Anirudh Nayak, age 37, is an engineer working in the UAE, where he stays with his wife and four-year-old child. He earns a monthly salary of Rs 3.8 lakh. His portfolio, worth Rs 1.99 crore, comprises Rs 1.1 crore of real estate (house and a plot), Rs 9 lakh cash, equity worth Rs 16 lakh, and debt worth Rs 70.8 lakh in the form of fixed deposit (Rs 34.5 lakh), PPF (Rs 27.3 lakh) and Sukanya Samriddhi scheme (Rs 9 lakh). His goals include building an emergency corpus, buying a house, saving for the child’s education and wedding, and retirement.
Financial Planner Pankaaj Maalde suggests Nayak first get rid of his credit card debt of Rs 6.6 lakh from his fixed deposit. He should then build the emergency corpus of Rs 7.7 lakh, which is equal to three months’ expenses, by allocating his cash holding.
This should be invested in an ultra-short duration fund. To buy a house worth Rs 1.8 crore in three years, he will have to allocate his plot of land and fixed deposit. For the remaining amount of Rs 92 lakh, he will have to take a home loan. At a rate of 9% for 20 years, the EMI will come to Rs 82,700, which can be sourced from the surplus.
How to invest for goals
For the higher education of his child in 14 years, he needs Rs 1.9 crore. He can build this by allocating the Sukanya Samriddhi scheme and starting an SIP of Rs 45,000 in a hybrid fund. He should also put in Rs 500 a year in the Sukanya scheme. As for the child’s wedding in 21 years, he will need Rs 2 crore. He will have to start an SIP of Rs 16,000 in a diversified equity fund and Rs 2,500 in the gold bond scheme or gold ETF. No existing resource is being allocated for this goal. For retirement, he will need Rs 11 crore in 23 years, and can assign his PPF corpus, stocks and mutual funds. Besides, he will have to start an SIP of Rs 53,000 in a diversified equity fund and Rs 500 a year in the PPF.
For life insurance, Nayak has two term plans and four traditional plans. Maalde suggests he surrender three traditional plans, and continue with one as a debt portion of his portfolio. He should also hold the term plans, but his life cover is inadequate and he should buy an additional Rs 4 crore term plan at a cost of Rs 4,167 a month.
As for health insurance, he has a Rs 3 lakh cover by his employer. Maalde suggests he buy an independent family floater plan of Rs 10 lakh, which will cost Rs 1,250 a month. He should also buy a Rs 50 lakh critical illness plan and Rs 1 crore accident disability plan at Rs 2,500 a month.