Overview
Once you get married, all the household expenses, asset creation and future expenses will not remain solely your responsibility. Your partner's income too will be there and together you can aim for newer goals. You need not pressurise yourself to achieve all objectives individually utilising your income only. Going by your current expenses, you would probably need around Rs 1.75 lakh per month after 35 years from now if inflation remains at 8 per cent annually. There is always a chance that you will be spending more after marriage considering that you will be managing the entire household plus children's education in coming years. Talking about your present goals, you have planned for several of them with different time periods to accomplish. We have recommended a combination of debt and equity portfolio evaluating each goal separately. All goals except for buying a house can be achieved by investing systematically. The shortfall in the monthly SIP will be met by rise in your salary every year. Also, don't forget to review your portfolio once a year and start switching to debt when near goal.
Do's
1 Keep 6 months expenses in savings account. Going by your current expenses, you may take out Rs 30,000 from emergency fund and invest for a better return
2 Invest in an ultra short term fund as accumulation for your marriage. Choose dividend reinvestment option to minimise your tax liability. Use the funds lying in your savings account
3 You have mentioned you require Rs 10 lakh for childrens' education after 4 years. Child education is an ongoing expense. You would probably require a lump sum after 20 years for higher education
4 On an average car prices rise by 8 to 10 per cent annually. So, a Rs 4 lakh car would cost around Rs 6.40 lakh after 5 years. For buying a car, invest into equity oriented balanced funds. Book gains and start switching to debt when you are near the goal
5 Higher education of children and retirement are long term goals. Invest into equity mid and small cap and large and mid cap funds
6 Continue investment into PPF and recurring deposits and HDFC Gold fund
7 Confirm with your employer if the medical insurance covers maternity expenses. If not, buy a separate medical insurance that would provide for maternity expenses. Maternity benefits usually start after a waiting period. Its better to buy the policy at the earliest
Don'ts
1 You wish to buy a house after 5 years that costs Rs 35 lakh today. Inflation will increase the house price during these five years to Rs 48 lakh taking 7 per cent inflation. If you borrow Rs 10 lakh from your parents, you will still need around Rs 35 lakh. A Rs 35 lakh home loan carrying interest rate of 10.5 per cent will need you to pay an EMI of Rs 34,000 for 20 years. Drop this goal for now
2 Nine funds are too many for a portfolio. Diversification is advisable but 4 to 5 funds are enough for a portfolio
3 Dividend option in mutual funds is beneficial for those who require regular income such as retired people. You should opt for growth option which is more suitable
This article was originally published on March 27, 2014.
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