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Name: Mukesh Kumar
Resides in Chandigarh
Profession: engineer with an Oil and Gas firm
Annual income
(Rs 6.24 lakh)
Status & goals
Mukesh Kumar is an engineer working with an oil and gas firm in Surat, Gujarat. He is single and lives with his father and mother. His parents are financially dependent on him. He wants to plan for his marriage, a new car and his retirement. In terms of existing investments, he has Rs 1,20,000 in his EPF account. He also has Rs 90,000 in savings bank. Mukesh has an exposure to direct equity which is currently valued at Rs 27,000.
Needed
A financial roadmap, which can help him plan a better future for him and a secured retired life.
Net monthly surplus
Rs 31,000
FINDINGS
EMERGENCY FUND Mukesh Kumar has an emergency fund which is equal to six months of his expenses.
LIFE INSURANCE: Mukesh is does not have an adequate life insurance cover.
HEALTH INSURANCE He and his family is dependent on his employer for health insurance cover.
INVESTMENTS He has not started any investment from existing surplus.
PROVIDENT FUND He has a good balance in the Employee Provident Fund account.
RECOMMENDATIONS
EMERGENCY FUND Mukesh needs to keep aside Rs 96,000 in savings-linked bank FD or liquid fund and maintain it as an emergency fund. His existing savings bank balance is allocated to this fund.
Express tip: Emergency fund carries utmost importance and helps in managing contingencies like job loss or disability.
LIFE INSURANCE As per need-based analysis, Mukesh should have life insurance coverage of at least Rs 40 lakh. He currently has two policies from LIC and one from ING Life. After taking into account the current surrender value of money back plans, the balance premium payable and the projected maturity value based on the current bonus, the post tax Internal Rate of Return (IRR) of all three plans is below inflation rate. So, he is advised to surrender all the plans. He should buy an online term plan of Rs 40 lakh from TATA AIA, which will cost him around Rs 4,600 per annum. It is advisable to disclose all the facts correctly while applying for fresh insurance. Surrender the plan only after getting the new term plan.
... contd.
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