Too much fixed income, too little equity

Sanjay (45) works as a project manager with an IT company and earns Rs 1.2 lakh per month. He lives in his own house with his parents who are financially independent, while his wife (41) is a homemaker. Sanjay has investments in fixed deposits, post-office monthly income scheme (POMIS), endowment insurance plans and mutual funds. His only major goal is to accumulate a sufficient corpus for his post-retirement years. Here is a financial plan for him. Emergency fund Maintaining an emergency fund equivalent to at least six months of expenses is a must. It acts as a cushion during difficult times and prevents your finances from getting derailed if some unforeseen, unavoidable expense occurs. Sanjay's monthly expenditure is Rs 51,000. And so he should maintain an emergency corpus of at least Rs 3 lakh. It should be kept in a combination of sweep-in fixed deposits and liquid funds. This will help him earn a higher return without compromising on liquidity. He can use a part of the money parked in his fixed deposits to create this emergency fund. Action: Maintain an emergency corpus of Rs 3 lakh. Health insurance For health insurance, Sanjay depends solely on a Rs 14 lakh health cover provided by his employer, which also covers his wife and parents. The health plan provided by your employer ceases to exist when you switch jobs. It doesn't cove

This article was originally published on October 06, 2021.