Financial Planning: Malhar Majumder

My wife, 27, and I, 29, together earn Rs 80,000 a month. Our expenses come to Rs 35,000 (including a car loan payment of Rs 5,500 and a rent of Rs 12,000). We give Rs 10,000 to both our parents. Another Rs 10,000 is in mutual funds for two years (Rs 2,500 each in two equity-diversified and two tax saving funds). We have Rs 5,000 in Public Provident Fund. I bought two unit-linked insurance plans (at Rs 6,000 monthly premium) last year for saving taxes. We both have health covers from our employers. We plan to buy a house (with a loan of Rs 25-30 lakh) in two years. Do we need to realign our investments?

Your joint expenses are Rs 35,000 monthly, while investments come to Rs 21,000. Where is the remaining Rs 14,000 going? Please track this amount, as it accumulates to Rs 1.68 lakh a year. You have taken a balanced investment approach. I see no point disturbing it. However, both should utilise benefits under Section 80C fully.

As for house purchase, go ahead. Even though you will incur an additional outgo (i.e. monthly instalments), it would get neutralised by the saving on rent and tax benefits. It will also increase future earnings.

I, 56, plan to take voluntary retirement this year. I would be receiving Rs 18 lakh and I have no dependants. Two years back, I liquidated most of my savings to buy a flat in Pune, where I will stay after retirement. I also have Rs 8 lakh (equity mutual funds, public provident fund and national savings certificates). How can I rebalance my investments to get a monthly income of Rs 15,000 to cover my expenses?

At 56, you have an apartment and Rs 26 lakh. You need Rs 15,000 a month, but what about rising costs as you grow older? Also, how will you tackle healthcare costs? You need a careful planning of investments, which may be achieved by investing in a mix of equity and debt, with a systematic withdrawal plan.

The other option is to stick with traditional debt products (Rs 20 lakh in senior citizen plan and fixed deposit in banks), and get a monthly income out of it, while keeping a smaller residual portion (say rupees six lakh) in equity mutual funds. This might serve in the short run, but may not be adequate once you enter a low interest regime.

The writer is a certified financial planner.