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Family finance: Why salaried Setty needs to increase investments to achieve his goals

Hyderabad-based Setty should also trim his insurance portfolio to secure his finances adequately.

, ET Bureau|
Last Updated: Jul 22, 2019, 09.49 AM IST
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For life insurance, Kumar has a Rs 50 lakh term plan, one traditional plan of Rs 5 lakh, and a Ulip of Rs 20 lakh.
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Gopal Setty, 39 years, stays with his homemaker wife, five-year-old child and parents, in a rented house, in Hyderabad. He works for a private firm and earns Rs 82,000 a month. Combined with a rental income of Rs 12,000, his total income comes to Rs 94,000. Setty has two houses and two plots of land, with a combined worth of Rs 60 lakh. He has also taken a home loan of Rs 12.5 lakh, for which he is paying an EMI of Rs 10,300.

His portfolio, worth Rs 86.96 lakh, includes real estate of Rs 60 lakh, cash worth Rs 10.5 lakh, equity worth Rs 10.96 lakh in the form of mutual funds, stocks and insurance fund value, and debt worth Rs 5.5 lakh in the form of EPF, fixed deposit and insurance surrender value. His goals include building an emergency corpus, buying a car, saving for his child’s education and for his own retirement.



Cash flow


Financial Planner Pankaaj Maalde suggests Setty build his emergency corpus of Rs 4.68 lakh, which is worth six months’ expenses, by allocating a portion of his cash (Rs 2.5 lakh), fixed deposit of Rs 1 lakh and insurance surrender value of Rs 1.5 lakh. This should be invested in a short duration debt fund. Next, Setty wants to buy a car worth Rs 9.8 lakh in three years. He can allocate the remaining cash and invest it in a debt fund.

How to invest for goals


For his child’s education in 13 years, Setty wants to amass Rs 1.2 crore and can assign his stocks and mutual funds to this goal. He will also have to start an SIP of Rs 22,000 in a diversified equity fund. For the wedding of his child in 20 years, he needs Rs 77 lakh. He will have to start an SIP of Rs 6,000 in a diversified equity fund and Rs 1,000 in the gold bond scheme. Finally, for retirement in 21 years, Setty will need Rs 3.4 crore. For this, he can assign his EPF and real estate, and start an SIP of Rs 3,000 in a diversified equity fund.

Insurance portfolio


For life insurance, Kumar has a Rs 50 lakh term plan, one traditional plan of Rs 5 lakh, and a Ulip of Rs 20 lakh. Maalde suggests he surrender the traditional plan and stop paying the premium for the Ulip. This will free up Rs 17,575 of premium to meet other goals. Since Setty’s life cover is inadequate, he should end the current term plan and buy a Rs 1 crore term plan, which will cost Rs 2,250 a month. For health insurance, Setty has a Rs 3 lakh plan from his employer. Maalde suggests he buy a Rs 10 lakh family floater policy, which will cost Rs 1,500 a month. He is also advised to buy Rs 25 lakh accident disability plan for a monthly premium of Rs 333.

Financial plan by Pankaaj Maalde Certified Financial Planner

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