A financial plan that puts idle money to use

Sarthak (38) and Priya (37) have a four-year-old son. They live in their own house, along with Sarthak's mother (59), who is financially dependent on them. Their combined monthly take-home salary is Rs 1.05 lakh, while their monthly expenditure is Rs 50,000. They have accumulated around Rs 26 lakh, which includes their investments in stocks, mutual funds, fixed deposits, Public Provident Fund (PPF) and the Employees' Provident Fund (EPF). Here is a financial plan for the couple to help them meet their various goals. Emergency fund Sarthak and Priya have Rs 6.85 lakh in fixed deposits. An emergency fund should be equal to at least six months of expenses. The couple already has more than double of what's required, so they may consider reducing their emergency corpus to Rs 5 lakh, which would be equivalent to their expenses for 10 months. The extra amount can be invested in equity funds over a couple of months. Further, instead of a traditional bank fixed deposit, they should opt for a sweep-in deposit, which offers higher liquidity. Action: Consider reducing your emergency corpus. Invest the extra amount in equity funds over a couple of months. Health insurance The entire family is completely dependent on the health cover provided by Sarthak's employer. An employer-provided health cover is valid as long as the job lasts. It is not available during the transition period if you decide to change your organisation. Hence, Sarthak and Priya should buy a family-floater health cover of Rs 5 lakh, covering themselve

This article was originally published on November 24, 2021.