Hi,
Need a direction to plan financial independence in next 8-10 years and kids education fund.
My position
Salary in hand 1.25 lpm (annual increment approx 5-6%)
Bonus /other perks annual approx 5 LPA
Wife's package 7LPA (increment approx 10-20 percent)
Income from rent approx 55k per month (will reduce to 25k from Feb 2026)
Loan
1. Housing loan 60lac emi 60K @8% after rate cuts (emi to reduce to 40k in next 1-2 months due to loan transfer to employer HBA scheme further loan will convert to simple interest)
2. Home loan 2 14lac emi 15k @7.5%
3. Home loan 2 top up 24.5 lac emi 25k @8%
Monthly spending 40k (it will increase by 15-20K from March 2026 owing to residence relocation and children education)
Annual spending travel etc 1.5 - 2 lacks.
Have term life insurance of 2.25 cr
Medical is covered fully for kids and parents by current company. Dont plan on seperating with the company before retirement
Investments
My MF equity oriented since 8 years almost 55lacs (current sip 25k)
Wife's MF equity oriented since 1 year approx 1.8 lacs (sip 20k)
Liquid funds 25 lacs (to be utilised for ongoing property development in next one year)
Receivable 10 -15 lacs
NPS self approx 25L (monthly deposit approx 15k)
EPFO self plus 10L (monthly deposit approx 40k)
House property 1 approx 1.5 cr
Flat 2 approx 2 cr
Gold bonds 2.5 Lacks
One ongoing paternal property is under commercial development likely to start giving return by 2026 year end. Expected return 3-4 LPM
May need to take one more topup loan of 20lacs to complete the above property development
Goal
Planning for education of 2 kids
College likely in 12, 15 years respectively
How much college fund to target considering medical education for both?
How to invest for my financial independence?
Thanks and regards
Vivek
Ans: You are doing well in building income, investments, and assets. That shows strong financial clarity and discipline. This lets us plan your path to financial independence over the next 8–10 years, while also taking care of your kids’ future education. You deserve appreciation for your hard work and family focus. Let us explore a complete 360?degree plan to help you reach both goals with confidence.
Current Financial Summary
Your salary in hand is Rs.?1.25?lakh per month.
Wife’s package is Rs.?7?lakh per annum with 10–20% increments.
Current rent income is Rs.?55k per month, dropping to Rs.?25k by Feb?2026.
Home loan 1: Rs.?60?lakh @?8%, EMI Rs.?60k.
This EMI will reduce to Rs.?40k soon after loan transfer.
Home loan 2: Rs.?14?lakh @?7.5%, EMI Rs.?15k.
Home loan 2 top?up: Rs.?24.5?lakh @?8%, EMI Rs.?25k.
Monthly spending is Rs.?40k; increasing by Rs.?15–20k in 2026.
Annual travel and leisure spending is Rs.?1.5–2?lakh.
Term life insurance of Rs.?2.25?crore is in place.
Medical cover for kids and parents is provided by employer.
Equity mutual funds (self) total Rs.?55?lakh; SIP Rs.?25k.
Equity mutual funds (wife) Rs.?1.8?lakh; SIP Rs.?20k.
Liquid funds Rs.?25?lakh for ongoing property development.
Receivables of Rs.?10–15?lakh.
NPS self is Rs.?25?lakh; monthly deposit Rs.?15k.
EPFO self plus is Rs.?10?lakh; monthly deposit Rs.?40k.
House property 1 valued at Rs.?1.5?crore.
Flat 2 valued at Rs.?2?crore.
Gold bonds worth Rs.?2.5?lakh.
Paternal property under development; returns likely from end?2026.
Likely need another top?up loan of Rs.?20?lakh for development.
You have clear income, investments, liabilities, assets, and projected changes. This sets a strong base for financial planning. Great job collecting this data.
Financial Independence Goal
You aim to achieve financial independence in 8–10 years. This means your passive income and investments cover your household expenses and lifestyle needs. You also have two children and want to fund their higher education, likely medical courses, as that was mentioned in your query.
Your goal is two?pronged: retire (or gain financial freedom) by 50 to 52 years of age, and fund two medical courses in 12–15 and 15 years respectively. We’ll work out a flexible, achievable plan to meet both.
Education Planning for Children
You mention medical education for both kids. Medical colleges in India are expensive. Today, medical education costs around Rs.?15–25?lakh per child per course (depending on public/private). With inflation (say 8–10% annually), the cost after 12–15 years can be around Rs.?60–90?lakh per child. That may rise higher if abroad is considered.
Therefore, aim to accumulate around Rs.?60–90?lakh for each child’s education fund by the time they enter college. That means a total goal corpus of around Rs.?1.2–1.8?crore dedicated solely to education.
We should treat these as separate financial goals, with dedicated investment plans.
Emergency Buffer and Loan Focus
Given your income and expenses, you need an emergency fund equal to six months of living expenses and EMIs—say around Rs.?5–6?lakh. This secures against sudden income drops, business slowdown, or emergencies during this intense property development period.
The high EMIs (especially the large top?up loan) and reducing rent income by Feb?2026 create cash flow pressure. To ease this:
Plan to pre?pay small extra amounts to reduce EMIs and interest costs.
Focus on restructuring your high?interest top?up loan, if possible, to reduce EMIs or interest burden.
Ensure liquidity remains intact for ongoing property needs and emergencies.
Creating an EMERGENCY RESERVE now prevents future setbacks.
Income and Expense Management
Your household income is substantial today. But upcoming changes in rent income and rising expenses require tight budget control.
Track expenses monthly to identify cost savings opportunities.
Review discretionary spends—like travel, entertainment, dining out—and moderate them.
Once property development is complete and rent income stabilises again, redirect surplus into investments.
Your current travel budget is fine but future budgets should consider children’s activities, schooling, and lifestyle inflation.
This disciplined approach secures your path to financial independence.
Investment Strategy for Independence
You already have significant equity mutual fund holdings. To build future passive income and wealth growth:
Continue SIPs in actively managed equity funds
They offer tailored allocation and better downside protection over time. Avoid index funds, as they just mirror market returns and may not buffer bear cycles as effectively.
Increase SIPs opportunistically
As rent income decreases and then rises again, redeploy surplus into additional equity and debt fund SIPs.
Maintain NPS and EPFO contributions
These provide tax savings and long?term security.
Add hybrid or balanced mutual funds
These mix equity and debt. They can provide steady growth and periodic income, useful for post?retirement stability.
Monitor tax impact
For equity mutual funds, long?term capital gains over Rs.?1.25?lakh are taxed at 12.5%, short?term at 20%. For debt funds, both are taxed as per income slab. Plan redemptions around this.
Segregate goal?based investments
Keep separate portfolios for education, retirement, and lifestyle goals. This helps clarity and prevents fund mixing or misallocation later.
Loan Repayment and Liability Management
Your liabilities are substantial. Reducing them is vital to achieve financial independence.
The top?up loan is sizable. Once the property yields income, aim to use it for part?prepayment.
If EMIs are overwhelming, consider extending tenure to reduce EMI burden—but not extend too far into retirement years.
Avoid new loans unless absolutely necessary for high?return investments.
Use excess cash post?loan reduction for investments rather than new borrowings.
This balances cash flow and future surplus creation.
Property Income and Asset Review
Your investment property is under commercial development with projected returns of Rs.?3–4?lakh per month by end of 2026. That will be a major positive cash flow stream. Until then, you have liquid funds and receivables covering the gap.
Maintain adequate reserve to complete development fully. Ensure rental contracts are aligned with lock?in periods and tenant terms once property is operational.
While property can be a source of income, do not allocate further new capital to real estate. Instead, redirect incremental savings into mutual funds for growth and liquidity.
Taxation and Benefit Planning
Tax planning can enhance returns and support goals:
Use tax?saving options like NPS and EPFO.
Be mindful of home loan interest deduction limits.
Manage capital gains tax on equity and debt systematically.
Consider the impact of bonus and perks as salary increases.
Good tax planning boosts available investible surplus.
Goal Allocation and Timeline
A long?term timeline (8–10 years) gives you time to build a strong corpus of Rs.?3–4?crore or more, sufficient to fund both education goals and financial independence. This will evolve in phases:
Months 0–24: Complete development, maintain liquidity, build emergency buffer, manage EMI.
Years 2–4: Reduce top?up loan, rent income stabilises, surplus invests into equity and hybrid funds.
Years 4–8: Equity and hybrid SIPs grow, property returns increase, education corpus accumulates.
Years 8–10: Finalise education corpus for elder child, begin partial use. Continue SIPs for younger child’s education and retirement planning.
Risk and Protection
You already have adequate term insurance (Rs.?2.25 crore) and medical cover. That protects family against major risks.
Maintain these as long as liabilities exist and children are dependent. Post-retirement, analyze whether coverage can be adjusted without risk.
As part of financial freedom, ensure you have sufficient liquidity and an active financial plan with regular reviews.
Regular Reviews and CFP Guidance
Active review is key to success:
Reassess cash flow and goals every year or after major life change.
Rebalance portfolios based on performance and goals.
Adjust SIPs and investments if goals change.
Work with a Certified Financial Planner for ongoing clarity, alignment, and discipline.
A professional can guide you to navigate cashflow changes and evolving goals smartly.
Final Insights
You are on a strong foundation. Your income, savings, investments, and property make you well?placed for financial independence.
The education corpus goal is large but achievable with consistent SIPs and disciplined investing.
Debt reduction, investment discipline, and budgeting are keys to your success.
Continue actively managed mutual funds via a Certified Financial Planner. Avoid index funds—they may underperform during downturns and lack active guidance.
Post?loan repayment, shift surplus into structured SIPs and hybrid funds.
Monitor taxes on mutual fund gains and structure withdrawals efficiently.
Keep risk protection intact and continue annual review with CFP guidance.
You already have strong financial habits. Now, combine them with a focused, systematic plan and professional review. That will shape your path to a secure, independent future and fully funded children’s education.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Ravi on Jul 24, 2024Hindi
