Regarding Financial Planning/review of my profile


I have gone through your blog and am really impressed with your suggestions regarding financial planning.

I have few questions and would seek guidance from you for same:-

I AM 28 years of age , single. I work with a Software company in bangalore .

I spend 15000 pm for my daily expenses .

Current salary- 10.5 lakhs per annum Take home salary- 65000 pm


Current Investments/Asset:

Booked House worth 34 lakhs by paying 4.5 lakhs now,.This will be completed after 3 years. Right now i am staying in rented place,. Taken a house loan of 29 lakhs for 20 years


Credit card- 55,000 Personal loan -25000 Builder Payment(due in 6 months)-150,000 PreEmi for Bank from Oct- 2000(this exponetially will grow to 28000 as construction progresses till 3 years)

My goals are:

1.House Loan –Want to preclose in 10 years.

2.Car Goal - (in 2 yrs)2013

3.Marriage Goal -(1 year) next year end 2012

4.Retirement(30 years)

5.Child (future)-Education and marriage

I have read lot of blogs/ watched Tv shows , they seem to suggest these ways :-

1.Get Term Insurance(10 times of salary)- i.e 1 crore. Have ICICI or Kotak here? Should i invest immediately

2.Buy Medical insurance for family- My company already has cover of 3 lakhs, but since i will be getting maried, do i need to invest??

3.Invest in PPF- how much for a year?

  1. SIP in diversified equity mutual funds.(how many Sips should i start , for which ones )??

5, Invest in Infra bonds- Should I??

Please suggest, how do I plan my investment.

asked Sep 30 '11 at 04:46 by mscrmguru 16113

First, nice to know that you are preparing youself at the right time for your future. Age is on your side and you can plan great things from here.

Now coming to your financial plan, please read below mentioned points carefully.

Term insurance:

You must get atleast insurance with sum assured 10 times yearly salary + all pending liabilities (personal/home loan etc). You can buy this when you are of 30 years. As most of the policies have a maximum period of 30 years, buying at 30 will make sure you are atleast covered till 60 years age. A person has most of the liabilities since this age only, as after that kids become independent. You should get atleast a cover of 1.5 to 2 crore as per your profile.
Get either ICICI iProtect online insurance or LIC Amulya Jeevan. If you are really a LIC fan, wait for some more time as they are coming up with cheaper online term insurance soon.

Medical Insurance:

When you get married, buy a family floater medical insurance immediately with good sum assured (more than 5 lakhs would be good). Companies like Apollo Munich and Max Bupa have good policies, which even cover maternity expenses too, but after a period.
Even if your employer has provided medical insurance, get one yourself too as company policy lapses the day you leave them.
As soon you have child, add them in floater policy too.
Also please get Critical illness rider added in medical insurance too. This will make sure you get a fixed sum (apart from medical expenses) in case of some major illness like cancer, heart problem, tumor etc.

Home Insurance:

As you will own your house in next few years, it will be advisable to cover your home against natural calamities and some disasters. This will make sure that you get an amount to re-construct your home after any incident.
Also you must get insurance for all household items like furniture, electrical/electronics appliances, jewelry etc against theft, mechanical or electrical breakdown.

Personal Accident insurance:

This will give you cover against an accident which causes permanent/temporary partial or fully disability. Term insurance, Medical insurance, Critical illness riders will fail to pay you anything here.

Emergency fund:

Anytime there cane be a need of some emergency amount. So I would advise you to keep at-least 2-3 lacs (depending on your location and life style) in liquid assets. If needed, you should be able to withdraw these fund on a very short notice like in a day or two. It may not generate great returns, but amount should be pretty safe and quickly withdraw-able.
For this requirement, I would advise either liquid mutual funds or a savings account with auto sweep facility. These may generate 6-8% returns depending on the period for which amount remains invested. This amount should not be touched unless there is an real emergency situation.

Once you have all insurances mentioned above, you and your family will be covered against most of the disasters in life.


If you are paying more interest on any loan than what you can earn on your investments, first try to clear that loan.
Clear your credit card and personal loan outstanding asap as it has highest interest rates. Please remember to pay whole credit card due amount every month to avoid hight interest payment.
Prepay home loan when you have additional income like bonus etc.

Short term goals:

Builder payments, buying car, marriage expense, honeymoon travel cost are short term money requirements which will come up in next 3-4 years. You should start saving for these right now. Your focus should be more on short term debt based investment rather than equity or any investment with long term lock-in.
You will also need to prepare for rise in monthly expenses once you are married as expenses will increase substantially after this.
Estimate expenses in next 3-4 years for all these and start building a corpus for same by investing into Fixed maturity plan(FMP) mutual funds and bank fixed deposits.

Long term goals:

Children education, their marriage and your retirement are some of the long term goals. Once you free from your short term goals (saved enough towards that), you can start playing long term game.
For long term, a mix of equity, debt and some part of gold fund may be good approach.
In the initial years, you should invest more into equities as risk appetite is more. As you grow older, children education expenses and other family expenses will rise and your risk taking capability will go down, so you should then start putting less into equities and more into debt based funds.
You can start with 75:20:5 ratio in equity, debt and gold based funds. After age of 35 years, you can start reducing equity portion with 2-3% per year so that by 55 your ratio is around 20:80.

For debt/safe portions: you should go with EPF, PPF and NPS (New Pension System)-G/C class. For equity portion: Diversified equity mutual fund SIP and NPS (E class) are good options. You can read more about some of the best funds here: Best equity mutual funds

Tax saving:

Term insurance, medical insurance, EPF, PPF, NPS will also help you in tax saving once direct tax code is applied from next financial year.
I would not recommend to invest in long term infra bonds to save income tax. As they have less interest and lock-in period is huge. Plus gains are taxable too. As you have loans and other liabilities to fulfill, I would rather advice to prepay loans from this money.

One personal advice: Plan for 1-2 small and one long trip every year, this make sure that energy and fun are back in life. I myself have worked for more than 8 years in software development and know how important is to get a break in life!

Having said all this, please do your own research as well, before following the above plan. As all financial websites say: We are not liable for any financial or any other kind of loss :)

We would also advise you to consult a certified financial planner in details. He may charge you some fees, but will take care of all your queries and give you confidence.

Do share this page with your friends and colleagues on FB/LinkedIn/Twitter, But only if you liked it!

answered Sep 30 '11 at 18:35 by Pankaj Batra 5.2k320

Thanks Pankaj, Your suggestions are really helpful.I have taken home insurance already for 5 years-HDFC ERGO Home Suraksha Plus. Before i turn 30 and get married, As suggested by you, these things are on my radar :- 1)Emergency fund:2-3 lacs - using liquid mutual funds or a savings account with auto sweep facility. Which liquid mutual funds should i be targeting here? I have another saving account where i can transfer every month. Whats special with auto sweep facility? 2)Liabilities:- Credit card interest are highest and then Personal loan. I am planning to clear them first before saving any money . Targetting this end of year. 3)Short term goals -Can you recommend some Fixed maturity plan(FMP) mutual funds and debt based investments for this. Well, Trip with my fiancee is on cards. So, personal life is going smooth, its just the financial plan needs to be sorted out. I am planning to Consult a Certified planner . But at this point, your suggestions are more than useful for me to look at goals and way to achieve them. One final question, how do i divide my saving of a month say 50,000 across above 3 points , I Mean what percentage to be more specific? Figure would be helpful say. Emergency fund 15,000 Liablities- 15000, Short term - 10,000.
(Sep 30 '11 at 23:43) mscrmguru
Emergency fund: You can choose among liquid mutual funds like Magnum InstaCash Liquid Floater-G, Birla Sun Life Floating Rate ST-G, HDFC Cash mgmt fund savings plan, Principal Cash Mgmt-G and ICICI Pru Liquid Inst I-G. Auto sweep facility transfers additional amount above a limit in saving account to fixed deposit and whenever account balance goes down, fixed deposit is automatically broken and amount comes back to normal saving account. Fixed maturity plans are closed ended mutual funds and open for a short period of 10-15 days. Whenever you want to invest just look for open NFOs and invest in a good AMC fund like HDFC, Reliance, DSP, Franklin etc. Check NFO here and click on FMP tab:
(Oct 01 '11 at 23:06) Pankaj Batra
I would advice you to go with below plan as of now: First pay off all credit card and personal loan liabilities. Whatever is left after this each month, invest everything into emergency fund until it reaches upto comfortable amount. It will take next 4-6 months to finish this task. Next, you may invest whole 50,000 per month for short term goals. When it reaches the required amount, start with long term plans. Unlike parallel processing in computing, financial planning needs priority driven processing.
(Oct 01 '11 at 23:06) Pankaj Batra
Thanks a lot Pankaj. I would really like to catch up with you someday if you are in bangalore. I think i just found my investment guru. mail me at my [email protected]
(Oct 04 '11 at 00:18) mscrmguru

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Asked: Sep 30 '11 at 04:46

Seen: 6,363 times

Last updated: Oct 04 '11 at 00:18