How is my current financial situation

My Name is Ravi G, 44 years old. I am working in PSU, married. My wife is house wife, and two children daughter (8), son (6) and my parents dependent on me. We have 2 BHK flat in which we are staying in, small house of three rooms in my native in Andhra Pradesh my parents are staying in. I have 45 lakhs worth term insurance from SBI and LIC, 10 lakhs worth Jeevan Anand and children policy. We have 6.72 lakhs Home Loan outstanding (insured), 1.8 lakhs car loan. My salary is 1.20 lakhs per month. Till now I am only investing in 20k/month in EPF (both statutory and optional). Medical covered in our company hospital for our family till I retire. Sir, my query is do I need to to invest further, and I want to invest 6,000 per month for long time. Please suggest me where to invest?

Apr 9, 2017 by Ravi G, Bangalore | Financial Planning

Your long query should be answered in details but that is not possible as you have not provided all the items in details. However, we have following observations to make in order to rearrange your current finances and help in future investments.

1. Term Insurance - Ravi, your life cover should be equal to at least 12 times your annual income + liabilities like home loan and car loan or personal loan, if any. Therefore, your minimum life cover should be 1 Crore and 81 Lakhs, say rounded to 2.00 Crores (12 x 1.20 lakhs per month salary + 672,000 Home Loan + 180,000 Car Loan). Therefore, you need to increase your life cover through term plans from current level of 45 Lakhs to 2 Crores.

2. You should invest only the statutory part of the EPF and should not invest more voluntarily simply because the EPF returns are much lower than returns from mutual funds in the long term. Therefore, you should invest the remaining monthly amount (Rs 20,000 - mandatory EPF contribution) through SIPs in a large cap or diversified equity fund.

3. As you want to invest Rs 6,000 per month for the long term, no investment can be better than that of mutual funds. You can select a large cap or diversified equity fund for this purpose.

4. SIPs - You can select couple of funds from SBI Bluechip Fund, Birla Sun Life Equity Fund, ICICI Prudential Value Discovery Fund, DSPBR Opportunities Fund and Mirae Asset India Opportunities Fund.

5. Overall, your financial situation looks good excepting that you need to increase your life risk cover and allocate more savings toward equity oriented savings in order to get superior returns in future. the other aspect you need to look at is reducing the home loan and car loan liabilities. You can reduce the same whenever you save some investible surpluses.

6. Though you have not mentioned, we think you should also plan to save for higher education and marriage of your children as they are already 6 and 8 years old.

Please feel free to write to us in case you have some more queries. Thanks :)

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