Karthik and Uma are from Coimbatore and recently married. They wanted to plan for their goals.

Karthik, aged 29, is employed in one of the leading IT firms, at Coimbatore. His salary will be ₹80,000 per month post tax from this April. Uma, aged 26, is currently not employed. She has completed her master’s in commerce. She is looking for employment in banks and preparing for the exams.

They have a long list of goals.

* They are looking to build six months of expenses as emergency fund.

* They are currently staying with Karthik’s parents and want to build an independent house in the land gifted by Uma’s parents. The estimated current cost is ₹35 lakh. They wanted to check when and how to achieve this goal.

* Uma spends ₹5,000 per month towards her exam preparation and is hopeful of getting employed in the next 12-18 months. The total expenses, excluding her education expenses, are ₹50,000 per month. She wanted to gift a bike to Karthik, which costs around ₹1.5 lakh from her earnings once she gets her dream job. Her starting salary is expected to be around ₹60,000 per month.

* Karthik’s savings in EPF, including employer’s contribution, is ₹4,500 per month. He wanted to check if he can retire at 55.

* They plan to have two kids in the next five years. They wanted to allocate enough funds for the initial expenses and education expenses as well. Uma is hopeful of getting adequate family support and not expecting any break in her employment after childbirth.

They both have an aggressive risk appetite and are willing to have more than 50 per cent of their investments in equity asset class as they are in accumulation stage.

Reviews, recommendations

* Karthik to opt for a term insurance of ₹1 crore immediately and Uma needs to assess her insurance requirement after getting into her employment. They need to opt for ₹5 lakh health cover in addition to the health cover provided by Karthik’s employer.

* They will have ₹20,000 per month as investment surplus till Uma gets employment.

* They were advised to follow a basket strategy to fund their goals — ₹10,000 per month towards short-term goals. This has to be built through recurring deposits, liquid funds and fixed deposits.

* This short-term basket will help them build four months of living expenses, ₹2 lakh and ₹1 lakh towards initial children’s expenses and to buy a bike. This basket will be built over five years with provision for withdrawal towards the short-term needs. The funding is focused on safety and liquidity.

* The next basket is towards funding their medium-term expenses such as children’s school admission fee, 30-40 per cent of house construction fund, career growth fund and additional emergency and medical fund to support their parents, in case of any emergency. They are advised to allocate ₹5,000 per month initially. Uma’s employment will help them increase the contribution towards this goal. This funding will have 40 per cent into equity and the balance will be in fixed income allocation.

* The final basket will be managed towards their long-term goals. As Karthik’s fixed income allocation is ₹4,500 per month in EPF, it was advised to invest ₹5,000 per month in equity mutual funds as long-term investments.

* If his contribution increases 8 per cent every year and the investment return is compounded annually at 12-15 per cent for the next 25 years, they will have a fair chance of accumulating ₹3-4.4 crore at the end of 25 years.

* It was also discussed to focus on career growth, accumulating wealth than thinking about retirement at a particular age. Investing should be intended towards long-term wealth creation for youngsters. The additional goals such as car purchase, house purchase, vacation will put more strain on the cash flow than savings and investments.

Investing is a marathon. Many young investors whom we talk to seem to understand this in the beginning. Excepting a few, many lose the long-term focus due to various challenges. Hence, professional guidance at the right time can throw up different perspectives and help take better decisions considering the short-, medium- and long-term goals.

The author is a SEBI registered Investment Adviser, she can be reached at www.financialplanners.co.in

Published on April 12, 2025