Balan is a 38-year-old non-resident Indian (NRI), working in the Middle East. He has two children: a ten-year-old daughter and a four-year-old son. His goals are children's education, daughter's marriage and his own retirement.
|Savings & investments||Amount (Rs)|
Balan should keep six months' of expenses (Rs 6 lakh) in his emergency fund. Because Balan is an NRI, the interest from a savings account is taxable for him and hence it will be wise to keep a portion of the emergency fund in an NRE (non-resident external) FD account. It will fetch him about 7 per cent (tax-free) while ensuring liquidity. But if there is a withdrawal in the first year, the interest will not be paid. The amount in his NRO (non-resident ordinary rupee) account can be allocated for this, with the remaining amount in the NRO account invested in equity funds.
Balan lives both in India and abroad. So, he must have adequate health insurance at both the places. In India, he already has a family-floater health insurance of Rs 2 lakh. This amount is not enough. He can get a super top-up plan of Rs 5 lakh with Rs 2 lakh deductible. Such a plan will provide him another Rs 3 lakh over his existing cover of Rs 2 lakh.
Balan has a term plan that also covers him outside India. He also has employer-provided life insurance in his country of residence. But going by his income, his life cover is inadequate. He should top it up by Rs 2 crore.
A roadmap to goals
None of Balan's goals are negotiable. Moreover, as he has no pension from his employer, he needs to build his retirement corpus in a way that when he returns to India he has sufficient corpus to live a comfortable life.
Balan has a monthly surplus of Rs 1 lakh at present to achieve all his future goals. On the adjacent page we have mentioned the monthly SIPs required for each goal for the first year. Then based on the number of years to reach a goal, the SIP has to be increased by 5 per cent every year. This way he can easily meet all his goals.
For his daughter's marriage, Balan is investing in Sukanya Samriddhi Yojana (Rs 1 lakh per year). Since it gives low returns, he should direct this amount to equity funds to earn a higher return. Since pre-mature exit from it is not allowed, he will have to continue the account till its maturity with the minimum yearly investment of Rs 1,000.
Balan has income in India. It's not known what this income is, but if it exceeds Rs 3 lakh per year, he should invest in a tax-saving scheme to save on the income tax. One can find top-rated tax-saving schemes on the Value Research website.
Balan also has many funds. In a portfolio, four-five funds are enough to provide diversification. He can exit Birla SL Manufacturing Equity and ICICI Prudential Banking funds as they provide limited diversification. He can also exit HDFC Balanced and HDFC Childrens Gift funds as they also invest in debt. Since his goals are long term, he need not have a debt component in his portfolio. Finally, he can exit Franklin India Prima Plus also as over 50 per cent of its portfolio overlaps with his two other Franklin funds. He can continue investing in the rest.