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Ramalingam Kalirajan |4329 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 21, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Jun 14, 2024Hindi

I'm 45 years old unemployed single living in own house, no loans, with 5 crores investment, i'm a very simple ordinary common middle class life style person with minimal needs for my own , please advice how to manage the finance, i don't prefer risky market related products, i have made loss of 40 lakhs in derivative trading, and my liking is for nsc scheme and bank fd, thank you

Ans: it's great to hear that you have a substantial amount saved and that you prefer a low-risk approach to your finances. Given your preference for NSC schemes and bank FDs, we can create a solid plan that aligns with your comfort zone and ensures you can live comfortably while safeguarding your principal amount.

Understanding Your Financial Situation
You are 45 years old, single, and unemployed. You live in your own house, have no loans, and have Rs 5 crores in investments. You prefer low-risk financial products and have previously incurred losses in derivative trading.

Setting Financial Goals
The first step is to set clear financial goals. Since you have minimal needs and prefer a middle-class lifestyle, your goals might include:

Ensuring a steady income to cover your living expenses.
Protecting your principal amount.
Having some liquidity for emergencies.
Planning for future healthcare needs.
Building an Emergency Fund
An emergency fund is crucial to cover unexpected expenses. Given your situation, setting aside 6 to 12 months of living expenses is advisable.

Emergency Fund:

Set aside Rs 20 lakhs in a high-interest savings account or a liquid mutual fund.
This ensures easy access to funds during emergencies.
Generating Regular Income
To generate a steady income, you can invest in safe and reliable instruments. Here’s how to allocate your Rs 5 crores:

Fixed Deposits (FDs):

Invest Rs 1.5 crores in bank fixed deposits.
Choose FDs with different maturities for better liquidity.
Opt for monthly or quarterly interest payouts to ensure regular income.
National Savings Certificates (NSC):

NSC is a safe investment with guaranteed returns.
Invest Rs 1 crore in NSCs for long-term safety and decent interest.
Interest is compounded annually and is tax-free.
Diversified Low-Risk Portfolio
To further diversify your investments while keeping risk low, consider the following:

Post Office Monthly Income Scheme (POMIS):

Invest Rs 45 lakhs in POMIS.
Provides a regular monthly income with a low-risk profile.
Senior Citizens Savings Scheme (SCSS):

If you are above 60, you can invest in SCSS.
Since you're 45, consider this option when you reach the eligible age.
SCSS offers regular interest payouts with safety.
Keeping Some Liquidity
It's important to have some liquid investments for easy access to funds. Here's how:

Short-Term Debt Funds:

Allocate Rs 50 lakhs to short-term debt funds.
These funds are low-risk and provide better returns than savings accounts.
They are ideal for maintaining liquidity and earning modest returns.
Health Insurance and Term Insurance
Having adequate insurance is essential to protect your financial future. Consider the following:

Health Insurance:

Ensure you have a comprehensive health insurance policy.
This will cover medical expenses without depleting your savings.
Term Life Insurance:

A term plan provides financial security in case of any unfortunate event.
Ensure you have a term insurance policy with adequate coverage.
Efficient Tax Planning
Efficient tax planning can save you money. Invest in tax-saving instruments and claim deductions:

Section 80C:

Invest in PPF, ELSS, or NSC to claim deductions up to Rs 1.5 lakh.
Section 80D:

Claim deductions for health insurance premiums.
Regular Monitoring and Adjustments
Financial planning is not a one-time activity. Regularly monitor your investments and make adjustments as needed. Here are some tips:

Annual Review:

Review your financial goals and progress annually.
Adjust your investments based on performance and market conditions.
Consult a Certified Financial Planner:

A CFP can provide professional advice and help you stay on track.
They can also assist in rebalancing your portfolio.
Managing Debt
Avoid taking unnecessary loans. If you have existing debt, prioritize paying it off. Here’s how:

Debt Repayment Strategy:

List all debts and their interest rates.
Pay off high-interest debts first.
Use any surplus funds to clear debts faster.
Setting Up a Retirement Fund
While planning for your current financial needs, don’t neglect your retirement. Start investing early for a secure retirement:

Employees’ Provident Fund (EPF):

Ensure you contribute to EPF.
It offers tax benefits and long-term savings.
National Pension System (NPS):

NPS is a good option for retirement planning.
It offers tax benefits under Section 80CCD.
Teaching Financial Literacy
Teaching yourself financial literacy is crucial. Building good habits will benefit you in the long run:

Simple Saving:

Understand the importance of saving money.
Use a budgeting app to track expenses and savings.
Basic Investing:

Learn the basics of investing.
Understand how different investment options work.
Final Insights
Financial planning is a journey. It requires discipline, regular monitoring, and adjustments. With proper planning, you can manage your loan repayments, start saving, and invest for a secure future. Remember to stay focused, be patient, and seek professional advice when needed. You are already taking a great step by planning for the future, and with consistent efforts, you will succeed.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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