Financial Planning:: Business Line

�� -->

I am 30 years old and work with a private company. My wife, 29, is a home maker and we have a 1-year-old son. Our family is covered by a group health cover policy given by my employer.

My goals are buying a single bedroom flat worth Rs 35 lakh within the next two years with 80 per cent loan.

For my son’s education, I need Rs 1 lakh per annum till he completes his higher secondary. Later, for his higher education Rs 12 lakh would be required.

I have a Jeevan Saral policy which entails payment of a monthly premium of Rs 2,000. I need your advice on continuing with this plan.

Also, suggest mutual fund schemes where I can invest.

- Prashant Bodhale

It is good to have aspirations, but at the same time it should be something that you can achieve. With your limited surplus, you need to prioritise your goals.

By buying a property worth Rs 35 lakh, all your surplus will be exhausted. It is also not certain if you will be eligible for a loan that covers 80 per cent of the property cost.

Consider this, for a loan of Rs 28 lakh with a tenure of 30 years, your EMI will be Rs 25,901. Since the EMI would be 86 per cent of your salary, you may not be eligible for a loan.

As a part of diversification, buy a plot and postpone your home purchase till the plot value appreciates by at least 40 per cent of your down payment of the home that you intend to buy.

EDUCATION

For higher education, the present cost of Rs 12 lakh will be Rs 35 lakh if the inflation continues to grow at 7 per cent.

To reach the target, you should save monthly a sum of Rs 6,150 for the next 16 years and it should earn 12 per cent return. Allocate 70 per cent to equity mutual funds to reach the goal.

INSURANCE POLICY

Insurance is a long term product and utmost care should be taken while buying a policy.

Since you are in the 10 per cent tax bracket, your yield is likely to be around 5.5 per cent. But if you surrender the policy, you will be entitled to receive only 30 per cent of the second and third year premiums paid.

You would be better off continuing with the policy. Since you need to continue the policy, stop VPF contributions from this month and invest the same in equity funds.

INVESTMENT

From fixed deposits, retain six months’ needs and shift the rest to equity schemes.

Invest in liquid funds and through systematic transfer plan shift it to equity schemes, according to prevailing market conditions.

Start equal amount of investments in Quantum Long Term Equity and Reliance Equity Opportunities.

Once your income starts increasing, invest more in equity to build a retirement nest.

(The author is CEO, myassetsconsolidation.com)