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Many goals to plan for

Jitendra, 29, and Riya have got married lately and want to attain a number of short- and long-term goals

I am a 29 years old. My salary is ₹45,000 per month; my wife's, ₹30,000. My expenses are ₹24,000 per month. My wife has an education loan and has been paying 5,000 per month as EMI. The loan will end in mid-2017. My wife's extra expense (transport, lunch, etc.) is ₹4,000 per month.

Savings/investments

Insurance

  • Health insurance: Company-provided health benefit for myself; company-provided health insurance of ₹2 lakh for wife. I have bought an extra family floater (Religare Care) policy of ₹10 lakh sum assured
  • Life insurance: Nil at present; planning to buy a term plan of ₹1 crore each for both of us.

Goals

  • House: Within four-five years (present cost ₹40-45 lakh). I want to accumulate money for down payment, interior furnishing and registration cost and want to take a loan for the rest of theamount.
  • Car: After five years. Present cost ₹5 lakh (down payment and loan).
  • Dream vacation: After ten years, i.e., on our tenth anniversary. Present cost ₹3 lakh.
  • Child's graduation: After 18 years. Present cost ₹5 lakh.
  • Child's post graduation: After 22 years. Present cost ₹15 lakh.
  • Child's marriage: After 25 years. Present cost ₹8 lakh.
  • Retirement: At 60. Present monthly requirement is ₹40,000.

I want to know whether we will be able to meet our goals. If we purchase a flat on loan, can we manage to have a surplus amount to carry on with our other investments?
- Jitendra & Riya Ghosh,

What they have (Cash Flow)

  • Monthly surplus of ₹42,000

What they want (Goals)

  • A house
  • A car
  • Retirement
  • Dream vacation
  • Child's education and marriage

What they should do
Emergency fund:
Jitendra and Riya already have a sufficient sum for contingencies.
Health insurance: Jitendra is a government official. All his medical expenses will be borne by the government. Riya is also covered under employer's health insurance and they have also taken a family-floater policy of ₹10 lakh. Both have sufficient health insurance.

Life insurance: Jitendra must buy a life cover of ₹50 lakh.We have considered the fact that Riya is also working while calculating this value. Once they have a kid, they will need to increase the cover.

Investments: Since the couple has no immediate goals, they can buy a car now by making a down payment from their existing mutual funds. By the time they buy a house, they will be through with the car loan.

They can continue with the PPF and the EPF for retirement. For all long-term goals, they should invest in equity funds through SIPs. They wish to invest in Axis Long Term Equity, Franklin India Prima Plus, Franklin India Smaller Companies and Franklin India Tax Shield. Since we do not recommend three funds from the same AMC in a portfolio, we have replaced the funds from the same AMC with other good funds from other AMCs.

They have also chosen a sm all-cap fund. Since small-cap funds are riskier, they can opt for a multi-cap fund, which invests across all market caps depending on opportunities. Based on their risk appetite, we are also suggesting a mid-cap fund. Jitendra had also invested in three funds during 2013-14. He may discontinue investing in Quantum Long Term Equity Fund as its performance has deteriorated.

Jitendra and Riya may remain invested in ICICI Pru Focused Bluechip Equity Fund, which is a five-star large cap fund. Jitendra wants to attain all the above-mentioned goals while paying home loan EMIs as well in the future. We advise him to plan again once he takes the home loan. His income would also increase during the time and he will be in a better position to understand his financial status.