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Ask Mint Money | Save regularly and target to save as per your earning capacity

Ask Mint Money | Save regularly and target to save as per your earning capacity
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First Published: Thu, Nov 10 2011. 09 36 PM IST

Updated: Thu, Nov 10 2011. 09 36 PM IST
I am 45 years old and my post-tax earnings per annum is Rs 16 lakh. I have bought two apartments and the total equated monthly instalment (EMI) outgo is Rs 34,000. I need to pay 30 more EMIs for one apartment and 96 more EMIs for the other. I have Rs 15 lakh in Public Provident Fund (PPF). My provident fund is about Rs 18 lakh as on today and gratuity Rs 2.5 lakh. Other investments are Rs 3 lakh in mutual funds through systematic investment plan (SIP) of Rs 7,000. The funds invested in equal proportion are HDFC Prudence, HDFC Top 200, ICICI Discovery Fund and Fidelity Equity. I have also direct exposure of Rs 22 lakh. I have a term deposit of Rs 4 lakh. I have a term insurance of Rs 20 lakh and a family floater plan of Rs 7 lakh. I also have a company health insurance. I have traditional insurance policies with an annual premium of about Rs 50,000. I pay Rs 1.5 lakh towards unit-linked insurance plan (Ulip), which I had stopped paying after first three premiums. My dependants are my spouse, daughter and son. Assuming 12% increase in annual income every year for another 13 years, what should be my investments to accomplish the following goals—higher education for my children and their marriage and a retirement corpus of Rs 2 crore.
—Chandru Bevinakuppe
You have planned your investments well. However, you may have to do a few adjustments. Your monthly investment in mutual funds (MFs) is too small and it appears you are not saving to your earning capacity. You have a potential to save another Rs 30,000 per month.
Your fund selection is good. Increase your savings in the same funds. You can consider adding gold via an exchange-traded fund or the gold fund route to your portfolio. You have also built a substantial portfolio in direct stocks. We generally recommend direct stocks portfolio only if you are able to track it otherwise we believe that MF is a better way.
Another aspect which is a matter of concern is your life cover. At your age and income level and considering your loans you, should increase the term cover by Rs 50 lakh.
In case of a Ulip where you have stopped paying the premium you should evaluate withdrawing the same. You are in the premium holiday mode, but the charges are not. They are being debited and are reducing your number of units.
You will be able to accomplish your goals of children’s education, marriage and retirement corpus of Rs 2 crore. But this is possible only if you save regularly and target to save as per your potential.
Also, you may need to revisit the retirement corpus you have planned as this does not envisage the inflation impact after 13 years. However, with the above planned savings you should be able to achieve your targets.
Surya Bhatia is a certified financial planner and principal consultant, Asset Managers
Queries and views at
mintmoney@livemint.com
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First Published: Thu, Nov 10 2011. 09 36 PM IST
More Topics: Ask Mint Money | Surya Bhatia | Savings | EMI | PPF |