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Ramalingam Kalirajan |4083 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 25, 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

Question by Robin on Jun 18, 2024Hindi

Money

I can't save money what to do I earn 15k per month

Ans: Managing your finances on a monthly income of Rs. 15,000 can be challenging, but with careful planning and discipline, you can start saving money and secure your financial future. Let’s break it down step by step to help you make the most of your earnings.

Understanding Your Financial Situation
Monthly Income
Salary: Rs. 15,000
Expenses
List all your expenses to understand where your money goes. Typical expenses might include:

Rent: Rs. 4,000
Groceries: Rs. 3,000
Transportation: Rs. 2,000
Utilities (Electricity, Water, etc.): Rs. 1,000
Mobile/Internet: Rs. 500
Other Expenses (Entertainment, Clothing, etc.): Rs. 1,500
Total Expenses: Rs. 12,000

This leaves you with Rs. 3,000, which can be allocated towards savings and investments.

Creating a Budget
Step 1: Track Your Spending
Keep a record of every rupee you spend. This helps identify unnecessary expenses and areas where you can cut back.

Step 2: Categorize Expenses
Divide your expenses into categories: Fixed (rent, utilities) and Variable (groceries, entertainment). Focus on reducing variable expenses.

Step 3: Set a Savings Goal
Aim to save at least 10-20% of your income. In your case, try to save Rs. 1,500-3,000 monthly.

Reducing Expenses
Housing
Negotiate Rent: Talk to your landlord for a possible rent reduction.
Roommates: Consider sharing accommodation to split costs.
Groceries and Food
Plan Meals: Make a weekly meal plan to avoid impulse buying.
Bulk Purchase: Buy non-perishable items in bulk for discounts.
Cook at Home: Eating out less can save a significant amount.
Transportation
Public Transport: Use buses or trains instead of taxis or autos.
Carpool: Share rides with colleagues or friends to cut costs.
Utilities
Energy Saving: Use energy-efficient appliances and switch off when not in use.
Optimize Plans: Choose cost-effective mobile and internet plans.
Increasing Income
Part-Time Work
Consider part-time jobs or freelancing to supplement your income. Skills like tutoring, writing, or graphic design can be monetized.

Selling Unused Items
Sell items you no longer need. Platforms like OLX or Quikr can help you find buyers.

Building an Emergency Fund
An emergency fund covers unexpected expenses and prevents debt. Aim to save 3-6 months of expenses. Start with a small amount and gradually build it up.

Automate Savings
Set up an automatic transfer of Rs. 1,500-3,000 to a separate savings account. This ensures consistency.

Investing for the Future
Systematic Investment Plan (SIP)
Start a SIP with a small amount. Mutual funds can be a good option for long-term growth. You can start with as low as Rs. 500 per month.

Recurring Deposit (RD)
An RD in a bank can help you save regularly. It’s safe and provides fixed returns.

Insurance
Health Insurance
Get a basic health insurance plan. It protects you from high medical costs and ensures you don’t have to dip into savings during emergencies.

Avoiding Debt
Credit Cards
Avoid using credit cards if you can’t pay the full amount each month. High-interest rates can lead to debt accumulation.

Personal Loans
Take personal loans only for essential needs. Ensure you can manage the EMIs within your budget.

Financial Discipline
Avoid Impulse Purchases
Before buying anything, ask yourself if it’s necessary. Wait for 24 hours before making a purchase decision.

Stick to the Budget
Review your budget regularly and adjust it as needed. Discipline is key to financial stability.

Final Insights
Managing finances on a limited income requires discipline and strategic planning. Track your spending, create a realistic budget, and prioritize savings. Reduce unnecessary expenses and explore ways to increase your income. Building an emergency fund and starting small investments can secure your financial future. Stay committed to your financial goals and regularly review your progress.

You can achieve financial stability and growth even with a modest income. Start small, stay disciplined, and watch your savings grow over time.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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Question by Dhrubajyoti - Apr 26, 2023Hindi

Money

I have earned per month 30000 but not to savings anything what to do

Ans: Hi try to save at least 25 % of the income.
so from your monthly income of Rs 30000 try to save Rs 7500
put 2500 per month in overnight fund or bank RD for 12 months - this is your emergency fund. do this for 2 to 3 years and you collect almost 1 lac in your emergency fund.

from balance Rs 5000 first buy a floater mediclaim for yourself and go for a pure term cover of at least 25 lacs

i believe after this still you can save Rs 2000 around per month , start a sip in an index fund

Ramalingam Kalirajan |4083 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 23, 2024

Asked by Anonymous - Feb 03, 2024Hindi

Money

I earn 50000 pm. Having a 35000 monthly financial Obligation and other borrowings how can I get out of this death trap and save money.

Ans: Managing financial obligations while trying to save money can feel like a daunting task. With a monthly income of Rs. 50,000 and financial obligations of Rs. 35,000, it’s essential to develop a structured approach. This guide will help you understand how to manage your debt, save money, and achieve financial stability.

Understanding Your Financial Situation
Monthly Income and Obligations
Monthly Income: Rs. 50,000
Monthly Financial Obligations: Rs. 35,000
Genuine Compliments
Your awareness and proactive approach to improving your financial situation is commendable. Acknowledging the need for change is the first step towards financial freedom.

Step 1: Assess Your Expenses
Categorize Your Expenses
Break down your monthly expenses into fixed and variable costs. Fixed expenses are those that do not change, such as EMIs, rent, and utility bills. Variable expenses include groceries, dining out, and entertainment.

Fixed Expenses
EMIs: Rs. 35,000
Rent
Utilities
Variable Expenses
Groceries
Dining Out
Entertainment
Track Your Spending
Use a budgeting app or a simple spreadsheet to track every expense. This will help identify unnecessary spending and areas where you can cut back.

Step 2: Create a Realistic Budget
Prioritize Essentials
Ensure that your budget covers essential expenses first. These include rent, utilities, groceries, and EMIs.

Allocate for Savings
Even with tight finances, it's crucial to save. Start small, allocating at least 5% of your income to savings. Gradually increase this amount as your financial situation improves.

Reduce Discretionary Spending
Cut back on non-essential spending. Limit dining out, entertainment, and other discretionary expenses until your financial situation improves.

Step 3: Debt Management Strategies
Debt Consolidation
Consider consolidating your debts into a single loan with a lower interest rate. This can reduce your monthly EMI burden and make it easier to manage.

Prioritize High-Interest Debt
Focus on paying off high-interest debts first. This will reduce the total interest you pay and help you become debt-free faster.

Negotiate with Creditors
If you're struggling with payments, talk to your creditors. They may offer extended repayment terms, reduced interest rates, or other relief options.

Step 4: Increase Your Income
Side Hustles
Explore opportunities for additional income. Freelancing, part-time jobs, or monetizing a hobby can provide extra funds to pay off debts and save.

Career Advancement
Invest in your skills and education to advance your career. Higher qualifications and certifications can lead to promotions and salary increases.

Step 5: Build an Emergency Fund
Importance of an Emergency Fund
An emergency fund provides a financial cushion for unexpected expenses. Aim to save at least three to six months’ worth of living expenses.

Start Small
Begin by saving a small amount each month. As your financial situation improves, increase your contributions to the emergency fund.

Step 6: Plan for Future Savings
Set Financial Goals
Set clear, achievable financial goals. Whether it's saving for a vacation, retirement, or a major purchase, having specific goals can motivate you to save more.

Automated Savings
Automate your savings to ensure a portion of your income is saved each month. This reduces the temptation to spend and helps build a habit of saving.

Expected Returns and Investments
Avoid Index Funds
Index funds often have lower returns compared to actively managed funds. Instead, consider mutual funds with professional management to maximize returns.

Regular Investments
Once your financial situation stabilizes, start investing in mutual funds through SIPs. Even small, regular investments can grow significantly over time.

Conclusion
Achieving financial stability requires a combination of disciplined budgeting, effective debt management, and strategic saving and investing. By following these steps, you can manage your financial obligations, save money, and work towards financial freedom. Remember, consistency and patience are key.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ramalingam Kalirajan |4083 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 18, 2024

Asked by Anonymous - Jun 17, 2024Hindi

Money

After fulfilling my needs I can save only twenty thousand per month..How can I invest it for my better futures?

Ans: Investing wisely is key to building a secure financial future. Saving Rs 20,000 per month is a solid foundation, and with the right strategies, you can ensure a prosperous future. Let’s explore a comprehensive plan to maximize your savings and investments.

Understanding Your Financial Goals
Before diving into investment options, it's crucial to outline your financial goals. These might include:

Retirement Planning: Ensuring a comfortable life post-retirement.
Children’s Education: Funding your children’s education needs.
Emergency Fund: Building a cushion for unforeseen expenses.
Home Purchase: Saving for a down payment on a house.
Wealth Creation: Generating long-term wealth.
Having clear goals will help you choose the right investment vehicles.

Building an Emergency Fund
An emergency fund is your financial safety net. It should cover at least six months of living expenses.

Recommendation:

Allocate Rs 5,000 per month until you reach your target emergency fund (Rs 1.5 to 2 lakhs).
Keep this fund in a high-interest savings account or a liquid mutual fund for easy access.
Retirement Planning
Planning for retirement early ensures that you can enjoy your golden years without financial worries.

Recommendation:

Contribute to the Employees’ Provident Fund (EPF) through your employer if available.
Start a Public Provident Fund (PPF) account and invest Rs 1,500 per month for tax-free returns and security.
Allocate Rs 5,000 per month in a balanced mutual fund for moderate growth with lower risk.
Investing in Mutual Funds
Mutual funds are an excellent way to diversify your investments and achieve higher returns.

Systematic Investment Plans (SIPs)
SIPs allow you to invest a fixed amount regularly, helping you build wealth over time.

Advantages of SIPs:

Rupee Cost Averaging: Mitigates market volatility by averaging the purchase cost.
Discipline: Encourages regular investing.
Compounding: Helps grow your wealth over time.
Recommendation:

Equity Mutual Funds: Allocate Rs 6,000 per month to diversified equity mutual funds. These funds offer higher returns over the long term, suitable for goals like retirement and wealth creation.
Debt Mutual Funds: Allocate Rs 3,000 per month to debt mutual funds. These funds provide stability and are less volatile than equity funds, suitable for medium-term goals.
Children’s Education Fund
Investing for your children’s education is crucial for their future success.

Recommendation:

Balanced Funds: Allocate Rs 3,000 per month to balanced mutual funds. These funds invest in a mix of equity and debt, providing stability and growth.
Education Savings Plans: Consider specific education savings plans that offer tax benefits and secure returns.
Tax-Efficient Investments
Optimizing your investments for tax efficiency can enhance your returns.

Equity-Linked Savings Scheme (ELSS)
ELSS funds offer tax benefits under Section 80C and have the potential for high returns.

Recommendation:

Invest Rs 1,500 per month in ELSS funds to save tax and grow your wealth. These funds have a lock-in period of three years but are among the best tax-saving instruments.
Health and Term Insurance
Ensuring adequate health and life insurance is essential for financial security.

Health Insurance:

Ensure you have a comprehensive health insurance policy for yourself and your family. This will protect you from high medical expenses.
Term Insurance:

A term insurance plan is crucial to secure your family’s future in case of any unforeseen events. The premium is affordable, and the cover is substantial.
Diversification for Risk Management
Diversifying your investments helps manage risk and improve returns.

Recommendation:

Equity Funds: Rs 6,000 per month
Debt Funds: Rs 3,000 per month
Balanced Funds: Rs 3,000 per month
PPF: Rs 1,500 per month
ELSS: Rs 1,500 per month
Emergency Fund: Rs 5,000 per month (initially, then redistribute)
Gold as a Hedge
Gold can be a good hedge against inflation and economic downturns, but it should not be a major part of your portfolio due to limited growth potential compared to equity.

Recommendation:

Consider allocating a small portion, Rs 1,000 per month, to gold ETFs or sovereign gold bonds for diversification.
Regular Portfolio Review
Reviewing your investment portfolio regularly ensures that you stay on track to achieve your financial goals.

Recommendation:

Review your portfolio at least once a year.
Rebalance your investments based on performance and changes in your financial goals or market conditions.
Financial Discipline and Consistency
Maintaining financial discipline and consistency in your investments is key to long-term success.

Recommendation:

Stick to your investment plan regardless of market fluctuations.
Avoid withdrawing from your investment funds unless absolutely necessary.
Exploring Additional Income Sources
Consider exploring additional income sources to boost your savings and investments.

Recommendation:

Freelancing: Leverage your skills to earn extra income.
Part-Time Work: Consider part-time opportunities that align with your expertise.
Online Courses: Invest in online courses to enhance your skills and increase your earning potential.
The Role of a Certified Financial Planner
A Certified Financial Planner (CFP) can provide professional advice and personalized financial planning.

Benefits of Consulting a CFP:

Expertise: Access to professional advice tailored to your financial situation.
Comprehensive Planning: Holistic view of your financial goals and how to achieve them.
Objective Advice: Unbiased recommendations based on your best interests.
Final Insights
Investing Rs 20,000 per month can significantly enhance your financial future. By diversifying your investments, planning for long-term goals, and maintaining financial discipline, you can achieve financial security and prosperity.

Emergency Fund: Start with Rs 5,000/month.
Retirement Planning: Invest Rs 5,000/month in balanced and PPF funds.
Mutual Funds: Allocate Rs 9,000/month to equity, debt, and balanced funds.
Children’s Education: Dedicate Rs 3,000/month.
Tax Efficiency: Utilize ELSS for tax-saving investments.
Regularly review your portfolio, consult a Certified Financial Planner, and explore additional income sources to maximize your savings and investments.

By following these steps, you will be well on your way to achieving your financial goals and ensuring a secure and prosperous future for yourself and your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Latest Questions

Ravi Mittal |238 Answers |Ask -Follow

Dating, Relationships Expert - Answered on Jun 28, 2024

Asked by Anonymous - Jun 28, 2024Hindi

Relationship

I am dealing with brkup its been 2 months its mutual because he is bhramin his parents will not allow intercaste and for me its not possible to settle in place where he lives . its almost 3-4 year of relationship from my age of 18 he was there with my i lost my father during corona he took care of me , he stayed by my side he is not upto the mark but still he is always there for me after that i leave that state where both we stayed and we did long distance for 2 years but now as he come to know his parents are way more strict he dont want to hurts his parents and even my reason that i have to compromise lot carrrer difference and all. As i lost my father at age of 18 i cry lot every one day gap during my relationship also i was so anxious , and some times due to family problems i always used to be disturbed and dont want to live sometimeslike sucidal thoughts and all but at the time of relationship i share all this to him and i feel okay and got back to my study as he motivates me little . but now after brkup i dont have any real friends , i cant talk to any one neither any person messeges me my depression is becoming more big now we are in no contact for some days but again we talk and again we are in no contact he feels like he is in guilt becos he hurted me and made me miserable also he dont think about any other relation ship whatever his parents will bring he will do but for me not that case becos we dont have nay guardian i have to in my own actually we are not that big for marriage but we thought of future more and brkup becos of i have to find some one right we are 21 also my campus placements are coming his neet pg is coming but my heart cries every day i feel choked , i cried , choked and hurt my head it happens often but i still think we can not talk becos how can we move on from some body we talk but my depression at peak level i msg him with bigtext with all that goin on my life. should we talk ? as their is no rush to find other person we have to first focus on career how can we set boundaries? though if i talk i mak eme feel someone i can talk and make me releif at the sam etime it hurts if i dont talk also its hurts more as i ahve no one to talk with . he insisted me that we can be friends i can see u like this he wants me to be happy he feel he did the sin to me. Pls tell what will be good for me how can i be little releif what should i should i talk treat or my depression how ?

Ans: Dear Anonymous,

I am very sorry for your loss. Losing a parent is tough. I am also glad you found someone to share your pain with at that moment. Coming to your dilemma- whether you should be in touch with him- I understand that it is a great relief to talk to him, but that is momentary, isn't it? You cannot continue doing this if you two are broken up. Even though he is not planning to get married right away, the problem is that he will someday. Plus, more often than not, one person moves on faster than the other, and in your case, if it's him, it will hurt more. The right thing to do is sit and have a clear conversation. Discuss the possibility of getting back together. Ask what is in his mind and express what's in yours. But going in this circle will only hurt you more; maybe not today, but someday it will.

Now, coming to your depression, I would suggest sharing your pain with close friends but you mentioned you have none. That is not uncommon. Not all of us are blessed with it. In that case, I recommend seeing a professional therapist. There is absolutely no shame in it. Rather it will help you in sorting your feelings. Finally, you can take care of them without relying on your ex. I am sure you are doing a wonderful job in managing your depression but a professional counselor can help you come out of this in a more structured way. Please consider it. If you are not comfortable seeing someone in person, there are several counselors available online. Just try it once and see how that makes you feel.

Remember we all need help occasionally. You are amazing and you do not have to hold everything together alone.

Best Wishes.

Nayagam P P |915 Answers |Ask -Follow

Career Counsellor - Answered on Jun 28, 2024

Asked by Anonymous - Jun 28, 2024Hindi

Career

I have got 282 in bitsat can I expect eni or other circuital streams in pilani campus? As I want only pilani campus.

Ans: Participate in BITS Counselling Process. You will get. However, have Plan B & Plan C and participate in some other Counselling Process also. All the BEST.

Yes Bina Madam. You can go ahead for MSc Physics if you are mentally prepared for MSc (than Engineering). Work for 2-3 years and if your Financial Condition permits, allow him for Abroad Education (or) he should keep upgrading his skills through CERTIFICATIONS to be competent among others. All the BEST for his Bright Future.

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Nayagam P P |915 Answers |Ask -Follow

Career Counsellor - Answered on Jun 28, 2024

Question by Sourav - Jun 28, 2024Hindi

Career

My son got 2124 rank in wbjee . Jadavpur chemical,jadavpur power, jgec cse ,calcutta university it. Which is better for him

Ans: Sourav Sir, Order of Preference (1) JGEC-CSE (2) CU-IT (3) JADAVPUR-Power & (4) JADAVPUR-Chemical. All the BEST for your Son's Bright Future Sir.

Yes Bina Madam. You can go ahead for MSc Physics if you are mentally prepared for MSc (than Engineering). Work for 2-3 years and if your Financial Condition permits, allow him for Abroad Education (or) he should keep upgrading his skills through CERTIFICATIONS to be competent among others. All the BEST for his Bright Future.

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Nayagam P P |915 Answers |Ask -Follow

Career Counsellor - Answered on Jun 28, 2024

Question by Vandana - Jun 28, 2024Hindi

Career

My daughter is getting ECE in NIT Raipur and data science and AI in iiit Naya raipur. Her comedy rank is 676. Provide some preferences

Ans: Vandana Madam, Please give utmost importance to her COMEDK Rank and get admission for her into any of the reputed and top-ranked colleges in Bengaluru i.e. BMS, RVCE, MSRIT etc. She can easily get the Stream which she wants. All the BEST for Your Daughter's Bright Future, Madam.

Yes Bina Madam. You can go ahead for MSc Physics if you are mentally prepared for MSc (than Engineering). Work for 2-3 years and if your Financial Condition permits, allow him for Abroad Education (or) he should keep upgrading his skills through CERTIFICATIONS to be competent among others. All the BEST for his Bright Future.

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Nayagam P P |915 Answers |Ask -Follow

Career Counsellor - Answered on Jun 28, 2024

Question by Krishnamurthy - Jun 28, 2024Hindi

Career

Hi, My son has got admission in Information science and engineering in NITTE University in Mangalore throught NUCAT under scholarship quota. His ComedK rank is 12K and any chances for good colleges in Bangalore for CSE. Should we continue in NITTE or opt for better colleges ?

Ans: Krishnamurty Sir, (1) NITTE itself is a very reputed University with a good NIRF & also QS World Ranking. As your Son also gets Scholarship through NUCAT, it is highly recommended to join ISE with NITTEA. He can keep upgrading his skills from 1st year itself till Campus Recruitment Drive during his 4th year, to be COMPETENT among other Students. (2) As far as his COMEDK-12000 Rank is concerned, it is difficult get admission for CSE in to any top colleges such as RVCE, BMS, MSRIT, DSCE etc. All the BEST for your Son's Bright Future Sir.

Yes Bina Madam. You can go ahead for MSc Physics if you are mentally prepared for MSc (than Engineering). Work for 2-3 years and if your Financial Condition permits, allow him for Abroad Education (or) he should keep upgrading his skills through CERTIFICATIONS to be competent among others. All the BEST for his Bright Future.

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Nayagam P P |915 Answers |Ask -Follow

Career Counsellor - Answered on Jun 28, 2024

Asked by Anonymous - Jun 28, 2024Hindi

Career

What is a better option ECE at PES (main branch) or ECE Vit Vellore Sir?

Ans: Prefer PES-ECE over VIT-V-ECE. All the BEST.

Yes Bina Madam. You can go ahead for MSc Physics if you are mentally prepared for MSc (than Engineering). Work for 2-3 years and if your Financial Condition permits, allow him for Abroad Education (or) he should keep upgrading his skills through CERTIFICATIONS to be competent among others. All the BEST for his Bright Future.

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Nayagam P P |915 Answers |Ask -Follow

Career Counsellor - Answered on Jun 28, 2024

Asked by Anonymous - Jun 28, 2024Hindi

Career

My son has 92.65 percentile in jee mains 202 in bitsat...bitsat I dont know what are chances of getting good discipline At the moment he is getting offer in ECE thapar....pls advise if it will be worth money condidering future prospects

Ans: (1) For 202-marks in BITS, getting admission into any one of the Streams of BE is difficult, though he can participate in Counselling Process. (2) As far as ROI (Return on Investment) is concerned, it does NOT depend only upon, where the student joins, but also depends upon student's self-motivation / dedication / skill upgrading with Certifications / personality & soft skills development / involving in extra & co-curricular activities / having a Professional LinkedIn Profile / keep updating about Job Market etc. As such, if your son has no other option, he can go ahead with THAPAR-ECE. All the BEST for your Son's Bright Future.

Yes Bina Madam. You can go ahead for MSc Physics if you are mentally prepared for MSc (than Engineering). Work for 2-3 years and if your Financial Condition permits, allow him for Abroad Education (or) he should keep upgrading his skills through CERTIFICATIONS to be competent among others. All the BEST for his Bright Future.

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Nayagam P P |915 Answers |Ask -Follow

Career Counsellor - Answered on Jun 28, 2024

Question by Devaraj - Jun 28, 2024Hindi

Career

Sir, My son is getting ICE in NIT Jalandhar. He has got 252 marks in BITSAT and BITS counseling is yet to start. Can you please suggest to choose between NITJ and BITS Goa/hydrerabad?

Ans: Devaraj Sir, prefer BITS, but getting CSE will be difficult. Your son will have to compromise either Stream or Branch-Location of BITS or Both. Other than ICE, please try for some other Streams with any other College. All the BEST for your Son's Bright Future.

Yes Bina Madam. You can go ahead for MSc Physics if you are mentally prepared for MSc (than Engineering). Work for 2-3 years and if your Financial Condition permits, allow him for Abroad Education (or) he should keep upgrading his skills through CERTIFICATIONS to be competent among others. All the BEST for his Bright Future.

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Nayagam P P |915 Answers |Ask -Follow

Career Counsellor - Answered on Jun 28, 2024

Asked by Anonymous - Jun 28, 2024Hindi

Career

I got electronics and computer engineering in thapar University. Should I take this branch or take a drop. Because I know I can do better. But my mental health is not good. I am so confused . Please guide me that should I take a drop or join thapar and work hard there for better opportunities.

Ans: Your 2-statements are contrary to each other. 'I know I can do better' & 'But my mental health is not good'. Also, you have NOT mentioned about your Percentile / Rank in JEE or any other Entrance Exams. Please try to avoid taking a drop. Anyway It is advisable to accept Electronics & Computer Engineering in Thapar and keep upgrading your Skills. All the BEST.

Yes Bina Madam. You can go ahead for MSc Physics if you are mentally prepared for MSc (than Engineering). Work for 2-3 years and if your Financial Condition permits, allow him for Abroad Education (or) he should keep upgrading his skills through CERTIFICATIONS to be competent among others. All the BEST for his Bright Future.

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Ramalingam Kalirajan |4083 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jun 28, 2024

Asked by Anonymous - Jun 28, 2024Hindi

Money

I am 27 year old female. I have a one year old son. My husband and I earn 120000 per month. We have monthly sips of 50000. How do you suggest we allocate the funds in order to achieve our goals of buying a house and our son's higher education

Ans: Your commitment to saving and investing Rs 50,000 per month is commendable. Balancing current financial responsibilities while planning for future goals like buying a house and securing your son’s higher education is crucial. Let's outline a comprehensive plan to achieve these goals.

Compliments and Appreciation

Firstly, congratulations on your disciplined savings habit and commitment to your financial goals. It's impressive to see such foresight and dedication to securing your family's future. Your approach to systematic investment planning (SIPs) is a strong foundation for achieving your financial objectives.

Understanding Your Goals

Before diving into fund allocation, it's important to clearly define your financial goals. You have two primary goals: buying a house and funding your son's higher education. Both goals have different timelines and financial requirements.

Buying a House

Purchasing a house is a significant financial commitment. Determine the time frame for this goal. If you plan to buy a house in the next 5-10 years, you need a strategy to accumulate the down payment and manage the EMIs.

Son’s Higher Education

Your son’s higher education is another crucial goal. Considering the rising cost of education, it's essential to start early. You have about 17 years to build a substantial corpus for this purpose.

Current Financial Situation

You and your husband earn Rs 1,20,000 per month. With Rs 50,000 allocated to SIPs, you have Rs 70,000 remaining for other expenses and savings. It's important to maintain a balanced approach to ensure you meet both your short-term and long-term goals.

Risk Tolerance and Investment Horizon

Assess your risk tolerance and investment horizon. Given your age and the long-term nature of your goals, you can afford to take more risks. Equity-oriented investments are suitable for long-term growth but should be balanced with some debt investments to reduce risk.

Diversification

Diversifying your investments is crucial. It spreads risk across different asset classes and sectors, reducing the impact of any single investment’s poor performance. A well-diversified portfolio balances risk and return effectively.

Allocating Funds for House Purchase

To buy a house, you need to accumulate a down payment. Here’s how you can allocate your SIPs for this goal:

Equity Mutual Funds: Allocate a significant portion to equity mutual funds. They offer higher returns over the long term, helping you accumulate the required amount faster. However, they come with higher risk, so diversify across large-cap, mid-cap, and multi-cap funds.

Debt Mutual Funds: Allocate a smaller portion to debt mutual funds. They provide stability and reduce overall portfolio risk. These funds are less volatile and provide steady returns.

Short-term Debt Instruments: As you approach your goal, shift a portion of your equity investments to short-term debt instruments. This protects your corpus from market volatility.

Allocating Funds for Son’s Higher Education

For your son’s higher education, a long-term investment strategy is essential. Here’s how you can allocate your SIPs for this goal:

Equity Mutual Funds: Given the long investment horizon, allocate a significant portion to equity mutual funds. They offer higher returns, and the power of compounding can significantly grow your investments over time. Focus on diversified equity funds to spread risk.

Child Education Plans: Consider child-specific mutual funds or education plans. These funds are tailored to meet the future education expenses of children. They come with a lock-in period, ensuring disciplined savings.

Balanced Funds: Allocate a smaller portion to balanced or hybrid funds. These funds invest in both equity and debt instruments, providing a balanced approach to risk and return.

Regular Funds vs. Direct Funds

Direct funds have lower expense ratios as they do not involve intermediaries. However, they require more active management and market knowledge. Investing through a Mutual Fund Distributor (MFD) with CFP credentials offers professional guidance, helping you navigate complex market conditions effectively.

Disadvantages of Index Funds

Index funds may seem attractive due to their lower expense ratios, but they merely track the market. They do not offer the potential for higher returns that actively managed funds can provide. Actively managed funds have fund managers who make strategic decisions to outperform the market.

Emergency Fund

Before aggressively investing, ensure you have an emergency fund. It should cover 6-12 months of your expenses. This fund acts as a financial cushion during unexpected situations, ensuring you don’t have to withdraw from your investments prematurely.

Insurance Coverage

Ensure adequate health and life insurance coverage. Health insurance protects against high medical expenses, while life insurance secures your family’s financial future in your absence. Consider term insurance for higher coverage at lower premiums.

Monitoring and Reviewing Investments

Regularly monitor and review your investments. Market conditions and personal circumstances change over time. A yearly review with a Certified Financial Planner can help ensure your investments remain aligned with your goals.

Financial Discipline

Financial discipline is crucial for long-term success. Consistently invest through SIPs, avoid unnecessary expenses, and focus on saving and investing. This disciplined approach will help you achieve your financial goals.

Tax Efficiency

Mutual fund investments offer tax benefits, especially equity-oriented funds. Long-term capital gains (held for more than one year) from equity funds are taxed at a lower rate. Additionally, ELSS (Equity Linked Savings Scheme) funds offer tax deductions under Section 80C of the Income Tax Act.

Creating a Financial Plan

Creating a comprehensive financial plan is essential. It involves setting clear financial goals, assessing risk tolerance, diversifying investments, and regularly reviewing and adjusting the plan. A Certified Financial Planner can help create and maintain a robust financial plan.

Avoiding Common Pitfalls

Common investment mistakes include withdrawing investments prematurely, lack of diversification, and not accounting for inflation. Avoid these pitfalls by sticking to the investment plan, diversifying the portfolio, and regularly reviewing the financial plan.

Retirement Planning

While focusing on these goals, don’t neglect retirement planning. Allocate a portion of your investments towards retirement. The earlier you start, the more you benefit from compounding. Consider a mix of equity and debt investments for long-term growth and stability.

Benefits of Starting Early

Starting early provides a significant advantage due to the power of compounding. Even small, regular investments can grow substantially over time. The earlier you start, the more your money will work for you.

Role of Certified Financial Planner

A Certified Financial Planner can provide personalized advice and help optimize your investment strategy. They offer expert guidance, portfolio management, and ensure your financial goals are met effectively.

Future Income Streams

Consider other potential income streams in addition to mutual funds. These could include part-time work, consulting, or freelance opportunities. Diversifying income sources can provide additional financial security.

Building Wealth Over Time

Wealth creation is a long-term process. Staying invested, being patient, and avoiding panic during market volatility are key. Stick to the investment plan, make adjustments as needed, and let the power of compounding work over time.

Systematic Withdrawal Plan (SWP)

In the future, if you need regular income from your investments, you can opt for a Systematic Withdrawal Plan (SWP). SWP allows investors to withdraw a fixed amount regularly, providing a steady income stream.

Final Insights

Your disciplined approach to saving and investing is commendable. By continuing your SIPs, diversifying your investments, and regularly reviewing your financial plan, you can achieve your goals of buying a house and securing your son’s higher education. Encourage regular discussions with a Certified Financial Planner to optimize your strategy and stay on track. Your dedication and foresight will ensure a financially secure future for your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

See more questions »

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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