A forgotten goal can derail your finances

Mukesh is 48 years old. He has an 18-year-old son, who is pursuing his B.Sc. His wife, who is a homemaker, is 44 years old. His 68-year-old mother lives with him and is financially dependent on him. Mukesh has a monthly take home salary of Rs 52,000. He lives in his own house. He has investments in various mutual funds, endowment policies, ULIPs and the EPF. Besides these, he owns a plot of land worth about Rs 5 lakh. Emergency corpus A financial plan should start with planning for emergencies. Typically, an emergency corpus should be equal to six months' expenses. Mukesh's monthly expenditure is Rs 20,000, excluding the insurance premiums. For him, the emergency corpus amount would add up to Rs 1.2 lakh. Currently, he holds only Rs 30,000 as his emergency fund, so he should raise it by Rs 90,000. The emergency corpus should be kept in a combination of sweep-in fixed deposits and liquid funds. These instruments will enable him to earn a higher return without compromising on liquidity. Action: Maintain an emergency corpus of Rs 1.2 lakh. Life insurance Mukesh has bought seven life insurance (endowment and unit-linked) policies, which provide him a collective life cover of around Rs 15.25 lakh. For this, he is paying yearly premiums

This article was originally published on April 23, 2020, and last updated on July 06, 2022.