Name: Shikha Arora,29 Resides in: Himachal Pradesh Profession: Government Service Net annual income (Rs 13.20 Lakh) Status & goals Shikhas Husband,Vinod (31) is also a government employee. The couple have a son Samar,1,and a daughter,Sanjana,3 months. Shikha looks after family's finances and takes all important financial decisions. She wants to have a proper plan for future goals of children and a house along with a commercial property which can generate rental income Needed A financial plan that will take care of their needs and provide stable income after retirement Net monthly surplus Rs 52,000 Observation Shikhas current savings is going towards insurance policies,bank deposits and Sahara RDs. Being government employees,retirement benefits are enough to continue their present lifestyle after retirement. Findings Bank Account: Balance in savings bank account is Rs 8 lakh. Health insurance: Currently entitled to reimbursement for treatment in any government recognised hospital. Health insurance will not be a bad choice if you need medical treatment from private hospital. Life Insurance: Though you have Rs 45 lakh sum assured,it is through expensive policies - premium outgo being Rs 1. 44 lakh per annum. Long Term Investments: Rs 4 lakh investment in bonds,Rs 10,000 per month RD and real estate worth Rs 12 lakh. Retirement: She would like to retire at age of 59-60 and expenses thereafter will be taken care by pension and income from commercial property. Liabilities: She has to repay a car loan of Rs 2,00,000. RecommendationsEmergency Fund: Maintain Rs 50,000 in savings bank account. Keep around Rs 1 lakh in short term funds,which can be made available in three working days. Express Tip: Do not keep money for more than 3-4 months of expenses in the emergency fund. Excess amount there will hamper long term growth. Life Insurance: You can buy a term plan of Rs 50 lakh and for Vinod Rs 1 Crore - total annual premium will be approximately Rs 36,000. Express Tip: Life insurance is for family protection and not for capital growth. Stick to term plans. Accident Insurance: Buy an accident insurance policy of Rs 25 lakh and for spouse Rs 50 lakh covering temporary total disability and permanent partial disability. This will cost Rs 10,000 per annum. Express Tip: Accident insurance covers income risk in the event of an accident. Car Loan Repayment: Car loan liability is Rs 2 lakh with interest close to 12 per cent. Also Rs 8 lakh is lying in savings account at 4 per cent. Immediately prepay the loan. Express Tip: Prepay loans with high interest rates when savings are yielding lower returns. Retirement Planning: Retirement corpus required is Rs 5.39 crore sufficient to maintain current lifestyle. Express Tip: Estimate monthly requirement and then calculate the corpus required. Children's Future: Start monthly mutual fund SIPs for these goals. For Samars education - Rs 7,500,for Sanjanas education - Rs 3,600. For Samars marriage - Rs 4,500 and Rs 4,200 for Sanjana's marriage. Express Tip: Education is turning expensive and should be properly planned. Start with SIPs in diversified equity mutual funds. Buying Real Estate: This goal is important for income in retirement years. Existing savings will yield Rs 66 lakh in 2025. For remaining Rs 1.68 crore,invest Rs 30,000 per month and increase savings by 5 per cent every year. Express Tip: If one has the cash flows to bear EMIs,property can be purchased on loan. Conclusion As Government employees you may get pension on retirement; but that alone will be not be sufficient to live a comfortable life. Do not forget that pension will be close to half your income,and state support will not be available after retirement
