I am 28 years old and my gross monthly income is Rs 50,000. But the net salary is only Rs 23,000 as deductions are made under the following heads: PF - Rs 6,510, house rent - Rs 10,500 and interest free loan EMI - Rs 3,676. My monthly expenses are Rs 12,000 and are likely to increase after my marriage in June next year.

I have started two SIPs with monthly contribution of Rs 2,000 and have direct equity exposure of Rs 40,000.

I have accumulated 100 grams of gold.

I own a plot worth Rs 2 lakh, purchased a few years back. It has not appreciated the way I expected it to.

I have term insurance for Rs 50 lakh and the annual premium is Rs 7,700. I have two other insurance policies for which I pay monthly premium of Rs 7,000.

I am covered under group health policy. For my parents, I have taken health insurance floater policy for Rs 2 lakh.

My goals and financial requirements are:

For my marriage I need Rs 5 lakh. I wish to buy a flat in Bangalore in 10 years with a budget of Rs 2 crore. How much do I need to save systematically to make it possible?

Would it be prudent to discontinue LIC’s term insurance and instead buy a similar cover from a private insurer?

I also want to know if I should discontinue my other two policies.

Sundar

Your asset allocation is not balanced. Investment in gold may have been rewarding, but at the same time you haven’t diversified your portfolio. You have adequate term cover. So, you should not have taken endowment policies.

You should ideally invest significantly in growth assets such as equity.

Of course, for short term needs you would be better off investing in debt instruments . Since your marriage is less than a year away, to meet the expenses you need to dilute your gold holdings. Besides, you also may need to borrow.

House

If your income grows at 10 per cent annually, at the end of ten years, you will be drawing a salary Rs 1.3 lakh. Assuming you accumulate Rs 50 lakh during the next 10 years and opt for a loan of Rs 1.5 crore (at 10 per cent interest for a 15-year tenure), your EMI will be Rs 1.65 lakh. So, buying a house for Rs 2 crore may almost be impossible.

Insurance

If you want to reduce your premium outgo, buy a new term policy closer to next renewal date. Unless you have another policy in force, don’t discontinue the existing one.

Close your Jeevan Saral policy. Since you have term insurance, start investing in bank RDs or PPF.

The same logic will apply for your endowment policy too.

(The author is CEO, SPP Wealth and Financial Planners. )

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