His goals include building an emergency corpus, buying a house, saving for his children’s higher education and weddings, and for his retirement.
According to Fincart, Sharma should first build an emergency corpus of Rs.4.8 lakh, which is equal to his six months’ expenses. For this, he can allocate his cash of Rs.4 lakh and a portion of his fixed deposit. This amount should be invested in a low duration fund. Next, he wants to buy a house worth Rs.1.82 crore in four years. For this, he can allocate his remaining fixed deposit, and equity and debt mutual funds. This will be sufficient to achieve this goal and no fresh investment is needed.
For his older child’s education in seven years, he will need Rs.38.9 lakh. For this, he can allocate Rs.20 lakh of equity funds, which will be enough to achieve the goal. For the younger child’s education in 11 years, he will need Rs.51.8 lakh. For this, he can assign Rs.17 lakh of his equity funds to meet the goal. For the kids’ higher education in 11 and 14 years, he has estimated a need of Rs.1.1 crore and Rs.1.5 crore, respectively. For the former, he will have to assign Rs.28.5 lakh of his PPF corpus and Rs.14 lakh of equity funds. For the latter he will have to assign the remaining PPF corpus and start an SIP of Rs.33,800 in equity funds.
For the children’s weddings in 18 and 22 years, he wants Rs.57.1 lakh and Rs.72.1 lakh, respectively. He will have to allocate his gold for both the goals, and for the latter, he will have to start an SIP of Rs.3,418 in an equity fund. For retirement in 18 years, he needs Rs.3.9 crore and can assign his EPF, NPS and gratuity corpus. He will need to continue investing Rs.6,000 a month in the NPS in order to achieve his goal. For life insurance, he has a term plan of Rs.2.4 crore provided by his employer. As per need based theory, Sharma does not require an independent term plan. For health insurance, he has a Rs.24 lakh medical cover provided by his employer. Fincart suggests he buy a Rs.10 lakh family floater plan and a Rs.90 lakh top-up, which will cost him Rs.2,466 a month in premium.
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