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Every employee at some point of time has to think about his family financial future. It is true that the busy schedule and career ladder at work don’t allow individuals to give enough space to look at the various options that are available in the market. You know, the best financial helper or guide would be the one who has gone through the worst crisis scenarios in his life. There is nothing wrong in taking suggestions from variety of experiences from different people and advices from analysts. But, we should always remember that all advices don’t lead to the best and think twice about the risk and profit involved before taking the decision. Profit is always inversely prorated to risk; ensure the level of risk always at your economic comfort level without disturbing the normal economic zone of your life.
After going through different analysts suggestions from magazines and suggestions from some of experienced dear ones I did come with a set of numbers that might vary but to the best of my knowledge. Ram is an employee earning 55,000 per month in Hyderabad, India in the year 2010 has set the following goals,
1.Purchasing a car by 2012
2.Purchasing a Flat to live-in Hyderabad by 2015
3.Child’s education till 2030
4.Child’s marriage and Retirement by 2035
Considering the goals of Ram, I did look into various analysts suggestions on the prices,
1.The cost of a car would be around 6 lakh by 2012
2.The cost of a 2 BHK flat would be around 40 lakh by 2015
3.The education expenditure for his child is expected to be around 1 crore in total by 2030
4.The cost of the marriage of his child would be around 1.2 crore by 2035
Though these figures look to be nightmare for Ram with salary around 55 thousand per month but can be achievable with proper financial planning.
1.Emergency fund, Ram can look for keeping at least 2-3 months of his salary in savings account and 4 months of his salary in liquid fund.
2.8000-10000 per month in tax savings which includes PPF, NSC,…etc
3.Ram can go for term insurance for a face value of 30 lakh and I strongly suggest NOT going for any endowment policies to avoid high premiums and less returns.
4.Ram can go for health insurance with at least 3-4 lakh cover for his entire family.
5.Ram can go for a pension plan of 5000 per month, which is 10% of his salary for retirement corpus.
These five points are considered based on the current salary of Ram, assuming that Ram salary shall increase at least by 5% every year and increase in his expenditure is expected to be raise by 7%. Ram would be able to save 10000 per month and ensure that his savings are properly distributed across to gain minimum of 10% income. Ram can choose equity for 10000 per month to gain the required 10% percentage and meet his goals without any hassles.
Courtesy, Source, References & Regards: Kishore