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How do I plan my finances and achieve long term goals

I am a permanent member of your site. My name is Sunil Kumar working in Central Govt. sector and my age is 32 years, recently married, my wife is home maker and no kids. My assets are follows 1) My salary package as on date: Rs. 6 Lakhs per annum, 2) EPF balance as on date 2 Lakhs, 3) Emergency fund I kept in SBI as OD against FD worth Rs. 1 Lakh 4) Term policy worth Rs. 75 Lakhs (Kotak - 25 Lakhs, Max life - 50 Lakhs) out of which I have paid annual premium of Rs. 8,500. Policy tenure up to 60 years. 5) Housing loan in HDFC for Rs. 20 Lakhs and paying monthly EMI as Rs. 20,000. 6) Investing MF in SIP mode (Monthly Rs. 2000) for tax benefit in SBI Tax Gain Scheme only. Still I don't have any financial planning but now I am aware of these things and financial goals are as follows 1) Retirement planning: my expenses as on today is Rs. 20,000 and I am going to retire in 60 years of age 2) Kids Marriage: After 20 years I expected to do marriage for my kids and need 10 laKhs as on today exp 3) Kids Education 8 lac as on today exp 4) After 3 years I need 300,000 for abroad tour. I can invest Rs. 15,000 pm in moderate risk. Can I fulfill my goals else how much amount I need to save to complete my goals. I can increase this SIP every year 10% Please suggest?

Dec 15, 2016 by Sunil Kumar, Chennai  |   Financial Planning

1. The term insurance plan you have taken considering your annual income is fine and adequately covers the family.

2. However, you have a home loan of Rs. 20 Lakhs for which you should have taken another term plan of Rs. 20 Lakhs up to the period the home loan will continue.

3. It is good that you are investing in ELSS SIP but the fund you have chosen is not performing well. You should consider changing this fund and invest from one of the top funds that we have covered in this blog - Top 3 ELSS Funds to invest in 2016 https://www.advisorkhoj.com/articles/Mutual-Funds...

4. You age is 32 years and you would retire at age 60. the current monthly expenses of Rs. 20,000 will be Rs. 102,000 after 28 years considering annual inflation @6%.

5. Child's marriage - After 20 years you will require 32 Lakhs at current cost of Rs. 10 Lakhs considering the above inflation rate.

6. Child's higher education - After 16 years you will require Rs. 20.32 Lakhs at current cost of Rs. 8.00 Lakhs, again considering the above inflation rate.

7. Foreign trip - you require 3.57 Lakhs after 3 years at current cost of 3 Lakhs considering the inflation.

Now, let us look at how you can achieve the above goals?

1. Expenses post retirement - Start a monthly SIP of Rs. 8,000 for 28 yrs. Expected return 12%. Expected Corpus Rs. 2.20 Crores. If you earn around 6-7% on this corpus post your retirement, then you can easily manage your monthly expenses.

2. Child's marriage - Start a monthly SIP of Rs. 3,500 for 20 yrs. Expected return 12%. Expected Corpus Rs. 35 Lakhs to meet this goal easily.

3. Child's education - Start a monthly SIP of Rs. 3,000 for 16 yrs. Expected return 12%. Expected Corpus Rs. 17 Lakhs to meet this goal.

4. Foreign trip - Start a monthly SIP of Rs. 8,000 for 3 years with expected return of 9.50%. Expected corpus Rs. 3.60 Lakhs.

Now that you know what is the total monthly SIP that you need to start for respective time periods, you will now need to know which category of funds you should invest?

Since you can take moderate risk, we suggest that you should invest in Balanced Funds only. However for the tenure of 3 years to meet the goal of foreign trip, you should do the SIP in a debt fund.

Please check the returns of top performing funds in these 2 categories and select the funds with which you want to start the SIPs -

Top performing balanced funds - https://www.advisorkhoj.com/mutual-funds...

Top performing debt funds - https://www.advisorkhoj.com/mutual-funds...

Hope the above helps you in planning your finances and achieving your long term and short term goals.

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