Family Finance: Despite skewed investment portfolio Noida-based Jhas should be able to achieve goals

Abhishek and Richa Jha live with their four-year-old child in their own house, in Noida. Both are employed and bring in a combined monthly income of Rs 2.67 lakh.

Besides the self-occupied house, the couple has a plot of land and four other properties, two of which are jointly owned with Abhishek’s brother. These properties are worth Rs 1.94 crore, and Abhishek has taken five home loans, two with his brother.

He is paying EMIs worth Rs 1.11 lakh for these loans. He also has a car loan worth Rs 12 lakh, for which he is paying an EMI of Rs 19,243. The couple’s portfolio includes Rs 3.5 lakh of cash, Rs 22 lakh as debt in the form of PPF (Rs 2 lakh), NPS (Rs 15 lakh) and fixed deposits (Rs 5 lakh). The equity component is worth Rs 6.4 lakh and is invested in mutual funds.

Portfolio

The couple’s goals include saving for emergencies, child’s education and wedding, and their own retirement. Financial Planner Pankaaj Maalde suggests they build the emergency corpus of Rs 6.9 lakh, which is equal to three months’ expenses, by assigning their cash and fixed deposit amount. This should be invested in an ultra short-term fund. As for the child’s goals, the couple wants to save Rs 84 lakh for higher education in 14 years, and Rs 2 crore for the wedding in 21 years. For education, they can assign a portion of their mutual fund corpus and continue with the SIP of Rs 19,000 in a diversified equity fund. For wedding, they can again allocate a part of their mutual fund corpus and continue with the SIP of Rs 19,000 in a diversified equity fund.

Cash flow

For retirement, the couple will need Rs 10.25 crore in 27 years, and will have to allocate all their properties, as well as the PPF and NPS corpuses. These are likely to yield the desired amount in the given period and no additional resources will have to be allocated to this goal. As for life insurance, Abhishek has a term plan worth Rs 2 crore and a traditional plan of Rs 16 lakh. Maalde suggests that he surrender the traditional plan and that Richa also buy a term plan worth Rs 1 crore.

This will cost Rs 1,000 a month in premium. As for health insurance, the couple has a Rs 25 lakh family floater plan. This is adequate for their needs and they should continue with it. However, Maalde suggests that Abhishek buy a Rs 25 lakh critical illness plan and a Rs 50 lakh accident disability plan. Both these will cost him Rs 2,583 in monthly premium.

How to invest for goals

Annual return assumed to be 12% for equity, 8% for debt. Inflation assumed to be 7%.

Insurance portfolio

Premiums are indicative and could vary for different insurers.

(Financial Plan by Pnkaaj Maalde Certified Financial Planner.)

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