Life insurance to investment: Expert answers all financial planning queries

Should you start investing in LIC's child plan for your daughter ?

I have an 18-year old daughter. I am divorced, and she stays with my spouse. I started investing in LIC’s child plan  in my daughter’s name when she was 2. I paid the last premium last year. The policy is due for the benefit in the upcoming year, but I don’t want to give her the money to her anymore. What can I do?

You can receive the proceeds in your name. You have to approach the insurer and execute what is known as an absolute assignment. By doing so, you will now become the owner of the policy, and therefore you will be entitled to receive all the benefits from the policy as well as the maturity amount. 

I am a retired senior citizen. I got Rs 1.5 crore from my port authority job and will start getting a pension of Rs 75, 000 a month. My wife earns Rs 1 lakh a year. We have three sons all abroad and settled.  Our household expen­se is Rs 30,000. How do I invest this money?

It is visibly apparent that you will not need to invest the money for any income generation. Even after your wife stops earning, you will still have more than adequate cash for your household expenses. Inflation is not a worry at the moment as your income is way above your monthly expense. As you move along, your incremental monthly surplus as well as wife’s monthly surplus may be invested into liquid/short term fund or fixed deposits. These additional investments will help you take care of inflation after about ten years or so.

Meanwhile, from the lump sum of Rs 1.5 crore that you have, invest about one crore into a combination of good quality company deposits and high-yielding bonds. From the interest of this money, you can start enjoying the rewards of your earnings. The balance Rs 50 lakh should be invested in good quality bluechip equity shares for generating additional wealth. 

We are a live-in couple in the mid-30s. How should we work out of everyday finances? We both earn around the same amount, Rs 1.75 lakh a month.

You earn the same amount of money every month, so it’s easy for you to divide your everyday expenses equally. Spend everything similarly; that should be your way forward. How­ever, your financial commitments, such as loa­ns and investments, should be done independently. You may nominate each other mutually if you like, Please ensure that you make a Will so that in case of any eventuality, one partner’s resources can help the other. Remember you cannot freely transfer or give money to each other as gifts as you are not legally married. If you do so, severe income tax repercussions could follow.

I am 42 years and single with a salary of Rs 86,000 a month. I have a total debt of 6.25 lakh. Rs 1.5 lakh gold loan, Rs 75,000 credit card, Rs 4 lakh borrowed from family. My rent is 30,000, my car EMI is 20,000. I want to start a business and need a business loan. My credit score is 871.

You are rapidly running towards a financial crisis. You have already borrowed way beyond you can afford, you are intending to borrow even more and to do a business you may be sa­c­rificing a steady income from your salary. This is not a good situation to be in. In my view, your primary objective should be to reduce yo­ur debt, start repaying people, move into che­a­per accommodation, consider using uber & public transportation, eliminate the car EMI, spend a little lesser and build a little bit of business kitty by investing into recurring deposits and fixed deposits. You will be able to focus and fully enjoy business when you have a little bit of a backup of financial stability behind you.

The writer is director, Transcend Consulting. The views expressed are the expert’s own. Send your queries to yourmoney@bsmail.in