By Jai Adiani

VARUN Jain, 27, is a young executive with a FMCG firm in Mumbai. At 27, he is already in the senior management with net earnings of Rs 1 lakh per month. His parents are settled, but Varun still makes it a point to send them Rs 20,000 pm.

Varun spends around Rs 35,000 and Rs 20,000 per month on household expenses and rent respectively. He makes a monthly contribution of Rs 4,166 towards donation. After all the expenses he’s left with a surplus of Rs 20,000 per month. He has no current assets or property, and only owns a car. Whatever surplus he has, he spends on consumption.

Varun will get married to his fiancée in two years time and wants to fund the marriage himself. His financial goals are as follows:
1. He needs to save Rs 5 lakh for his marriage, set in 2011
2. He wants to replace his old car with a new one costing Rs 12 lakh by 2010
3. He wants to retire at the age of 50, ie, 2032 and lead the same lifestyle

Taking into account his current income-expenditure and inflation at 7 per cent, here’s my advice:

Read: Are returns from my MF, PPF taxable?

Donations
The donations he makes are not directed to Section 80 G funds which give tax benefits. So, he loses out on saving tax there.

Insurance
Varun has no insurance. Since he has no dependents, there is no need to take a life insurance policy immediately. Assuming he keeps his household expenses at Rs 35,000 per month post marriage, he should take a term policy of Rs 81 lakh for a period of 21 years ie, till his retirement. Varun should take this policy now as it will be cheaper at 27 than at say 29-30 years, but it’s important that he takes it after his marriage.

Next page: Retirement funding
Read: How to find value in very old shares

Illustration: Vaibhav Shirke

Jai Adiani is a Certified Financial Planner practicing with Sykes & Ray Financial Planners. Sykes & Ray offers comprehensive & professional fee-based Financial Planning Services in India. Jai Adiani can be contacted on jai@sre.co.in

Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content.

1 | 2 |  

e-mail:

Suggest a story idea! Write to us!