from the next financial year.
* Term insurance needs to be hiked to about Rs 25 lakh each. The premium payable will be no more than Rs 20,000 per year as they are in the lower age bracket.
* Invest Rs 10,000 in a monthly SIP of diversified equity mutual fund for 20 years. This could meet children's education needs.
* Invest Rs 5,000 per month in SIP of gold ETF for 20 years. This could be useful for your children's marriage expenses or prepaying your home loan.
* Family floater health policy for the couple for Rs 5 lakh with critical illness cover may be undertaken with a premium outgo of about Rs 5,000 per annum.
Recommendations are made assuming that they would retire at the age of 60 and longevity would be 80 years.
(L. Ravindran, PhD, is a financial adviser and MD of Wealthmax Enterprises Management Private Limited)