Express Clinic

Profession: Centre Head in a Telecom BPO

Net annual income

R 16.8 lakh

Status amp; goals

Ashish and Radha reside in their own house with their 2 kids,Aman 6 and Ridhima 3. Ashish has recently joined this company and this is his fifth Job in his career spanning 10 years. He has been withdrawing the EPF accumulated with his previous employer every time he joined a new company. Radha is a home maker. She is worried about Ashish8217;s frequent job changes. She is interested in proper planning of their finances so that they can cope with uncertainties

Needed

A secure financial future for the family. Shield to face job related uncertainties.

Net monthly surplus

R 67,000

Current Investments

Savings Account R 1 lakh

Bank Fixed deposits R 10 lakh

Nsc R 10 lakh

ULIPs R 3 lakh

Findings

Emergency fund:

Sufficient liquidity available.

life Insurance:

The life cover is not adequate.

Health insurance:

Employer provided cover of R 3 lakh.

Investments:

Tilted towards the safe instruments.

Liabilities:

Home loan with balance tenure of 14 years.

Provident fund:

Almost zero balance.

Recommendations

Emergency fund: He needs to break FD of R 10 lakh and make a fresh FD of R 3.40 lakh. This in addition to savings account balance.

Express tip: Ideally in young age it should be 3 months of monthly expenses but can be increased as per the situation.

Life Insurance: Ashish does not have adequate life insurance coverage. He should have cover of at least R1.8 crore. It is advisable to buy a term plan online which would cost around R 25,000 pa.

Express tip: Not having adequate insurance coverage may jeopardise the financial lives of dependents in case of any mis-happening.

Health Insurance: Ashish should immediately buy a separate floater health insurance policy of R 5 lakh covering all his family members,costing around R 9,000 pa.

Express tip: Switching jobs is common these days. Get yourself an individual medical cover to manage any health emergency.

Accident Insurance: Ashish should buy accidental insurance coverage of at least R 1 crore with a temporary total disablement benefit of R 15 lakh,so that the basic family expenses should not get hampered due to unforeseen accident. The premium for this would be around R 13,000 p.a

Express tip: Coverage for disability and loss of income is a necessity in today8217;s fast lifestyle.

Children8217;s education 2024/ 2027: He should allocate R 4 lakh from his bank FD to this goal,and start saving R 21,000 pm in the equity:debt ratio of 80:20. Use equity diversified mutual funds for equity allocation and dynamic bonds and PPF for debt allocation.

Rate of return assumed 14 post tax in equity and 8 post tax in debt.

Express TIP: It8217;s easier to select products when the goals and time horizons are clear.

Children8217;s marriage 2032/ 2035: Start saving R 5,500 pm in equity:gold ratio of 80:20. You can use gold ETF route.

Rate of return assumed is 14 post tax in equity and 8 post tax in gold.

Express TIP: Gold is an essential asset as far as children8217;s marriage planning is considered

Retirement Planning 2036: Ashish should understand the importance of EPF as it gives tax free returns and can be used as a good retirement savings tool. Start saving R12,500 in equity:debt allocation of 80:20 for this goal.

Express tip: EPF is a good and compulsory savings instrument which has the potential to multiply your investments manifold due to employer8217;s contribution and compounding factor. The longer you keep investing,the greater is the accumulation on maturity. That8217;s why whenever you switch your job; transfer the balance of EPF in new account.

Loan Repayment 2012: He should surrender the ULIPs,start recurring deposits of balance surplus left after all the savings towards other goal and transfer the accumulation to loan account every six months. Use the maturity proceeds of NSCs next year to clear off the loan.

Express tip: One should be out of debt liability as soon as possible to concentrate better on other important goals.