Express Clinic

Profession: Team Manager with a BPO firm

Net annual income

Rs 7.85 lakh

Status amp; goals

Mayank is an IT professional,who unlike the people of his age is clear about his goals. He is single and lives in his own house with his mother. Along with his job,he also runs a blog which in turn provides him with handsome income enough to meet personal expenses. He is very particular about his mothers well being and wants to provide for her a secure future

Needed

A financial plan that will enable Mayank to create a corpus for her mother and help him save smartly towards his goals

Net monthly surplus

Rs 40,417

Findings

Current investments

Bank fixed deposit: Rs 1.50 lakh

Mutual funds: Rs 1 lakh

Ulips: Rs 2 lakh

Emergency fund: He never keeps sufficient money in savings account and has no idea about emergency fund.

Life insurance: 2 ULIP policies with total premium of Rs 1 lakh per annum but does not have adequate insurance coverage.

Health insurance: He is totally dependent on his employer provided insurance coverage.

Investments: Investments have been done on the guidance of friends and relatives and not properly structured.

Liabilities: He has no liabilities as of now.

Recommendations

Emergency Fund:

He needs to maintain Rs 75,000 as emergency fund in savings bank account.

Express tip: Emergency fund is required to manage the unexpected scenarios. One should always maintain 3-6 months of monthly expenses in liquid form to manage emergencies.

Life Insurance:

As his mother is dependent on him financially,Mayank should buy a term life insurance plan with a sum assured of Rs 1 crore. He should go with online term plan,which will offer insurance with a premium of around Rs 10,000. He is also advised to discontinue the ULIP plans once the minimum premium payment period gets over.

Express Tip: Adequate life insurance coverage is must for the people who have financial dependents on them. And buying that coverage through term plans and that too online term plans is the better option.

Health Insurance

Mayank should buy an individual health insurance cover of Rs 3 lakh for himself and Rs 5 lakh for his mother through separate individual mediclaim policies. The total premium outgo will be Rs 25,000. He should also add his mothers name in the employer provided group health insurance policy.

Express Tip: One should be adequately insured on health through an individual policy besides employer provided cover.

Accident insurance

Mayank should buy a comprehensive accidental insurance policy of at least R 50 lakh sum assured. The premium for this would be around R 6,750.

Express Tip: Accident policy covers any disability resulting from an accident.

Marriage

He should start investing Rs 14,000 per month in balanced mutual funds for this goal. Also he should allocate the current investments in mutual funds and ULIPs towards this goal. Rate of return assumed 10 per cent post-tax

Express Tip: When the goal is of short term nature,one should reduce the equity allocation in the portfolio. Equity has the potential to deliver good returns in long term but for short term it can be volatile and risky.

Training academy

Start investing R 11,700 per month in large cap equity oriented mutual funds for this goal.

Rate of return assumed is 12 per cent post-tax

Express Tip: When goal is more than 5 years way then maximum allocation should be into equity oriented instruments which are ideally suited to provide better inflation beating returns.

Retirement planning

With the asset allocation of 80:20 as equity and debt,Mayank should start investing R 8,000 per month for this goal. He should use multi cap equity funds and PPF as investment tools for achieving this target. Rate of return assumed 14 per cent in multi cap funds and 8 per cent in PPF

Express Tip: PPF is the evergreen and one of the best debt instruments available for providing guaranteed returns for long term goals like retirement.

Conclusion

Investing early in life and that too with a clear vision of ones goal provides the impetus to achieve financial success. It also helps in minimising outflow on investments as you have a very long period to benefit from the power of compounding