hello gurus,
need advise on next step:
I have 3 SIPs: Two 5k each and one 1.5k (total sum atm is 4 lakh)
ppf ~ 11 lakh
stocks worth ~ 3.4 lakh
Currently i have no loans
i am unmarried
Dont own any real estate or vehicle.
monthly expenses: 40-50k due to frequent travels
salary in hand: 1.2 lakh
i am having problem in saving apart from what has been mention above,
i have a goal for next 3-4 month to create emergency fund.
Please what should be done apart from my goal?
Ans: You have a stable financial base with SIPs, PPF, and stocks. Your goal to create an emergency fund in 3-4 months is practical and timely. However, saving more requires optimising expenses, investments, and setting clear financial priorities.
Let us assess your current finances and provide a detailed plan for your next steps.
Current Financial Overview
SIP Investments
Three SIPs totaling Rs. 11,500 per month with a current value of Rs. 4 lakhs.
SIPs provide disciplined equity investments with long-term growth potential.
PPF Investment
Rs. 11 lakhs in PPF is a secure and tax-efficient investment.
Continue annual contributions to maximise benefits.
Stocks
Rs. 3.4 lakhs in stocks is a good exposure to direct equities.
Ensure your portfolio has diversified and fundamentally strong stocks.
No Liabilities
You are debt-free, giving flexibility in managing your finances.
Monthly Expenses
Monthly expenses of Rs. 40,000-50,000 are reasonable given your travel needs.
Savings are limited after covering expenses and investments.
Income
Rs. 1.2 lakh in-hand salary provides scope to increase savings.
Building an Emergency Fund
Set a Target Amount
Aim for 6-12 months of expenses in your emergency fund.
Based on Rs. 50,000 monthly expenses, target Rs. 3-6 lakhs.
Choose the Right Investment Vehicle
Use liquid mutual funds for better returns and accessibility.
Alternatively, consider a high-yield savings account.
Allocate Monthly Savings
Save Rs. 40,000-50,000 monthly over the next 4 months.
Redirect discretionary travel expenses towards this goal temporarily.
Maintain Liquidity
Avoid locking funds in long-term investments for the emergency fund.
Optimising Your Savings
Review Travel and Discretionary Spending
Track travel expenses and identify areas for reduction.
Allocate savings from reduced discretionary spending to investments.
Set a Monthly Savings Target
Aim to save at least 30% of your monthly income (Rs. 36,000).
Automate savings to ensure consistency.
Increase SIP Contributions
After building your emergency fund, increase SIPs by 10%-15%.
Diversify into actively managed funds for consistent performance.
Leverage Salary Hikes
Allocate future salary increments to savings and investments.
Enhancing Your Investment Strategy
Diversify Equity Portfolio
Ensure your SIP portfolio includes large-cap, mid-cap, and hybrid funds.
Avoid index funds; actively managed funds outperform in volatile markets.
Add Debt Instruments
Invest in corporate bonds or short-term debt funds for stability.
This balances your equity-heavy portfolio.
Continue PPF Contributions
Maximise annual contributions (Rs. 1.5 lakhs) to grow the corpus tax-free.
Review Direct Stocks
Diversify your stock portfolio to minimise risk.
Avoid high-risk or speculative stocks.
Planning for Future Goals
Marriage and Vehicle Purchase
Start a goal-specific SIP for future milestones like marriage or buying a vehicle.
Allocate Rs. 10,000 monthly for these goals.
Retirement Planning
Begin planning for retirement through equity and balanced funds.
Target a corpus that supports post-retirement expenses adjusted for inflation.
Tax Efficiency
Plan investments to optimise tax savings under Section 80C and 80D.
Insurance Coverage
Health Insurance
Ensure adequate health insurance coverage beyond employer-provided plans.
A policy of Rs. 5-10 lakhs is essential for unforeseen medical expenses.
Life Insurance
Term insurance is unnecessary if you have no dependents currently.
Consider purchasing a term plan when you have dependents in the future.
Key Milestones
Emergency Fund
Achieve a Rs. 3-6 lakhs emergency fund in 3-4 months.
Post-Emergency Fund Investments
Redirect surplus income to increase SIP contributions.
Long-Term Planning
Regularly review and rebalance your investment portfolio annually.
Final Insights
Building an emergency fund should be your immediate priority. Post that, focus on optimising savings, diversifying investments, and planning for long-term goals like retirement. With discipline and a well-structured plan, you can achieve financial independence while enjoying your current lifestyle.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment