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Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Aug 02, 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
Saibal Question by Saibal on Jul 21, 2024Hindi
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I am 40 years old. I need your suggestions about the shaving scheme and plans. I am a Private employee salary PM (93000 in hand) Myself(39) Wife (39) One Daughter(12 years) Expense per Month school Fees:-2000/- PM EMI for Flat:-- 33500/- PM in kolkata (Loan amount 38 L started from Nov 2021 present interest rate 8.9%) 1 extra EMI every 3 Months (after getting a variable amount of 25K ) started from this month only. home expense 12000 -PM(approx) shavings PM :---- Post office 10,000 PM(RD) from May 2015 SIP in mutual fund 18000 from Aug 2022 and want to continue at least 10 yrs. Mirae emerging direct 5500 PM Mirae Tax saver Direct: 5000 PM SBI Bluechip growth: 2000 PM Quant small cap 2000 PM. Motilal Oswal TAX saver: 2500 PM Lic(4000) per year - Money-back policy existing 5,50000 in mutual fund through SIP. Post office 400000 TD from Dec 2020 FD 66000 at Uco Bank. Health insurance through office up to 14 L. Fund for Daughter's Higher Education. Fund for Daughter's Marriage. plan to complete the home loan within 10 yr. one confusion in 2024 I will get approx 18Lakh from the Post office should I deposit all money against the home loan or keep as TD, and use the interest amount to reduce the home loan?

Ans: Income and Expenses


Your monthly income is Rs. 93,000. Your major expenses are:


• School fees: Rs. 2,000 per month


• Home loan EMI: Rs. 33,500 per month


• Home expenses: Rs. 12,000 per month


This leaves about Rs. 45,500 for savings and investments.


Current Savings and Investments


You're already saving and investing in:


• Post Office RD: Rs. 10,000 per month


• Mutual Fund SIPs: Rs. 18,000 per month


• LIC policy: Rs. 4,000 per year


• Existing mutual fund investments: Rs. 5,50,000


• Post Office Term Deposit: Rs. 4,00,000


• Bank FD: Rs. 66,000


Home Loan


Your home loan details:


• Loan amount: Rs. 38 lakhs


• Interest rate: 8.9%


• Extra EMI: Every 3 months


Investment Goals


Your main financial goals are:


• Daughter's higher education


• Daughter's marriage


• Completing home loan within 10 years


Suggestions for Savings and Investments


1. Emergency Fund


Create an emergency fund of 6 months' expenses. Keep it in a savings account or short-term deposits.


2. Increase Equity Allocation


Your equity allocation seems low. Consider increasing it for long-term growth.


3. Diversify Your Portfolio


Add more asset classes like debt funds to balance your portfolio.


4. Review Insurance Coverage


Check if your life insurance cover is enough. Consider a term plan if needed.


5. Goal-based Investing


Align your investments with specific goals. This helps in better planning.


6. Regular Portfolio Review


Review your portfolio every 6 months. Make changes if needed.


7. Avoid Premature Withdrawals


Don't withdraw from long-term investments for short-term needs.


8. Increase Investments


Try to increase your investments as your income grows.


Using Post Office Maturity Amount


About the Rs. 18 lakh maturity from Post Office in 2024:


• Paying off the home loan can save interest.


• But keeping it invested can give returns.


• A balanced approach might work best.


• Use part of it to reduce loan, invest the rest.


Finally


Your financial planning seems on track. Keep up the good habits. Regular review and adjustments will help achieve your goals.

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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Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 16, 2024

Asked by Anonymous - May 04, 2024Hindi
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Hello Sir, I am a Govt Employee aged 31 Yrs. Salary 1.5L per month. Savings - 1. Monthly Investment in Govt Savings Scheme with 7.1% ROI. Total Corpus till now is 21 lakh and investing 30k per month. 2. SIP - 14K per month since last two yrs and have accumulated 3.6 L. 3. Bal savings account 2 L. Liabilities - 1. Home Loan - 23L balance with 8.7% ROI and 240 months. Apart from this I am able to save 10k more every month. Annual increment amount to 10-20k. Can you please advise what all measures I can take to Build a Corpus of 5 Cr plus atleast by next 15 yrs. Also should I finish my Home Loan first or should I explore more options for investment. I would request if you can guide how someone like me should plan the finances in a better manner.
Ans: Financial Planning for a Government Employee: Building a ?5 Crore Corpus in 15 Years
Congratulations on your prudent financial habits and your ambition to build a substantial corpus for the future. Let's craft a plan to help you achieve your goal while optimizing your finances.

Assessing Your Current Financial Position
Your current savings, investments, and liabilities provide a solid foundation. With a monthly salary of ?1.5 lakh, disciplined savings habits, and existing investments, you're well-positioned to reach your financial goals.

Maximizing Savings and Investments
Government Savings Scheme: Continue investing ?30,000 monthly in the Government Savings Scheme, offering a reliable 7.1% return. This provides stability to your portfolio.

Systematic Investment Plan (SIP): Maintain your SIP of ?14,000 per month. Consider increasing this amount gradually with each salary increment to accelerate wealth accumulation.

Additional Savings: Utilize the extra ?10,000 saved monthly to bolster your investment portfolio. Consider diversifying into a mix of equity, debt, and other asset classes for long-term growth potential.

Addressing Liabilities
Home Loan: With a remaining balance of ?23 lakh at 8.7% interest, continue servicing the loan while exploring opportunities to refinance at lower rates. However, prioritize investments that offer higher returns than the loan interest.
Planning for Incremental Income
Annual Increment: Utilize the annual increment of ?10,000-20,000 to boost your investments. Consider allocating a portion towards debt repayment and the rest towards investment to accelerate wealth creation.
Optimizing Investment Strategy
Asset Allocation: Maintain a balanced asset allocation aligned with your risk tolerance and investment horizon. Consider gradually shifting towards more aggressive investments like equity for higher returns over the long term.

Diversification: Diversify your investment portfolio across various asset classes to mitigate risk and enhance returns. Explore options like mutual funds, PPF, NPS, and direct equity investments based on your risk appetite and financial goals.

Prioritizing Financial Goals
Home Loan vs. Investment: While it's essential to reduce debt, consider the opportunity cost of repaying the home loan early. Evaluate if your investments can generate higher returns than the loan interest rate. If yes, prioritize investing while continuing to service the loan.
Regular Financial Review
Periodic Review: Conduct a comprehensive financial review at least annually to track progress towards your goals, reassess your risk tolerance, and make necessary adjustments to your investment strategy.
Conclusion
By diligently following this financial plan, you can work towards building a corpus of ?5 crores or more within the next 15 years while balancing debt repayment and wealth creation. Remember, financial planning is dynamic, and it's essential to adapt your strategy based on changing circumstances and market conditions.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2024

Asked by Anonymous - May 09, 2024Hindi
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Hi! I am a 23 year old female. I earn 1.12 lakhs/month before taxes as salary. I am only earning individual at my home. We have a house loan of 38 lakhs of 18 years that almost started 5 years ago. We used to pay 29k EMI on a loan of 28 lakhs initially but after my father's business faced huge losses, we took additional 10 lakhs loan and after defaulting on EMIs and taking a 9 month break in between, we finally pay 45k EMI on 38 lakhs loan. I have different SIPs of 9k amount that after 3-5 years would mature. For example, in one SIP I pay 5k/month. So after 5 years I would get (300000 + 60000 bonus) on it. I have to pay monthly expense of 10k/month and I pay back a few more lenders amounting to 15k/month. After all the expenses I save almost 25-30k/month. I have around 2.5 lakhs in savings. I want to save a minimum of 10-15 lakhs in 2-3 years for my marriage and family. Can you suggest how should I start my financial planning/what investments can I do to have good returns (I'm a medium risk-taker) in next 2-3 years so I can start building my family's future and have a plan for paying off the loans?
Ans: Assessing Your Current Financial Situation

Before diving into financial planning, let's assess your current financial situation. You're 23, earning a substantial monthly salary of 1.12 lakhs before taxes. However, it seems you're facing some financial challenges, primarily due to your family's housing loan and previous business losses. Your EMI for the housing loan has increased to 45k/month after additional borrowing and a break in payments.

You've also mentioned various SIPs, monthly expenses of 10k, and repayment of other lenders amounting to 15k/month. Despite these commitments, you manage to save around 25-30k/month, which is commendable.

Setting Financial Goals

Your primary financial goal is to save 10-15 lakhs in the next 2-3 years for your marriage and family. Additionally, addressing the housing loan and building a secure financial future for your family are crucial objectives.

Creating a Financial Plan

Emergency Fund:
Start by building an emergency fund to cover unexpected expenses. Aim to save at least 6-12 months' worth of living expenses, considering your family's financial situation. Keep this fund in a liquid and accessible account.

Repaying High-Interest Debt:
Prioritize paying off high-interest debt, such as personal loans or credit card debt, to reduce financial burden and interest expenses. Since you're saving a significant portion of your income, allocate a portion towards accelerating debt repayment.

Optimizing Investments:
Given your medium risk tolerance, consider a balanced investment approach. Diversify your portfolio across various asset classes, including equity, debt, and possibly real estate.

Equity Investments: Since you have a relatively short investment horizon of 2-3 years, consider equity mutual funds with a blend of large-cap, mid-cap, and balanced funds. These can potentially offer higher returns while managing risk.

Debt Investments: Given the stability they offer, consider investing in debt mutual funds or fixed-income securities. These can provide steady returns and help balance the overall risk in your investment portfolio.

Real Estate: While you haven't mentioned real estate as an investment option, it's worth considering for long-term wealth accumulation. However, ensure thorough research and due diligence before investing in property.

Systematic Investment Plans (SIPs):
Continue with your existing SIPs, as they provide a disciplined approach to investing. However, reassess the funds you're investing in to ensure they align with your financial goals and risk tolerance. Aim for a diversified portfolio of SIPs to mitigate risk.

Budgeting and Expense Management:
Review your monthly expenses and look for areas where you can potentially reduce costs. Redirect the saved amount towards your savings and investment goals. Additionally, consider discussing financial responsibilities and budgeting with your family to collectively manage expenses.

Seeking Professional Guidance:
Consider consulting with a Certified Financial Planner to tailor a financial plan that aligns with your goals and risk profile. They can provide personalized advice and guidance to optimize your financial journey.

Conclusion

In summary, building a solid financial plan requires a systematic approach, goal setting, and disciplined execution. By focusing on building an emergency fund, repaying high-interest debt, optimizing investments, and managing expenses, you can work towards achieving your short-term and long-term financial goals. Remember, consistency and patience are key virtues in the journey towards financial security.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 06, 2024

Asked by Anonymous - Jun 24, 2024Hindi
Money
Hello sir I m 48 years old and me & my wife got earing of 1+ lakhs per month and home loan of rs 40 lakhs.. Which i took 4 years back..with EMIof ?39615/ month Which i have planned to increase by 5% every year I too have daughter of 5 years .. Who has started going to school From this year As per saving is concerned.. I have ppf... ?2000/ month Bajaj allience? 6000/year Sukanya s yojana ? 1000/ month Met life pnb ? for last 10 years. ? 3000/ month Epf.. Both me & my wife Since last year 19& 18 years respectively How shd i manege my finance So that i could.. Finish the loan before me & my wife retirement.. Thank you
Ans: Managing your finances effectively can ensure a secure and comfortable future for you and your family. At 48, with a combined monthly earning of over Rs 1 lakh and a daughter starting school, it's essential to have a robust financial plan. Let's dive into how you can manage your finances to finish your home loan before retirement and secure your family's future.

Understanding Your Financial Position
Firstly, let's assess your current financial status:

Age: 48 years
Combined Monthly Earnings: Over Rs 1 lakh
Home Loan: Rs 40 lakhs, taken 4 years back
EMI: Rs 39,615/month, planned to increase by 5% annually
Daughter's Age: 5 years, recently started school
Existing Investments and Savings
You have several ongoing investments and savings plans:

PPF: Rs 2000/month
Bajaj Allianz: Rs 6000/year
Sukanya Samriddhi Yojana: Rs 1000/month
Met Life PNB: Rs 3000/month (for last 10 years)
EPF: Both you and your wife have been contributing (19 years and 18 years respectively)
Goal: Finishing the Home Loan Before Retirement
Your primary goal is to finish the home loan before you and your wife retire. Let's break down the steps to achieve this.

Step 1: Evaluating and Adjusting the EMI
You're currently paying an EMI of Rs 39,615/month. Increasing this by 5% annually is a good strategy. This will help you pay off the loan faster and reduce the total interest paid. Here’s how you can implement it effectively:

Yearly Increase: Make sure to adjust your budget to accommodate this increase each year.
Prepayments: Use any bonuses or extra income for prepayments. This reduces the principal amount and the interest burden.
Step 2: Reviewing Your Investments
Now, let's review and optimize your existing investments for better returns and liquidity.

PPF (Public Provident Fund):

Pros: Safe, tax-free returns.
Cons: Lock-in period of 15 years, partial withdrawals allowed after 7 years.
Recommendation: Continue with PPF for its safety and tax benefits.
Bajaj Allianz:

Pros: Provides insurance cover along with investment.
Cons: Returns are generally lower compared to mutual funds.
Recommendation: Consider surrendering this policy and investing the proceeds in mutual funds for better returns.
Sukanya Samriddhi Yojana:

Pros: High-interest rate, tax benefits, specifically for girl child.
Cons: Lock-in period until the girl turns 21.
Recommendation: Continue with this as it's specifically for your daughter’s future.
Met Life PNB:

Pros: Provides insurance cover.
Cons: Lower returns compared to mutual funds.
Recommendation: Evaluate the surrender value and consider moving the funds to mutual funds.
Step 3: Building a Balanced Portfolio
Creating a balanced portfolio with a mix of equity and debt investments will help you achieve your financial goals.

Equity Mutual Funds:

Pros: Higher potential returns, suitable for long-term goals.
Cons: Market risk, requires patience and a long-term horizon.
Recommendation: Allocate a portion of your savings to equity mutual funds for wealth creation.
Debt Mutual Funds:

Pros: Lower risk, stable returns.
Cons: Lower returns compared to equity.
Recommendation: Use debt mutual funds for medium-term goals and to balance the risk in your portfolio.
Step 4: Increasing EPF Contributions
Both you and your wife have been contributing to EPF for many years. Consider increasing your voluntary provident fund (VPF) contributions. EPF offers safe and tax-free returns, making it an excellent tool for retirement planning.

Step 5: Education Fund for Your Daughter
With your daughter starting school, it's essential to plan for her future education expenses.

Sukanya Samriddhi Yojana:

Continue contributing as it offers good returns and tax benefits.
Education Fund:

Recommendation: Start a dedicated education fund with equity mutual funds. This will help you meet her higher education expenses.
Step 6: Emergency Fund
Ensure you have an emergency fund that covers at least 6-12 months of your monthly expenses. This fund should be easily accessible and kept in liquid assets like a savings account or liquid mutual funds.

Step 7: Insurance Coverage
Having adequate insurance coverage is crucial to protect your family’s financial future.

Term Insurance:

Ensure both you and your wife have term insurance coverage that is 10-15 times your annual income. This provides financial security in case of an unfortunate event.
Health Insurance:

Have comprehensive health insurance for your entire family to cover medical expenses.
Analyzing and Rebalancing Your Portfolio
Regularly review your portfolio to ensure it remains aligned with your financial goals and risk tolerance. Rebalance your portfolio annually to maintain the desired asset allocation between equity and debt.


It’s commendable that you are focused on managing your finances and securing your family’s future. Your commitment to increasing your EMI and planning for your daughter's education is impressive. Balancing multiple financial goals at this stage of life is challenging, and your proactive approach is truly inspiring.

Final Insights
To achieve your goal of finishing the home loan before retirement, focus on increasing your EMI, making prepayments, and optimizing your investments. Building a balanced portfolio with equity and debt mutual funds will help in wealth creation and risk management. Regularly review and rebalance your portfolio to stay on track.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 30, 2024

Money
Myself Saibal from Kolkata. I need your suggestion about the shaving scheme and future plan. I am a Private employee salary PM (94000 in hand) Saibal(39) Wife (39) One Daughter(12 years) Expense per Month school Fees:-2000/- PM EMI for Flat:-- 33500/- PM in kolkata (Loan amount 38 L started from Nov 2021 present interest rate 9.3) 1 extra EMI every 3 Months (after getting a variable amount of 25K ) started from this month only. home expense 12000 -PM(approx) shavings PM :---- Post office 10,000 PM(RD) from May 2014 SBI, 2000 PM(RD) from March 2014(maturity date March, 2024 ammount 200000) SIP in mutual fund 18000 from Aug 2021 and want to continue at least 10 yrs. Mirae emerging direct 5500 PM Mirae Tax saver Direct: 5000 PM DSP Blackrock micro capital: 1000 PM SBI Bluechip growth: 2000 PM Quant small cap 2000 PM. Motilal Oswal TAX saver: 2500 PM Lic(4000) per year - Money-back policy existing 7,50000 in mutual fund through SIP. Post office 400000 TD from Dec 2020 FD 66000 at Uco Bank. Health insurance through office up to 14 L. Fund for Daughter's Higher Education. Fund for Daughter's Marriage. plan to complete the home loan within 10 yr. one confusion in 2025 I will get approx 18Lakh from the Post office should I deposit all money against the home loan or keep as TD, and use the interest amount to reduce the home loan? please let me know if any change is required for shavings.
Ans: Hey Saibal, it's great that you're thinking about your financial future. You've done a commendable job planning for various needs. Your detailed approach shows dedication. Let's dive into your financial plan and future strategy.

Income and Expenses

You have an in-hand salary of Rs. 94,000 per month.

Monthly expenses include:

School fees: Rs. 2,000
Home loan EMI: Rs. 33,500
Additional home EMI every three months: Rs. 25,000
Home expenses: Rs. 12,000
Your current commitments are substantial but manageable with your income.

Savings and Investments

Your savings and investment portfolio includes:

Post office RD: Rs. 10,000 per month (since May 2014)
SBI RD: Rs. 2,000 per month (since March 2014, maturing in March 2024 with Rs. 2,00,000)
SIPs in mutual funds: Rs. 18,000 per month (since August 2021)
Your SIPs include:

Mirae Emerging: Rs. 5,500
Mirae Tax Saver: Rs. 5,000
DSP Blackrock Micro Cap: Rs. 1,000
SBI Bluechip Growth: Rs. 2,000
Quant Small Cap: Rs. 2,000
Motilal Oswal Tax Saver: Rs. 2,500
Additionally, you have:

LIC policy: Rs. 4,000 per year
Post office TD: Rs. 4,00,000 (since December 2020)
FD: Rs. 66,000 at Uco Bank
Health insurance: Rs. 14 lakhs through your office
Future Goals

You aim to:

Fund your daughter's higher education and marriage
Complete your home loan within 10 years
Optimize the Rs. 18 lakh maturity amount in 2025
Analyzing Your Current Strategy

You've diversified well across savings schemes and mutual funds. Here's a closer look at each aspect.

Savings
Your recurring deposits (RDs) are steady, providing a reliable return. However, as these mature, you may consider shifting some funds to higher-return investments like mutual funds.

Mutual Funds

Your mutual fund SIPs are a strong point. They offer potential for significant returns over time. However, it's crucial to periodically review the performance and adjust if needed.

Home Loan Management
You plan to complete your home loan within 10 years. Your current EMI is Rs. 33,500 with an additional EMI every three months. This is a smart move to reduce the principal faster.

Insurance
Your health insurance coverage of Rs. 14 lakhs through your office is good. Ensure it's adequate by considering additional coverage if needed.

Fund Utilization in 2025
You’ll receive Rs. 18 lakhs from the post office in 2025. Here's a strategy to consider:

Pay Off Home Loan

Using the entire amount to pay off a portion of your home loan can significantly reduce your outstanding principal. This will lower your EMI burden and save interest costs in the long run.

Term Deposit (TD) Strategy

Alternatively, keeping the Rs. 18 lakhs as a TD and using the interest to pay your EMIs can provide liquidity. However, this might not be as effective in reducing your overall loan burden compared to direct repayment.

Recommendations for Adjustments
To optimize your financial plan, consider these adjustments:

1. Reviewing Mutual Funds

Regularly review your mutual fund portfolio. Monitor performance and make changes if funds consistently underperform.

2. Increasing SIP Investments

If possible, increase your SIP contributions over time. This will compound returns and build a substantial corpus.

3. Evaluating Insurance Needs

Assess if your current health insurance is adequate. You might need additional coverage for unforeseen medical expenses.

4. Home Loan Prepayment

Whenever you receive bonuses or windfalls, consider prepaying your home loan. This reduces the principal and interest burden.

5. Educational and Marriage Fund

Start dedicated investments for your daughter’s education and marriage. Consider child plans or earmarked mutual funds for these goals.

Final Insights

Your financial plan is robust, but a few tweaks can optimize it further. Prioritize prepaying your home loan to reduce interest costs. Regularly review and adjust your mutual fund portfolio. Ensure your insurance coverage is adequate for your family’s needs.

Moving Forward
Monitor Investments: Regularly check your SIPs and make adjustments as needed.
Prepay Home Loan: Use any extra income or bonuses for prepayments.
Ensure Adequate Insurance: Reassess your health insurance coverage periodically.
Dedicated Funds for Goals: Set up specific investments for your daughter’s education and marriage.
You're on a strong financial path, Saibal. With a few adjustments, you can achieve your goals efficiently. Your dedication to securing your family’s future is commendable. Keep up the great work!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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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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