Family finance: Why Das needs to stagger money goals

Varsha Das is only 26 years old and works in the IT sector, in Kolkata, earning Rs.59,000 a month. Her portfolio of Rs.27.08 lakh comprises a house worth Rs.20 lakh, cash of Rs.1.7 lakh, equity funds worth Rs.2.38 lakh, and debt in the form of Rs.2.2 lakh of EPF and Rs.80,000 of debt funds. She has a gold loan of Rs.70,000 for which she is paying an EMI of Rs.3,000. Her goals include building an emergency corpus, buying a house, saving for her wedding and retirement, and building a retirement corpus for her mother.

According to Fincart, Das should first repay the gold loan of Rs.70,000 with her cash holding. This will free up Rs.3,000 for investment. Next, she should build an emergency corpus of Rs.2 lakh, which is equal to her six months’ expenses. For this, she can allocate cash of Rs.1 lakh and debt funds. For the shortfall, she can either save the surplus before starting investment or build the corpus as and when she has sufficient funds. This amount should be invested in a low duration fund.

Das wants to get married in three years and has estimated a need of Rs.9.5 lakh. She can allocate her equity fund corpus for the same and start an SIP of Rs.16,074 in a debt fund. For her mother’s retirement corpus in eight years, Das will need Rs.32.1 lakh and will have to invest Rs.21,342 in equity funds.

However, due to lack of surplus, she can start with an SIP of Rs.5,000 and increase the amount after a rise in income and completion of her wedding goal. Das also wants to buy a house in four years, but due to lack of surplus she should push the goal to 10 years. For a house worth Rs.71.6 lakh, she can allocate her property, which will fund 50% of the amount. For the remaining sum, she can take a loan and the EMI can be funded by the rise in income.

Das wants to retire at 50, but will have to push it back due to lack of surplus. Given her current expenses and inflation, she will need Rs.4.4 crore and should allocate her PF corpus for the same. Besides, she will need to start an SIP of Rs.11,907 in equity funds after a rise in income.

For life insurance, she has a term plan of Rs.50 lakh, for which she is paying a monthly premium of Rs.512. As per the need-based theory, she does not require any more cover. For health insurance, she has a Rs.5 lakh cover provided by her employer. Fincart suggests she buy a Rs.10 lakh plan and a Rs.90 lakh top-up plan, which will cost her Rs.878 a month in premium.

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