Planning Your Financial Goals

Most of the Indian families keep on working to figure out finances for their life’s goals. Majority of these people live in a state of uncertainty throughout their lives, but a few of them show diligence by opting the route of appropriate financial planning. Amit Shukla, a 38-year-old officer at a Central government corporation, decided to reach out to manojshrivastava.com for a financial planning that may put him on the path of financially secured future. 

Amit Shukla is an officer in NTC Ltd, New Delhi, and his wife Shubhi is working with Bank of Baroda at Noida. They are blessed with one daughter Kavya, who is a 6-year-old, busy in her early schooling. The monthly household income of Amit’s family is Rs. 95000 (Rupees ninty five thousand). He is paying Rs. 18,000 (Rupees eighteen thousand) as EMI towards his home loan. Besides this EMI, his monthly household expenses are Rs. 38000 (Rupees thirty eight thousand). He will retire after 22 years from now at the age of 60. He wishes to create a fund of around Rs. 16,00,000 (Rupees sixteen lakh) by the year 2030 for his daughter’s higher education, Rs. 40,00,000 (Rupees forty lakh) by the year 2038 for the marriage of his daughter and a fund of around Rs. 4,00,00,000 (Rupees four crore) by the year 2040 at the time of his retirement to meet his post retirement expenses.



Here is an investment plan to take care of his future life goals

Contingency Fund

Modern family structure has shifted from joint family to nuclear family. Therefore, it has become mandatory to keep some contingency fund equivalent to minimum six months of household earnings. During difficult times, contingency fund acts as a cushion and supports the family in many ways. The monthly household earnings of Amit is Rs. 95000 (Rupees Ninety-five thousand) so the appropriate contingency fund should be around Rs. 6,00,000 (Rupees Six lakh).

This fund should be parked in short-duration debt funds. This would help him to earn a reasonable return without compromising on liquidity

Action

Maintain Contingency Fund of Rs. 6,00,000 (Rupees Six lakh) by investing in short duration debt fund.

Education of daughter Kavya

Amit wishes to accumulate a sum of around Rs. 16,00,000 (Rupees sixteen lakh) after 12 years from now for his daughter’s higher education. To achieve this goal, he needs to invest Rs. 5000 (Rupees five thousand) per month for 12 years to create a corpus of Rs. 16,00,000 (Rupees sixteen lakh). The expected annual rate of return on this investment is assumed to be 12 per cent. 

Action

Start investing in a monthly SIP of Rs. 5000 (Rs five thousand) in a good large cap fund.

Wedding of daughter Kavya

Wedding is considered as a gateway to enter into the second phase of life. Ceremonial wedding is a part of our culture involving significant costs. Amit will need Rs. 40,00,000 (Rupees forty lakh) for his daughter’s wedding after 20 years, therefore he needs to plan his investment accordingly. Assuming annual return @ 12%, he should invest Rs. 4,000 (Rupees four thousand) every month over a period of 20 years.

Action

Start investing in a monthly SIP of Rs. 4000 (Rs four thousand) in a good large and mid-cap fund.

Retirement

Amit wishes to have around Rs. 4,00,00,000 (Rupees Four crore) after 22 years from now to lead his retired life free from financial hassles. His retirement is scheduled in the year 2040. He would have to invest Rs. 31,000 (Rupees thirty one thousand) per month for 22 years to accumulate the desired sum of amount. During calculation, we have assumed inflation @ 5% and rate of return on investment @ 12%. 

Action

Start investing in monthly SIP of Rs. 31,000 (Rupees thirty one thousand) in a good multi -cap fund

Health insurance: Amit should cover his family with a health insurance policy because the cost of treatment is gradually going high. There are three members in his family and they need an adequate family health cover to meet their medical expenses. He should buy a health insurance policy of Rs. 5,00,000 (Rupees five lakh) covering the tentative medical needs of his family.

Life insurance :The best suggestion is to go for a term life insurance plan for a sum assured of Rs. 1,00,00,000 (Rupees one crore) from a reputed life insurance company.

*** For the sake of simplicity, tax calculation has not been incorporated in this plan. Taxes will be payable as per the tax slab prevailing during the particular financial year.

The writer is a Chief Executive Officer of MF world Email: manoj.shrivastava@mfworld.in  www.manojshrivastava.com 

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