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24 year old with 28k salary - How to manage investments, life goals & parents' finances?

Ramalingam Kalirajan |7466 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Dec 03, 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 Priyam on Dec 02, 2024Hindi

Hi , I am 24 yrs old. My monthly income 28k in hand(total PF deductions 3600 (1800 + 1800) from both me and employer PM) and total PF amount till date 26000 and I had been doing SIP contributions (5000 thousand Per month) started last November 23. In Nov 24 I have increased it to 5500 PM. I have FD (50,000) as emergency fund . From next month my income will be increased to 32k. I have some questions related. 1. Should I increase my PF contribution ? or should I open a PPF/NPS account if yes then which one should I go for PPF or NPS ? 2.Planning to get married in next 3 years and need 15 lakhs for that . So how to plan for that? 3. This is a bit early but I need to ask that I would be planning to buy a house in next 20 yrs or 25 years . So should I start investing for it seperately or leave it as of now? 4. As my father is retired and mother house wife , we have a combined health insurance but no life insurance. My employer has provided me with both of them (life/health) . So should I buy a life insurance for me now or I can wait for another 2 to 3 years ? given that( I am fit as of now with no bad eating habbits) 5. Should I think of investing in gold like SGBs somewhere down the line? 6. For short- term investments which investment option is best like for 2 years or less ? 7. As my father is a senior citizen so I opt to have FDs in his account but the problem is he has account in two banks where in one account interest rates are more but it's not breakable online (Gramin Bank) and SBI(where Roi is a bit less but accessible and brekable online). Which one to prefer? 8. My father is having a PPF account is which is maturing next year Mar 25. Corpus almost 30lacs . Where should he invest it as he has a fear that if he invest it in SWP (all 30 ) then due to war's between europen countries the market can crash and he has this saving only. So how to invest this 30lacs ?? 9. In every six months I get some bonus cash from company so how to invest that? 10. How to increase the emergency fund like should I do FD every month or like every quarter or every six months? Plz guide me and suggest me a roadmap on how to move ahead with my investment journey.

Ans: Below is a step-by-step guide to address your queries and create a comprehensive financial roadmap.

1. Should You Increase Your PF Contribution or Open a PPF/NPS Account?
EPF Contribution: There is no harm in increasing your voluntary PF contribution. It provides tax savings and builds a solid retirement corpus with safe returns.

PPF or NPS:

PPF: Suitable if you prefer tax-free returns with safety and a fixed interest rate.
NPS: Good if you are comfortable with partial market exposure and disciplined for retirement planning.
Recommendation: If you are not yet focused on retirement, continue with the EPF for now. Consider PPF for additional tax-saving benefits.

2. Planning Rs 15 Lakhs for Marriage in 3 Years
Set Clear Goals: Start by estimating how much you can save monthly toward this goal.

Investment Options:

Invest Rs 20,000 per month in debt-oriented mutual funds or recurring deposits for stability.
Avoid equities as the horizon is short, and markets can fluctuate.
Utilize Fixed Deposits for lump-sum allocations if you receive bonuses.
Pro Tip: Monitor your goal regularly and adjust SIPs to meet the Rs 15 lakh target.

3. Should You Start Planning for a House Purchase Now?
House Goal Timeline: Since this is a 20-25 year goal, it’s better to wait. Your immediate focus should be marriage and emergency funds.

Long-Term Investment: Once other goals are on track, consider investing in diversified equity mutual funds. These have the potential to generate inflation-beating returns over decades.

4. Should You Buy Life Insurance Now?
Life Insurance Requirement: As you are unmarried and have no dependents, life insurance is not urgent.

Health Insurance: Stick with the employer-provided health insurance for now.

Action Plan: Purchase term life insurance only when you have financial dependents, such as a spouse or children. Ensure coverage of at least 10-15 times your annual income.

5. Should You Consider Investing in Gold?
Gold as an Investment: Gold should not exceed 5-10% of your portfolio. Use it as a diversification tool, not a primary investment.

SGBs (Sovereign Gold Bonds):

Ideal if you plan to hold for the long term.
They provide interest income and capital appreciation without physical storage hassles.
6. Best Short-Term Investment Options (2 Years or Less)
Fixed Deposits: Offer guaranteed returns and are suitable for short-term needs.

Liquid Mutual Funds: These are better than savings accounts and provide slightly higher returns with liquidity.

Recurring Deposits: Good for disciplined savings over the short term.

7. FD in Father’s Account: Gramin Bank or SBI?
Choose SBI FD: Although Gramin Bank offers higher interest, SBI provides online accessibility and convenience.

Reasoning: Accessibility is crucial, especially during emergencies or market volatility.

8. Where Should Your Father Invest Rs 30 Lakhs PPF Maturity?
Systematic Withdrawal Plan (SWP): A good option for monthly income with partial market exposure. However, diversify the amount to reduce risks.

Suggested Allocation:

Rs 10 lakhs: Invest in Senior Citizens Savings Scheme (SCSS) for safety and regular income.
Rs 10 lakhs: Opt for balanced advantage mutual funds for moderate growth.
Rs 10 lakhs: Keep in FDs for emergencies or short-term needs.
Pro Tip: Reassure your father that diversification minimizes risks. Avoid investing all in one instrument.

9. How to Invest Your Bonus?
Allocate Wisely:

50% toward goals like marriage or emergency fund.
30% toward long-term investments such as mutual funds.
20% for personal needs or contingencies.
Flexibility: Use the bonus to increase SIP contributions for long-term benefits.

10. Increasing Emergency Fund
Systematic Savings: Add Rs 5,000 monthly to a Fixed Deposit or Liquid Fund.

Flexible Frequency: Alternatively, allocate every quarter or six months based on bonuses or surpluses.

Target: Aim for at least six months’ worth of expenses as your emergency fund.

Additional Suggestions
Regular Mutual Fund Investments: Continue increasing SIPs as income grows. Opt for actively managed funds with proven track records.

Avoid Direct Funds: Direct funds require active monitoring and expertise. Invest through a Certified Financial Planner for better guidance.

Tax Planning: Use Section 80C to save tax through EPF, PPF, or ELSS funds.

Final Insights
You have taken the right steps by starting SIPs and creating an emergency fund. Focus on balancing short-term and long-term goals effectively. Diversify your investments and ensure risk management. Seek professional advice for complex decisions involving larger amounts.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Asked on - Dec 03, 2024 | Answered on Dec 04, 2024

6. Recurring Deposits: They are for minimum 5 years , So for short terms FD's are the best options and liquid mutual funds 2. My mom is already doing RD's for marraige so should I continue that or allocate some portion to debt- mutual funds as well ? 1. I'm already doing EPF (govt. backed ) and SIP(Market-valued) then do you thing PPF will make more sense above NPS for me. Given that my current SIPs are for retirment plannings Can you suggest me how to break up my salary as from 32k (5500 goes to SIPs , 7000 for needs , 3000 for wants) , So around 17,000 is saved every month in my bank account . How to invest this 17,000 amount for PPF , marraige (MOM's RD ) , emergency fund (given that I am planning to open a ppf account next year April25) ??

Ans: For your Rs. 17,000 monthly savings:

Allocate Rs. 8,000 to your marriage goal. Consider a mix of your mother’s RD and debt mutual funds.

Save Rs. 5,000 for an emergency fund through FDs or liquid mutual funds.

Reserve Rs. 4,000 for PPF from April 2025.

For personalised strategies, consult a Certified Financial Planner or an MFD like us for tailored solutions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

Asked on - Dec 22, 2024 | Answered on Dec 23, 2024

Regarding my father's pension plan . He already has 4L invested as lumpsum in Mutual funds diversified into 3 category SBI,Mahendra , canara. We are planning to invest 26L out of 32L(ppf) corpus to the invested 4L to make total 30L in MF and start SWP so that most of the amount would not be blocked. Planning 30L to invest in hybrid SWP plan what are your thoughts about it ??And remaining 6L in SCSS to get quarterly return. We are not considering FDs bcz they can come under tax for my father. Is it so?? Regarding my plan should I postpone my ppf starting plan for now bcz I woud be needing money for marraige in next 3 years so I am considering to invest in short term investments. Plz correct me if I am wrong ??

Ans: For your father’s plan: Investing Rs. 30 lakhs in hybrid mutual funds for SWP and Rs. 6 lakhs in SCSS is a good diversification strategy. Avoiding FDs due to potential tax liabilities is valid for senior citizens. Ensure the hybrid funds align with risk tolerance and income needs.

For your PPF plan: Postponing it for now makes sense if the marriage goal is a priority. Short-term investments like debt mutual funds or FDs could be more suitable for the three-year horizon.

For detailed strategies, contact a Certified Financial Planner or an MFD like us for a customised solution.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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