Financial Planner Suresh Sadagopan chalks out a financial plan for Business Standard reader Rahul Lad.

Profile: Rahul Lad, 29, just married and staying with his parents

Current situation: Is debt free because he is staying in his father's house. He contributes Rs 3,000 a month towards his family expenses. The rest is left to his daddy dear. He has decent savings in the form of post office fixed deposits,
national saving certificates, equities and mutual funds. All his investments add up to Rs 4,30,000. He has been using the systematic investment plan route to invest in mutual funds.

Besides the monthly contribution of Rs 3,000 per month towards household expenses, he spends another Rs 20,000 a year for festivals and travel and another Rs 38,600 a year towards LIC [Get Quote] policies. That leaves a surplus of Rs 90,400 a year. Also, his wedding has strengthened his financial position, as his wife is also working and brings home a salary of Rs 7,000 a month.

Financial goals:

• Wants to buy a home at Kalva, estimated at Rs 15 lakhs (Rs 1.5 million).
• Wants to take care of his childrens' higher education
• Wants a comfortable retirement

For the future: The planning is based on a few assumptions. For starters, the couple's salaries will keep increasing at 10 per cent a year and we are not factoring any promotions or change of assignment. After a couple of years, his contribution towards household expenses will double to Rs 6,000 per month, as his father is retiring. The couple are expecting their first child in two years and the next in four years. Due to children the expenses would go up by Rs 1,500 and Rs 2,000 a month respectively.

Also, all the other expenses are assumed to be growing at 5 per cent a year.  For childrens' schooling, we have provided Rs 700 a month to start with, going up by 5 per cent every year. For their 9th standard to junior college, we are providing between Rs 1 to Rs 1,50,000 per child per year for tuitions and classes, alone. For graduation, an estimate of Rs 800,000 has been made and provided for each child. For their marriage, an amount of Rs 10 lakhs (Rs 1 million), has been provided.

He can buy his house at Kalva in the next financial year and make the down payment of Rs 2,50,000, from his savings. He can take the rest of the Rs 12.5 lakhs (Rs 1.25 million) as loan, for 20 years. The EMI per month comes to Rs 13,125 per month, which is serviceable. In his case, since he is planning to take a loan and has got married, a term insurance of Rs 20 lakhs (Rs 2 million) is recommended, which would cost him about Rs 7,000 a month.

When he buys the home, his finances will be under pressure . That pattern will continue for another 6 years, as in this period, he also starts a family and expenses increases. The children's education has been covered as well. So are their marriage expenses. That leaves his other goal -- retirement planning. Rahul is looking at a very comfortable retirement.  He is going to work for the next 30 years and I have assumed that his wife would too.  If they relentlessly save the surpluses that they generate, they would have king's ransom of Rs 4.64 crores (Rs 46.4 million).

Investment returns are assumed at a small 8 per cent a year.  At present, he should look at investing in equities and mutual funds, to give a leg-up to his investments. His PF, post office investments and NSC form the debt component. He could tilt towards Debt products later on, as required. As we can see, lots of money for Lad.