Express Clinic

Profession: Doctors with Independent Practice

Net monthly income

(Rs 2.5 lakh)

Status & goals

The Salhotras own their clinic jointly in a Mumbai suburb. Their elder child Aman is 6 and daughter Maya is 3 months old. They wish to give direction to their finances after deciding to pursue independent practice

Needed

A roadmap that will allow the doctor couple to save and invest smartly for a secure financial future.

Net monthly surplus

Rs 1.2 lakh

Findings

Emergency Fund: There is a balance of Rs 5 lakh in the savings account. There is one fixed deposit of Rs 2 lakh in the bank.

Health insurance: Both husband and wife are covered individually for Rs 5 lakh each. But the children are not covered for health risks.

Life Insurance : They have a joint-life policy,a savings-cum-insurance product. The life cover on this policy is R20 lakh for each. It is expected to give R47 lakh on maturity. The life cover is less in light of their lifestyle and goals.

Investments : The investments are small and all debt oriented,as in fixed deposits and PPF. Most of their savings were used up for down payment of their house and setting up the clinic.

Retirement: There has been no focussed approach towards planning for retirement. As they are practicing doctors,they are looking at their practice as a source for their retirement income. But for calculation purpose they would like retirement to be taken at Dr Anuj’s age of 60.

Liabilities: They have an outstanding home loan of R 58 lakh for which they pay an EMI of R53,000 per month. The remaining tenure of the loan is 18 years.

Recommendations

Emergency Fund

They need is R5.5 lakh as emergency funds. They have R7 lakh in savings bank and FD. There can be some improvement on the returns by converting their savings account to a flexi-account.

Express tip: Always keep 3-6 months of expenses in ready to use form. Do not forget the EMI’s and your business running expenses.

Health Insurance

They can go for a family floater policy for R8 lakh. This will enhance their own coverage,at the same time cover both the children who have no health cover presently. This should cost them about R19,000 p.a.

Express Tip: Children should also be covered under health plans,as any requirement for them will create same stress on finances as in case of requirement for other family members.

Personal Accident Insurance

They need to take a personal accident cover of R1 crore. They should ensure that they include the disability benefits. This should cost them about R12,000 p.a.

Express Tip: Disability can restrict income earning capacity. A personal accident policy covers this risk substantially.

Life Insurance

Anuj needs to take a life cover of R3 crore and Pashmina needs a cover of R45 lakh. They can go for term insurance policies which will cost altogether R74,000 per annum.

Express Tip: All earning members of the house need to be covered as any loss of income will affect their goal achieving capacity.

Child Goals

They need to save about R43,000 per month to meet the goals for their children at a return of 15 per cent. This is possible by investing in diversified equity mutual funds.

Retirement

We have assumed that they need to build up their entire corpus required for retirement,without looking at selling their practice later. They should get about R47 lakh from their insurance policy. They will need to invest R44,000 per month for the next 25 years in a mix of equity and debt mutual funds at 15 per cent returns.

Express Tip: Defining a target amount helps get focus in savings and investments.

Conclusion

It is necessary to regularly review plans,as life situations keep changing. At all times,it is essential that the focus should be achievement of goals and not products.