Family finances: Santosh needs to cut financial goal values

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G. Santosh is a government employee and lives with his wife, a guardian, and two children, aged 19 and 14, in Chennai. They receive a combined salary of Rs 72,000 per month, in addition to a pension of Rs 22,500, as Santosh is a defense service retiree. He is also earning a rental income of Rs.8,667 per month from a house Rs.42 lakh, for which he has taken a loan of Rs.16.15 lakh and pays an EMI of Rs.30,000. He has another house worth Rs.15 lakh and land worth Rs.3 lakh. His goals include building an emergency corpus, saving for college and his children’s marriages, and retirement.

According to Fincart, the lack of investable surplus, insufficient assets and a very short time horizon mean that Santosh will not be able to achieve his goals if he does not reduce the values ​​of the goals. He would also have to pay off the home loan with his insurance plan, which expires next year, and one of the mutual funds. This will release Rs.30,000.

For now, he can start by building up an emergency corpus of Rs.2.18 lakh, which is equivalent to his three-month expenses, by allocating some of his money. This amount should be invested in a low duration fund. For his children’s higher education, Santosh will need Rs.24.2 lakh and Rs.29.2 lakh in two and four years respectively. For the former, he can allocate part of his corpus of stock funds and a house worth Rs.15 lakh. For the latter, he can allocate the parcel of land, the shares, a mutual fund and the remaining cash.

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It will also have to start a SIP of Rs.39,819 in debt fund from next year. For child marriages in seven and 11 years, it will require Rs.37.5 lakh and Rs.60.7 lakh but due to lack of surplus, it is advisable to reduce these target values. For his retirement, he will need Rs 1.59 crore in eight years. It can affect its EPF, PPF and NPS corpus, and also start a SIP of Rs.68,855 in equity funds. He can start with Rs.12,000 for now and increase it with an increase in his earnings. He will also continue to receive a pension for life.

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For life insurance, Santosh has two term plans of Rs.1.04 crore and a traditional plan of Rs.5 lakh. Although he needs higher cover, cash constraints mean he won’t be able to pay the premium. Since he only has eight years to retire, Fincart suggests that he continue with the existing covers and not buy any more. For health, he has Rs.4 lakh cover and Rs.24 lakh accidental disability plans for him and his wife. Since his medical expenses will be covered by the government even after retirement, he no longer needs health coverage.

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