How to plan your expenses and savings

Madhavi Sharma (45) runs an HR firm, has two children, Dhruv (18) and Dhristi (16). And her husband, Mohan, is a senior corporate executive (all names changed).
Life’s goals:
Madhavi wants her children to get education abroad, a retirement corpus to supplement her husband’s savings towards retirement, and a comfortable retired life.
Assets and liabilities:
Home worth Rs 3 crore (jointly owned with Mohan); Bank FDs: Rs 24 lakh at maturity; PPF: Rs 12 lakh; equity MFs: Rs 2.5 lakh; post office schemes: Rs 7 lakh at maturity ; savings bank accounts: Rs 1 lakh.Her networth is Rs 1.83 crore.
Monthly net income:
Rs 1.35 lakh and Mohan’s Rs 3 lakh
Monthly expenses:
Rs 1.28 lakh
How should she plan?
For Dhruv and Dhristi’s education overseas, intended corpus is Rs 25 lakh each. It’s three years away for Dhruv and five years for Dhristi. Since the cost of education inflation is about 12% per annum, including the potential depreciation in currency , Madhavi would need Rs 35 lakh for Dhruv and Rs 44 lakh for Dhristi.
Bank FDs and PO schemes could be used to fund Dhruv’s education. However , as FDs are not tax efficient investments for Madhavi, she should look at more tax-efficient investments such as debt MFs to park funds for the next three years. She could also explore top-rated corporate FDs for better returns in comparison to bank FDs. She should also save Rs 9,000 per month to achieve the corpus needed for Dhruv’s education.
For Dhristi’s education, the PPF with a current balance of Rs 12 lakh and a yearly investment of Rs 1 lakh could be used. The PPF account could be rolled over once it matures in 2016, so that she can continue to get the tax free return on it. The existing equity MFs will also be used. In addition, to attain the target corpus for Dhristi’s education , Madhavi should invest Rs 25,000 per month. As the goal is five years away, to improve the rate of returns she can put part of this in equity MFs.
Retirement:
It’s 15 years away. At current monthly expenses of Rs 77,000 (excluding children’s education), she will require a corpus of Rs 5.7 crore when she is 60 (@ 8% inflation). As most investments in bank FDs, post office, equity MFs and PPF will be used, Madhavi should invest every month towards her retirement corpus.
At current assumptions, the monthly investment target is at Rs 1.64 lakh. Considering her current income and the investments she has to make for her children, she may not be able to invest so much alone. So here Mohan and she can jointly look at their finances and decide how they can invest together for a happy retired life. They can look at adding domestic and international equities, and commodities into their monthly investments, as over the long run these asset classes can help them reach their goals sooner. This of course is different from the conservative approach that Madhavi has been following till date.
Insurances:
Madhavi can look at buying two pure term insurance plans and assign each plan to Dhruv and Dhristi . She also has a Rs 5 lakh medical cover but given higher risks of lifestyle diseases and higher medical cost inflation, she should have an additional Rs 5 lakh top-up health cover.
The writer is co-founder , Plan Ahead Wealth Advisors