I am 38, self-employed, and my wife, 36, is a home-maker. We have two sons aged 12 and 9. My parents are financially dependent. I have a health cover for ₹10 lakh and ₹5 lakh for my parents, and term insurance for ₹1.5 crore. Most of my investments are in fixed deposits (₹50 lakh), and gold (₹35 lakh). Occasionally, I take an overdraft (OD) from my FD for business. Please suggest a plan to help me reach my goals.

Gowthaman

It is always good to build a portfolio with proper asset allocation. Holding fixed deposits for overdraft (OD) facility is logical, but calculate the post-tax return. Since your OD limit is less than ₹25 lakh, there are banks which offer collateral-free OD. So, don’t lock up such huge capital with poor return. Education: The total outgo for four years is ₹1.52 crore. So re-allocate ₹40 lakh from FDs to a portfolio of mutual funds, gold and fixed deposits to earn post-tax return of at least 10 per cent. This will account for ₹71 lakh. To meet the shortfall, invest ₹78,000 per month for six years. It should deliver 11.8 per cent return. Inflation is assumed at 7 per cent for all the cases. Invest in an allocation of 60:30:10 in equity mutual fund, debt including debt mutual funds, and gold.

For your second son’s education, invest ₹13,000 a month to reach ₹25 lakh. For your sons’ marriage, to meet the present value of ₹40 lakh, save ₹20,400 per month until you reach the target of ₹1.22 crore

Retirement : Assume you need ₹35,000 per month to meet monthly expenses for you and your spouse. At retirement, it will be ₹1.55 lakh, for which you need a corpus of ₹4.1 crore and it should earn 1 per cent above the prevailing inflation. To build this corpus, save ₹33,000 per month.

The writer is a financial planner and founder, Myassetsconsolidation.com

Send your queries to blinefp@gmail.com

Related Topics