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Family finance: Businessman Mathur needs to build a bigger emergency corpus

Apart from building an emergency corpus, Vishvas Mathur's other goals include saving for his child’s education and wedding, and retirement.

, ET Bureau|
Last Updated: Jul 01, 2019, 06.30 AM IST
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Mathur can meet all his goals with existing resources, but needs to create a bigger contingency corpus.
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Vishvas Mathur, 40, has recently started his own business and brings in rS 96,000 a month. He stays with his homemaker wife and 11-year-old child, in Ahmedabad.

His portfolio, worth Rs 4.4 crore, is skewed heavily towards real estate, with four properties worth Rs 3.4 crore. He has also taken a home loan of Rs 20 lakh, for which he is paying an EMI of Rs 21,000.

The remaining portfolio includes cash of Rs 1.2 lakh, equity worth Rs 10.6 lakh in the form of mutual funds and stocks, and debt worth Rs 1.2 crore in the form of fixed deposit, EPF, PPF, debt scheme, debt funds and insurance maturity value.

His goals include building an emergency corpus, saving for his child’s education and wedding, and retirement. The financial planning team of Fincart suggests that he also build a medical buffer because he has developed a medical condition and can no longer afford life or health insurance.


Cash flow

To start with, Mathur should build an emergency corpus of Rs 4.4 lakh, worth six months’ expenses, by allocating his cash, stocks and a portion of his fixed deposit. This should be invested in a short duration debt fund. Next, he wants to save Rs 24.1 lakh for his child’s education in about five years. He can amass this amount by allocating his mutual funds and fixed deposit and doesn’t need to start any fresh investment.

How to invest for goals

For the child’s wedding in 15 years, Mathur wants to build a corpus of Rs 23.9 lakh. This can be fully funded by assigning his debt scheme and doesn’t require any fresh investment. For retirement at 55, Mathur will need Rs 3.4 crore in 15 years. He can assign his EPF, PPF and debt scheme corpuses, insurance maturity amount and one property worth Rs 1 crore.

All these will fully fund the goal and no additional investment will be required. After meeting all the goals, Mathur is left with two properties and a surplus of Rs 19,299. He can fall back on the real estate and invest the surplus to create a corpus for his business.

For life insurance, Mathur has five traditional plans of Rs 4.6 lakh, and for health insurance, he has a Rs 5 lakh family floater plan. These were bought before Mathur developed a medical condition, which means that if he tries to buy more insurance, it will come at a high premium and will be unaffordable for him.

Fincart suggests he retain his traditional plans and family floater plan, and create his own medical buffer of Rs 44 lakh by allocating his remaining fixed deposit to it.

Insurance Portfolio

Financial plan by FINCART

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