All these costs will be revised based on inflation.
Where are they today?
Cash flow: The gross annual inflow from various sources is Rs 20.29 lakh against an outflow of Rs. 10.38 lakh. The outflow includes routine household expenses, taxes, EMI on home loan, insurance premium and regular investments in EPF. EMI consumes about 6% of annual inflow.
Net worth: The market value of all assets owned by the couple is worth Rs. 1.56 crore. Out of this, Rs 1.09 Crore is for personal consumption in the form of house, jewellery and car. They have an outstanding mortgage of Rs 2.20 lakh.
Contingency fund: Against the mandatory monthly expenses of Rs 53,944, the balance in savings bank, bank FD, liquid funds and cash together amounts to Rs 26 lakh, which is equivalent to 48 months' reserve.
Health & life insurance: Life insurance cover for Rahul is Rs 8 lakh and that of Pallavi is Rs 10 lakh. This is mainly by way of investment-oriented policies. Rahul's employer has provided health cover in form of floater plan to entire family worth Rs 7 lakh.
Savings & investment:
Invested assets comprise equity mutual funds worth Rs 1.27 lakh, direct equity shares worth Rs 55,630, fixed deposits worth Rs 2 lakh, Rs 1.12 lakh balance in employee provident fund and life insurance worth Rs 18 lakh. Balance in savings bank account is Rs 25 lakh and bank FD is Rs 1 lakh.
Fiscal analysis
Family is saving a substantial part of the income. A huge surplus is lying in savings bank account but this is temporary. Borrowing is well within their limits. Both health and life cover needs enhancement.
The way ahead
Contingency fund: They should keep about Rs 1.6 lakh for contingencies. Out of this, Rs 25,000 in form of cash at home is recommended considering there are elderly parents at home. Rest of the amount can be parked in a savings bank account linked to an FD.
Any balance over and above the contingency fund should be utilized to pay back outstanding home loan. After paying back home loan, surplus funds available should be deployed according to suggestions given below.
Health & life cover: The couple should enhance health cover to Rs 5 lakh each for Rahul and Pallavi and Rs 3 lakh for their daughter. If possible, they should also obtain a health cover for parents. Rahul's live insurance should be enhanced to Rs 1.5 crore and Pallavi's Rs 65 lakh, both in the form of term plans.
Planning for financial goals
Home buying: Purchasing a bigger house is possible. First, the surplus funds in the savings bank account after repaying the home loan should be invested in a mutual fund scheme having about 75% in equity and rest in debt. Second, the couple should start SIP of Rs 15,000 in a similar mutual fund scheme. This is suggested as they want to purchase bigger house seven years later. At the time of purchase, they can liquidate the existing home and fund the shortfall with a home loan.
Daughter's education & marriage: They should invest Rs 25,000 every month in a large-cap equity fund, international equity fund and gold fund and increase the allocation by 10% every year. The corpus thus created should be utilized to fund education and marriage-related expenses.
Retirement planning: They should continue contributing to EPF and PPF. An SIP in a mid/small-cap equity fund should be initiated.
Travel & Car: The couple should save systematically every year, after providing for the necessities. Whenever funds are available, they can go on a vacation and buy a luxury car.
Planner's eye
There is no doubt the family will achieve all their goals. There are three strong reasons for it: Since the couple's lifestyle is simple; they save a substantial portion of income; it is a double-income family; and they are living with parents.
http://timesofindia.indiatimes.com/business/india-business/Use-surplus-funds-to-repay-home-loan/articleshow/46560956.cms
Where are they today?
Cash flow: The gross annual inflow from various sources is Rs 20.29 lakh against an outflow of Rs. 10.38 lakh. The outflow includes routine household expenses, taxes, EMI on home loan, insurance premium and regular investments in EPF. EMI consumes about 6% of annual inflow.
Net worth: The market value of all assets owned by the couple is worth Rs. 1.56 crore. Out of this, Rs 1.09 Crore is for personal consumption in the form of house, jewellery and car. They have an outstanding mortgage of Rs 2.20 lakh.
Contingency fund: Against the mandatory monthly expenses of Rs 53,944, the balance in savings bank, bank FD, liquid funds and cash together amounts to Rs 26 lakh, which is equivalent to 48 months' reserve.
Health & life insurance: Life insurance cover for Rahul is Rs 8 lakh and that of Pallavi is Rs 10 lakh. This is mainly by way of investment-oriented policies. Rahul's employer has provided health cover in form of floater plan to entire family worth Rs 7 lakh.
Savings & investment:
Invested assets comprise equity mutual funds worth Rs 1.27 lakh, direct equity shares worth Rs 55,630, fixed deposits worth Rs 2 lakh, Rs 1.12 lakh balance in employee provident fund and life insurance worth Rs 18 lakh. Balance in savings bank account is Rs 25 lakh and bank FD is Rs 1 lakh.
Fiscal analysis
Family is saving a substantial part of the income. A huge surplus is lying in savings bank account but this is temporary. Borrowing is well within their limits. Both health and life cover needs enhancement.
The way ahead
Contingency fund: They should keep about Rs 1.6 lakh for contingencies. Out of this, Rs 25,000 in form of cash at home is recommended considering there are elderly parents at home. Rest of the amount can be parked in a savings bank account linked to an FD.
Any balance over and above the contingency fund should be utilized to pay back outstanding home loan. After paying back home loan, surplus funds available should be deployed according to suggestions given below.
Health & life cover: The couple should enhance health cover to Rs 5 lakh each for Rahul and Pallavi and Rs 3 lakh for their daughter. If possible, they should also obtain a health cover for parents. Rahul's live insurance should be enhanced to Rs 1.5 crore and Pallavi's Rs 65 lakh, both in the form of term plans.
Planning for financial goals
Home buying: Purchasing a bigger house is possible. First, the surplus funds in the savings bank account after repaying the home loan should be invested in a mutual fund scheme having about 75% in equity and rest in debt. Second, the couple should start SIP of Rs 15,000 in a similar mutual fund scheme. This is suggested as they want to purchase bigger house seven years later. At the time of purchase, they can liquidate the existing home and fund the shortfall with a home loan.
Daughter's education & marriage: They should invest Rs 25,000 every month in a large-cap equity fund, international equity fund and gold fund and increase the allocation by 10% every year. The corpus thus created should be utilized to fund education and marriage-related expenses.
Retirement planning: They should continue contributing to EPF and PPF. An SIP in a mid/small-cap equity fund should be initiated.
Travel & Car: The couple should save systematically every year, after providing for the necessities. Whenever funds are available, they can go on a vacation and buy a luxury car.
Planner's eye
There is no doubt the family will achieve all their goals. There are three strong reasons for it: Since the couple's lifestyle is simple; they save a substantial portion of income; it is a double-income family; and they are living with parents.
http://timesofindia.indiatimes.com/business/india-business/Use-surplus-funds-to-repay-home-loan/articleshow/46560956.cms
