TaxTMI 
TaxTMI 
TaxTMI 
A lot of us have big dreams to fulfil in our lives and almost all of them are money-dependent. At the same time, we have certain financial commitments to take care of, which are quite likely to put our dreams on hold. However, with some careful planning, it is possible to find the balance between the two opposites and live a comfortable life without any financial hiccups.
To understand how this can be done, let us consider the example of Mr. Sharma.
Mr. Sharma is a 30 year-old-professional living in Delhi with a monthly income of ₹ 70,000. He lives in a self-occupied house and he took a home loan to buy it. His necessary monthly expenditure is ₹ 50,000 in which, ₹ 20,000 goes towards EMI for Home Loan and an additional ₹ 15,000 goes to his parents who are dependent on him, and the rest is split between insurance premiums.
Coming to the value of Mr. Sharma’s financial assets, it is ₹ 9 lakh. Of this ₹ 9 lakh, ₹ 5 lakh is invested in fixed deposits and another three lakhs is in a savings account. He has also invested ₹ 1 lakh in an equity-oriented mutual fund scheme. The value of his house is ₹ 40 lakh and the outstanding amount of his home loan is ₹ 10 lakh.
The total asset value comes to ₹ 49 lakh, while Mr. Sharma’s liabilities are priced at ₹ 10 lakh.
Now that we know what Mr. Sharma’s assets are liabilities are, let us take a look at his essential expenses.
Emergency Fund: An ideal emergency fund should have enough money in it to cover expenses for roughly four months. Since Mr. Sharma’s savings account has ₹ 3 lakh, his contingency fund is sufficient. However, considering that banks offer a low rate of interest on savings accounts, it is advisable for Mr. Sharma to keep roughly 20 percent of the sum in the bank, while the rest can be put in liquid funds.
Health Insurance: Mr. Sharma is insured for up to ₹ 4 lakh, but his parents are not covered by any health insurance plan. As a result, he should purchase health insurance policies for his parents immediately.
Life Insurance: Since Mr. Sharma’s parents are dependent on him and given that he has an outstanding home loan amount of ₹ 10 lakh, he has already purchased a term insurance plan with ₹ 70 lakh assured to reduce any risk in the future. Since he is well-covered by his insurance plan, Mr. Sharma can consider upgrading his policies to paid-up status.
Home Loan EMI: Mr. Sharma is paying an EMI of ₹ 20,000, which is less than 30 percent of his monthly income. Needless to mention, he should have no difficulties in clearing his home loan debt comfortably in the coming years.
Coming to Mr. Sharma’s financial goals, he has listed a few of them.
Marriage: Mr. Sharma predicts that his marriage will cost ₹ 10 lakh. He plans to get married in two years’ time. Given that he has limited funds, excluding the emergency reserve, he should consider lowering the budget for his wedding. Additionally, he can also start investing a few thousand rupees every month in mutual funds to help him pay for his wedding.
Vacation: Mr. Sharma plans to go on his dream vacation in 2019 to Europe. Taking into account that such vacations have a high budget, he should start investing at least ₹ 4,000 every month.
Retirement Fund: Mr. Sharma plans to retire by 2035 and is looking to amass ₹ 70 lakh in his retirement pool. Apart from his monthly contribution to the National Pension System, he will need to invest at least ₹ 15,000 to reach his target. Since it is impossible for him to save the desired sum from his current salary, Mr. Sharma should consider investing the money in a diversified portfolio to mitigate any future risks. He can also start investing in mutual funds via systematic investment plan (SIP) and increase the amount gradually.
From the above example, it is clear that Mr. Sharma can achieve his life goals while staying on track to fulfil his current financial obligations. This can be possible for you too and all it takes is some careful planning. Simply list all the assets and liabilities, along with charting out a probable financial roadmap for the future. Based on these, you should also consider building an investment portfolio and invest in those schemes over time.
