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Planning for Immediate Goals


Budgeting

 

 

When we talk of financial planning, it is mainly about goal setting, saving and planning for the future. But, sometimes reaching certain key milestones in our life like marriage may require a complete re-working of our finances- planning for our immediate goals. Let us take Aryan’s case to understand this better.

Aryan is a 27 year old bachelor employed with an MNC. An engineer, Aryan has been working for the last 4 years and is drawing a reasonably good salary. His father is still working, and he doesn’t have any dependents. Like other young people of his age, Aryan has lot of friends, a very active social life and loves to spend on luxury lifestyle products. He usually uses his credit card for doing so and is always on revolving credit. In the last 4 years, he has hardly saved anything much consciously, except investing in a couple of mutual funds recommended by friends.

But all that is set to change now. He is all set to get married in 6 months time, to a girl of his parents’ choice. Though the girl is currently employed in her city of residence, she has to quit since she has to re-locate to a new city after marriage. So, till such time she finds another job, Aryan will have to support her financially. Aryan desperately needs to sort out his finances and get an investment plan in place.

Here is how his current financial position looks like

Net take home salary – Rs. 50,000/- pm

Monthly expenses – Rs. 35,000 /- pm

Car Loan EMI – Rs. 5000/- pm

Assets

Cash in bank – Rs 50,000/-

Equity mutual funds – Rs 1,00,000/-

Own car – Rs. 4,00,000/-

Liabilities

Credit card outstanding – Rs 25,000/-

Car loan outstanding – Rs 1,00,000/-

Recommendations

  • Pay off the credit card outstanding immediately and avoid revolving credit and part paying in future. The huge interest + service + late payment charges eat away a significant portion of his earnings.
  • Reduce unwanted monthly spending and start saving a small sum regularly to build a sound investment portfolio for the future. He can opt for a couple of good systematic investment plans of equity mutual funds.
  • He should try and part pay/ pre pay the car loan as soon as possible as it does not offer any tax benefits and he has to service the interest amount.
  • Aryan doesn’t have any insurance cover. Since he will now have a dependent and his responsibilities are set to increase, it is advisable that he takes a pure term cover for the required sum assured.

 

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