I am 40 year old, unmarried. I have ancestral porperty in which I live. I have savings of about 30 lacs . 7 lcs in equity rest in FDs. I was working in corporate, then ran a startup. Which failed and eroded all my capital, but thankfully I have cleared all debt and have no debt on me. I do have a retal income of 12k, a couple of small plots of about 30 lacs put together an health insurance of 25 lacs... my income is very inconsistent ... last year i made 3 lacs.. year before that i earned 30 lacs... what should i dom
Ans: Evaluating Your Financial Situation and Future Planning
You have shown remarkable resilience in managing your finances. Clearing all your debts after a startup failure is commendable. Let's delve into your current financial situation and explore ways to secure a stable financial future.
Current Financial Landscape
Your financial assets and income sources include:
Savings: Rs 30 lakhs, with Rs 7 lakhs in equity and the rest in fixed deposits.
Rental Income: Rs 12,000 monthly.
Plots: Two small plots valued at Rs 30 lakhs collectively.
Health Insurance: Coverage of Rs 25 lakhs.
Your income has been inconsistent, with earnings varying significantly over the past two years.
Analysing Income Inconsistency
Your income fluctuates due to the nature of your work. This inconsistency can pose challenges in financial planning and achieving long-term goals. Let's address these challenges with a structured approach.
Stabilising and Growing Your Income
A steady income stream is crucial for financial stability. Here are some strategies to consider:
Diversify Income Sources
Relying on a single income source can be risky. Explore multiple income streams to mitigate this risk. For example, freelance consulting, part-time jobs, or passive income from investments.
Skill Enhancement
Invest in skill development. Enhancing your skills can lead to better job opportunities and potentially higher and more consistent income.
Investment Strategy
Your current investment portfolio includes equity and fixed deposits. While these are good, a more balanced approach could yield better returns.
Equity Investments
You have Rs 7 lakhs in equity. Equities can offer high returns but come with risks. Consider diversifying within equities to include a mix of blue-chip stocks and growth stocks.
Fixed Deposits
Fixed deposits offer safety but lower returns. Explore other investment options that balance safety and returns, such as debt mutual funds.
Actively Managed Funds
Actively managed funds can potentially offer higher returns than index funds. These funds benefit from professional management and have the flexibility to adapt to market changes.
Property and Real Estate
You own ancestral property and two small plots valued at Rs 30 lakhs. While real estate provides value, it’s not always the best investment due to liquidity issues.
Utilising Property for Income
Consider generating income from your existing properties. Renting out unused portions or developing them for rental purposes can provide a steady income stream.
Health Insurance
Your Rs 25 lakhs health insurance provides a safety net. Ensure the coverage is adequate for potential medical expenses and consider increasing it if necessary.
Emergency Fund
An emergency fund is crucial for unexpected expenses. Allocate funds to build or maintain an emergency reserve, ideally covering 6-12 months of expenses.
Retirement Planning
Although you are unmarried, planning for retirement is essential. Consistent investments and a diversified portfolio can ensure a comfortable retirement.
Systematic Investment Plans (SIPs)
Consider increasing your SIP contributions. Regular and disciplined investments in SIPs can leverage compounding, enhancing your retirement corpus over time.
Diversifying Investments
Diversify your investments across different asset classes. This strategy spreads risk and can improve returns, ensuring a balanced portfolio.
Tax Efficiency
Optimise your investments for tax efficiency. Utilise tax-saving instruments and strategies to reduce your tax liability, thus increasing your net returns.
Professional Guidance
Seeking advice from a Certified Financial Planner can provide personalised strategies tailored to your financial situation and goals. They can help you navigate complex financial decisions.
Monitoring and Adjusting Your Plan
Regularly review your financial plan. Adjust your strategies based on changes in your income, market conditions, and financial goals.
Future Goals and Financial Security
Securing a stable financial future involves setting clear goals and following a structured plan.
Clear Financial Goals
Define your financial goals clearly. Whether it's buying a new property, investing in your business, or planning for retirement, clarity helps in planning effectively.
Consistent Savings and Investments
Maintain consistent savings and investment habits. This discipline is key to achieving long-term financial security.
Risk Management
Manage risks through diversification and insurance. Adequate health and life insurance can protect you from unforeseen financial burdens.
Building a Financial Cushion
Create a financial cushion to protect against income fluctuations. This cushion can provide stability and peace of mind during uncertain times.
Long-Term Wealth Creation
Focus on long-term wealth creation through strategic investments. A balanced portfolio with a mix of equity, debt, and other instruments can provide growth and security.
Conclusion
Your journey has had its challenges, but your resilience is inspiring. With a strategic approach, disciplined investments, and professional guidance, you can achieve financial stability and growth.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
