With no financial liabilities or dependents yet, Dr Praveen and Dr Pervinder have the advantage of starting on a strong wicket—they are not too late to start planning for their finances. Another thing that goes for them is the fact that Dr Praveen works with the Government of India, which ensures he has a job till he retires, a crucial factor in these uncertain times. With so much in their favour, all that the couple need is to follow a few basic tenets of financial planning to see them through their future financial goals and life.
Given their future goals are some years away, it is very important that they start putting their money into equities, because it is the only asset class which can beat inflation. Moreover, equity investments are more likely to earn better returns than investments in bank deposits and other fixed return instruments. Savings and investments to save tax under Section 80C of the Income Tax Act up to Rs. 1.5 lakh are permissible each financial year; post the mandatory NPS deduction, they should maximise the remainder into an ELSS (equity linked savings scheme). Investments in ELSS have equity exposure and also have a shorter three-year lock-in.
Dr Pervinder is expected to get into employment from 2016, which will allow for additional cash flows to the family, and ease their current limited resources. As they are able to comfortably manage their living expenses on a single pay, they should consider continuing with one pay to fund the house and use the other to save and invest for the future. By following this path, they will have a clear sum to invest each month towards their financial goals and monitor its progress better. Further, in doing so, they can ensure that the investments are tax efficient and optimise their mandatory income tax liabilities.
Although they have medical cover by way of the CGHS facility, it will be prudent to supplement it with critical illness cover to meet any medical emergencies that may arise in the future. They can also look for a policy that will not only insure both of them, but also cover the parents for whom they are creating a corpus towards medical emergencies from 2020. Some of their big-ticket financial goals are long-term, and given the time in hand they can easily achieve them. But, at the same time, they should review the goal costs a few years from now to not fall short of what they may eventually need.
Having set out on a mission to accomplish their financial aspirations, the couple should start investing and make it a habit to check the progress of their investments once a year. This approach will go a long way to help them not only cope with financial anxieties, but also have a greater control over their finances, which will automatically result in the financial goals being met as planned.
A plan to act upon
House for investment purpose in 2018
Holiday in 2018
Medical corpus for parents in 2020
Children’s education and marriage