Hi , I am 35 year Old i earn 1.20 Lac monthly have no savings . I have two kids . I am also having housing loan where my EMI is 40k and monthly expense of 40k. approximately. NpS and ppF is already there . NpS by company 20k monthly increases gradually 5% year. PPF 10k . What should I do to have corpous of 5cr in 25yrs.

Ans: Building a Rs 5 Crore Corpus in 25 Years

You are 35 years old, earning Rs 1.20 lakh monthly, with a housing loan and monthly expenses of Rs 40,000 each. Your goal is to build a corpus of Rs 5 crore in 25 years. Let’s create a detailed financial plan to achieve this.

Assessing Your Current Financial Situation

You have an NPS contribution by your company of Rs 20,000 monthly, increasing by 5% annually. You also contribute Rs 10,000 monthly to PPF. Understanding your current cash flow is essential for planning future investments.

Managing Your Expenses

Your monthly expenses include a housing loan EMI of Rs 40,000 and other expenses of Rs 40,000. This leaves you with Rs 40,000 from your monthly income of Rs 1.20 lakh. It’s crucial to allocate this remaining amount effectively to meet your investment goals.

Emergency Fund

Before investing, it’s vital to have an emergency fund. This fund should cover at least six months of your expenses, which would be around Rs 2.40 lakh. An emergency fund provides a financial cushion for unexpected situations.

Increasing Savings

With Rs 40,000 remaining each month, you need to increase your savings rate. Try to save at least 20-30% of your income, which would be Rs 24,000 to Rs 36,000 monthly. This will boost your investment potential.

Investment Strategy

A diversified investment strategy is crucial for building a substantial corpus. Let’s explore different investment options:

Equity Investments

Equity investments offer high returns but come with higher risks. Investing in equity mutual funds through SIPs (Systematic Investment Plans) can provide long-term growth. Consider allocating a significant portion of your savings to equity mutual funds.

Debt Instruments

Debt instruments like bonds and debt mutual funds provide stability and regular income. They are less volatile than equity investments and help balance your portfolio.

Public Provident Fund (PPF)

Your existing PPF contribution of Rs 10,000 monthly is a good start. PPF offers tax benefits and a guaranteed return, making it a stable investment option.

National Pension System (NPS)

Your company contributes Rs 20,000 monthly to NPS. NPS is a tax-efficient investment for retirement, with both equity and debt options.

Sukanya Samriddhi Yojana (SSY)

If you have daughters, consider investing in SSY. It offers attractive interest rates and tax benefits, securing their future education and marriage expenses.

Gold Investments

Gold is a good hedge against inflation. Allocate a small portion of your portfolio to gold to diversify and provide security.

Creating a Balanced Portfolio

A balanced portfolio with a mix of equity, debt, PPF, NPS, and gold ensures growth and stability. Regularly review and rebalance your portfolio to maintain the desired asset allocation.

Setting Milestones

Break down your Rs 5 crore goal into smaller milestones. For example, aim to reach Rs 1 crore in the next five years, then Rs 2 crore in the following five years, and so on. Setting milestones helps track progress and stay motivated.

Tax Planning

Efficient tax planning enhances your returns. Utilize tax-saving instruments like PPF, NPS, and ELSS (Equity Linked Savings Scheme) to reduce your taxable income and maximize savings.

Increasing Income

Look for opportunities to increase your income. This could include taking up freelance work, pursuing a side business, or seeking a promotion at work. Additional income can boost your savings and investments.

Education and Marriage Planning for Children

Plan for your children’s education and marriage expenses. Education costs are rising, and early planning ensures you have sufficient funds when needed. Allocate specific investments for these goals.

Reviewing Insurance Coverage

Ensure you have adequate life and health insurance coverage. This protects your family’s financial future in case of any unforeseen events. Term insurance is a cost-effective way to secure life coverage.

Monitoring and Adjusting Your Plan

Regularly monitor your investments and financial plan. Adjust your strategy based on market conditions and changes in your financial situation. Staying flexible helps you adapt to unforeseen challenges.

Staying Disciplined and Patient

Building a corpus of Rs 5 crore requires discipline and patience. Stick to your investment plan, avoid impulsive decisions, and stay focused on your long-term goal.

Avoiding Common Pitfalls

Avoid common investment pitfalls like over-reliance on one asset class or chasing high returns without considering risks. Diversification and risk management are key to successful investing.

The Role of a Certified Financial Planner

Consulting a Certified Financial Planner (CFP) provides valuable insights and guidance. They can help you create a personalized financial plan, optimize your investments, and ensure you stay on track to achieve your goals.

Final Insights

Building a corpus of Rs 5 crore in 25 years is achievable with a disciplined approach. Focus on increasing savings, diversifying investments, and efficient tax planning. Regularly review and adjust your financial plan to stay on track. With patience and determination, you can secure a prosperous future for yourself and your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in