Financial planning – need Guidance

POSTED BY suman ON March 13, 2012 1:45 pm COMMENTS (4)

I have a monthly income of about 50k. My spouse earns about 70k each month. Together we have a home loan of 40L – EMI around 42k.

I have a LIC policy of about 50k(sum assured). I have no idea whether its a term insurance or not. As this is very less, i would like to get a new term insurance to mitigate risk – in case of my absence to cover house loan emi.
Please suggest what the minimum amount of insurance i should look at for term of about 25-30 yrs.

Also, i hve heard online insurance has lesser premium. is this still true?

I invest about 10k every year in PPF. Should this amount be increased?

I would also like to invest in SIP for some good mutual funds, which have low risk and good returns [If there is any such fund :o)) ] please suggest me a few good mutual funds. Is this the right time to invest in a mutual fund thro sip?

Our monthly expenses totals to : 20k at max.

Thanks
Suman

4 replies on this article “Financial planning – need Guidance”

  1. Krishna Kishore Appala says:

    1) Investing all 10k in one Mutual fund is not a good idea.
    Diversification has to be done in funds and also in fund houses. It would be good if you divide your 10k into some 2-3 funds consisting of both Equity and Balanced funds (in a proportion based on your risk appetite).

    2) There are quite other funds which performed consistently good (apart from the ones which i stated above) :
    a) HDFC Prudence (Balanced Fund)
    b) Franklin India Bluechip (Equity : Large Cap)

    3) In my opinion you can exit from ULIP . ULIP’s or Endowment plans will never beat the inflation. And divide that premium of 30k in such a way INSURANCE + INVESTMENT (small portion in pure term insurance + remaining into another asset class where you can earn atleast 8-9% returns).
    Buy doing like this you will be covered more and also the returns will be decent enough to beat inflation.

    4) You are Under-insured. (Because you are having a house loan of 40L and cover of only 50L, and what about other needs of your family).
    Agreed that your spouse is also earning . But it should not be the case that 42k of her salary should go to the EMI , if any thing wrong happens. OR
    Pay 40L loan and then left with 10L for her.

    Both are not good scenarios.

    You have to do some calculations before choosing the insurance amount
    lt will be more or less the summation of :
    a) Any loans on your name.
    b) Monthly expenses of your family to be met for least 10 years.
    c) Money needed for your children studies and marriages.
    d) Some emergency fund for your family.
    Calculate the amount and then take only pure Term insurance.

    Also don’t take entire amount under one insurance.
    For example : Take 2 term insurance policies of 40L and 50L each.
    By doing this , you can cancel the 40L insurance once your EMI is done.

    There are many pure term insurance providers like ICICI prudential , Bharti AXA , HDFC Life , Kotak Life insurance etc. You can go with any one.

    Thanks

  2. suman says:

    Thank you. I am not looking at ELSS as i have a home loan and it will take care of my investment upto 1L for 80C deductions.

    I would like to know if i have a term of about 10-20 years and a max investment of upto in 10k mfs, is there any issue with investing in a single fund – or should the amount be split into multiple MFs.

    I am thinking of investing into HDFC Top 200 as you have suggested after doing some background check. Let me know if there are any other must-invest MFs to consider for long term tenure.

    However, i have a ulip in which i am investing 30k a year. I do not know if its the right time to exit or continue with it. [ICICI Ulip started in 2009 – with 3 year lock, which will end in 2012.]

    And regarding insurance, would a insurance cover of 50L suffice? or would i be underinsured with this amount? i am planning to go for term insurance. Which is the cheap and best(wrto. premium and claim) policy available?

    1. Dear Suman, 50+70K = 1.2L Rs. Is it you & your spouse’s cash in hand salary ior the income before deductions? Please clarify.
      Size of family? Home loan EMI is 42K, 20K is the mly expenses, where the remaining amount is going? How much emergency funding you are having as of now?

      What about health cover for you & your family?

      Are you & your spouse eligible for PF or not? If yes, what are the current values for respective PFs? What are your other investments & assets apart from that house?

      Thanks

      Ashal

  3. Krishna Kishore Appala says:

    Equity based Mutual Funds will always give very good returns in long term (10 years or above).

    You can choose any one of the following and start SIP :

    1) HDFC Top 200
    2) SBI Magnum Contra

    (If you want to go for ELSS funds)

    3) Canara Robeco Equity Tax saver
    4) Sundaram Paribas Tax saver
    5) HDFC Tax saver

    All this funds have good returns in previous years , and performed consistently well.

    And also you can increase your investment in PPF (say 20k per year , based on your needs) . This money will be getting atleast 8% of interest and will be compounded over a period of time and gives you a good corpus at the time of your retirement.

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