FOUNDATION OF FINANCIAL PLANNING

 Term insurance is the foundation of your financial planning. Term insurance secures your family's financial future. Term insurance is one of the basic financial needs.

Swati and Satish Kumar. Swati is a primary teacher in a permanent unaided school in Pune. Satish Kumar works as a clerk in a Co-Operative Bank. Seven years ago, both of them jointly bought a flat in Pimpri for 25 lakhs, for which they took a home loan of 15 lakhs for twenty years. 3 lakhs have been repaid out of this home loan. Swati had contacted for financial planning. Two financial goals were set for the Kumar family. The first is to become debt free in the next seven to eight years and the second is to provide for their retirement planning. Swati and Satish Kumar have fixed deposits of Rs.5 lakhs.

Action plan

Swati had many questions regarding financial planning. She is primarily a school teacher. He answered their questions. Financial planning should begin with term insurance. Term insurance is the foundation of your financial planning. Term insurance secures your family's financial future. Term insurance is one of the basic financial needs. Especially today, term insurance comes with many features and benefits, from affordable premiums to additional riders. Term insurance plans provide financial security to the entire family in case of the unfortunate death of the policyholder. Additional cover can be availed in case of critical illness or accidental death of the policyholder. Both of them should take term insurance of 50 lakhs each by spending 3000 per month from their available savings.

The second step in financial planning is health insurance. Swanand Kulkarni has health insurance coverage of two lakhs from his place of employment. At present, this insurance coverage is not enough. Mediclaim policy provides the policyholder with a cashless hospitalization facility or compensation of almost 80 per cent of the claim amount.

Both should take a joint (floater) health insurance policy of 5 lakhs.

Out of a fixed deposit of 5 lakhs, 2 lakhs should be kept for urgent expenses. Invest the remaining 3 lakhs as follows

1 lakh: Canara Robeco Flexicap Fund

1 lakh: Nippon India Multicap Fund

1 lakh: Franklin India Focused Equity Fund

5000 each in three funds on 'SIP'.

Deposit (Thousand Rupees)

Salary

Swati Kumar – 35

Satish Kumar – 35

Total Accumulation – 70

House expenses – 22

Instalment of Home Loan – 22

Health Insurance – 2

Term Insurance – 3

Savings – 21

Total cost – 70

Investments in mutual funds are subject to market risks. Please read the prospectus of the fund thoroughly before investing.