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Should I return to India with uncertain job prospects and mounting medical bills?
Ramalingam Kalirajan |10876 Answers |Ask -Follow
Mutual Funds, Financial Planning Expert - Answered on Sep 22, 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
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 - Sep 22, 2024Hindi
I am 47 years old and working abroad in the Gulf., married but have no children. An insecure job (Sales and Marketing in the Healthcare segment) with 9 months remaining in the present contract period and a monthly salary of 2.65 lakhs in INR after conversion. Living expenses required 1.25 lakhs and I am left with only 1.4 lakhs to send back home every month. Ongoing medical expenses for the family require around 12 lakhs (+ an additional 2 lakhs) to be completed in the next 9 months. No home/car/personal loan in India presently. Assets include Home + Plot in home town, two houses earning rent of 10K per month, Ancestral property of agricultural land of 3 acres (which is barren and hard to grow any crop), Equity investments of 5 lakhs in shares with cash on hand of 8 lakhs in India. Other investment liabilities presently include LIC Premiums, ULIP premiums, and Health and Car insurance which works out to 2 lakhs per annum for the next 2 years. Investments in insurance and ULIPs will yield returns only from Dec 2026. Applying for jobs in India and abroad but no luck yet. Suggest a plan on how I manage my finances if I have to come back abruptly given the insecure situation in this part of the world. And what key questions I need to answer., I am confused.
Ans: You are currently 47 years old, working in an unstable sales and marketing job in the healthcare sector in the Gulf. You have nine months left in your contract and face uncertainty about future employment. You earn Rs. 2.65 lakhs per month, and after living expenses of Rs. 1.25 lakhs, you send Rs. 1.4 lakhs back to India. Additionally, there are ongoing medical expenses amounting to Rs. 12 lakhs, plus an extra Rs. 2 lakhs that need to be met within the next nine months. You have some key financial commitments in the form of LIC, ULIP premiums, and health and car insurance, amounting to Rs. 2 lakhs annually for the next two years.
Your assets include a home, a plot in your hometown, two rental houses earning Rs. 10,000 monthly, agricultural land, Rs. 5 lakhs in equity, and Rs. 8 lakhs in cash savings.
Let’s break down how you can manage your financial situation, especially if you must return to India abruptly.
Assessing Cash Flow & Medical Expenses
Your current salary provides you with Rs. 1.4 lakhs to send back home every month, but there is a pressing need to cover medical expenses of Rs. 12-14 lakhs over the next nine months.
These medical expenses will eat into your monthly savings or cash reserves, which means you may face a liquidity crunch in the short term. It is essential to ensure you have a clear plan for covering these medical costs while continuing to save for future needs.
What You Can Do
Create a Medical Emergency Fund: Allocate a portion of your Rs. 8 lakhs in cash reserves specifically to handle these medical costs. This will prevent unnecessary pressure on your monthly cash flow and give you peace of mind. You can then prioritize building this fund up again once the medical expenses are over.
Prioritize Savings: Focus on increasing your savings, even if that means slightly cutting down your living expenses abroad. See if there are areas where you can cut back or reduce discretionary spending to boost your savings buffer. Even saving an extra Rs. 10,000-20,000 monthly can help.
Evaluating Investment Commitments
You have insurance and ULIPs as investments, with returns starting from December 2026. However, these investments are likely not yielding optimal returns due to their high costs.
What You Can Do
Review Your Insurance Plans: If possible, check if any of the insurance or ULIP policies are underperforming. Given that their maturity is still a few years away, it might be wise to consider if surrendering these policies and reinvesting in more flexible and higher-yielding options like mutual funds will benefit you. Consult a Certified Financial Planner to guide you in this area.
Switch to Regular Mutual Funds: If your focus is on actively managed mutual funds, you should consider shifting some of your insurance-based investments into well-researched funds through an MFD and CFP. Actively managed funds have the advantage of being able to outperform index funds, especially during volatile market conditions. Since your ULIPs and insurance may have higher charges, they could hinder your returns compared to mutual funds.
Why Avoid Direct Funds: If you have been considering direct mutual funds, it’s important to know they can sometimes result in missed opportunities or inadequate management due to the absence of a professional advisor. Regular funds, when invested through a trustworthy MFD with CFP credentials, can outperform direct funds because they offer better fund selection, continuous monitoring, and timely adjustments.
Managing Assets and Liabilities
You have various assets: property in your hometown, two rental houses bringing in Rs. 10,000 per month, equity investments worth Rs. 5 lakhs, Rs. 8 lakhs in cash, and agricultural land that is barren.
What You Can Do
Maximize Rental Income: Rs. 10,000 from two houses is a modest amount. You may want to assess if there is potential to increase this rent over time. If you feel that these properties are not providing enough returns, consider renting out the home or plot in your hometown as well. Since you don’t have plans to live there right now, renting these out may provide a steady cash flow that can offset your living expenses in India or abroad.
Reassess Agricultural Land: The agricultural land isn’t generating any income, which can be a missed opportunity. You might want to explore leasing it out to someone who can cultivate it. Even a nominal rent could be beneficial, as the land is otherwise lying idle. This would also reduce maintenance costs and make the land more productive.
Strengthen Equity Portfolio: You have Rs. 5 lakhs in equity investments. While this is a good start, considering the potential of equity to generate inflation-beating returns over the long term, you could aim to increase this allocation. Since equities can provide better returns than ULIPs and insurance policies, focusing on this area will help in wealth accumulation for future needs.
Evaluate Gold as an Investment: If you have any idle gold investments, you might want to consider their value. Gold can act as a hedge against inflation, and selling or leveraging it in times of emergency could provide you with immediate liquidity. This can be an option for medical expenses or any abrupt changes in your income.
Retirement Planning and Building a Safety Net
Since you are 47, it’s important to start thinking about building a retirement corpus, especially if you return to India soon. You should aim for a financial plan that provides income stability for the long term.
What You Can Do
Continue Building Emergency Fund: Given the uncertainties in your job, focus on creating a solid emergency fund. Ideally, this should cover 12-18 months of your expenses in case of job loss or a sudden need to return to India. With your living expenses at Rs. 1.25 lakhs monthly, you would need a fund of Rs. 15-20 lakhs. This will give you a cushion while searching for jobs or setting up income streams back home.
Build Your Retirement Portfolio: A retirement corpus should be a top priority at this stage. You can create a mix of investments, focusing on debt and equity mutual funds to balance risk and returns. Avoid relying heavily on insurance products like ULIPs, as they may not provide the liquidity and returns you need for retirement planning. Regular SIPs in diversified equity funds can grow your portfolio faster than ULIPs.
Ensure a Stable Post-Retirement Income: Since you own properties and have rental income, you already have a base for post-retirement income. You can further enhance this by investing a part of your equity or savings into high-dividend-paying stocks or mutual funds. Also, systematically investing into debt mutual funds closer to your retirement will ensure a predictable income stream.
Job Uncertainty and Transitioning Back to India
Since there is a chance you may need to return to India abruptly, it's essential to have a plan that ensures financial security during the transition.
What You Can Do
Build a Buffer for the Transition: You may not find a job in India or abroad right away. Therefore, it’s important to create a transition fund to cover at least six months of living expenses. This should be separate from your emergency fund. This buffer will allow you to take the time to find a suitable job without financial stress.
Explore Freelance/Consulting Work: Given your experience in sales and marketing in the healthcare sector, you may want to explore opportunities for freelance consulting or remote work. These jobs can give you flexibility and a backup income source.
Invest in Upskilling: Now might be a good time to invest in upskilling or gaining certifications that can improve your chances of finding a new job in India or abroad. Explore courses that are in demand within your industry and sector, whether in digital marketing, healthcare innovations, or related fields.
Final Insights
You are in a challenging yet manageable situation. Your key focus should be on building a solid emergency fund, reviewing your insurance-based investments, and increasing your equity exposure. Since job security is uncertain, preparing for a possible return to India is essential. Maximize your income sources, whether through increased rent or alternative job opportunities like freelance consulting.
You already have a solid asset base, but liquidity and future income stability are crucial. Ensure that your investments are aligned with long-term growth goals and provide flexibility in case of sudden changes in your employment status.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/
Your assets include a home, a plot in your hometown, two rental houses earning Rs. 10,000 monthly, agricultural land, Rs. 5 lakhs in equity, and Rs. 8 lakhs in cash savings.
Let’s break down how you can manage your financial situation, especially if you must return to India abruptly.
Assessing Cash Flow & Medical Expenses
Your current salary provides you with Rs. 1.4 lakhs to send back home every month, but there is a pressing need to cover medical expenses of Rs. 12-14 lakhs over the next nine months.
These medical expenses will eat into your monthly savings or cash reserves, which means you may face a liquidity crunch in the short term. It is essential to ensure you have a clear plan for covering these medical costs while continuing to save for future needs.
What You Can Do
Create a Medical Emergency Fund: Allocate a portion of your Rs. 8 lakhs in cash reserves specifically to handle these medical costs. This will prevent unnecessary pressure on your monthly cash flow and give you peace of mind. You can then prioritize building this fund up again once the medical expenses are over.
Prioritize Savings: Focus on increasing your savings, even if that means slightly cutting down your living expenses abroad. See if there are areas where you can cut back or reduce discretionary spending to boost your savings buffer. Even saving an extra Rs. 10,000-20,000 monthly can help.
Evaluating Investment Commitments
You have insurance and ULIPs as investments, with returns starting from December 2026. However, these investments are likely not yielding optimal returns due to their high costs.
What You Can Do
Review Your Insurance Plans: If possible, check if any of the insurance or ULIP policies are underperforming. Given that their maturity is still a few years away, it might be wise to consider if surrendering these policies and reinvesting in more flexible and higher-yielding options like mutual funds will benefit you. Consult a Certified Financial Planner to guide you in this area.
Switch to Regular Mutual Funds: If your focus is on actively managed mutual funds, you should consider shifting some of your insurance-based investments into well-researched funds through an MFD and CFP. Actively managed funds have the advantage of being able to outperform index funds, especially during volatile market conditions. Since your ULIPs and insurance may have higher charges, they could hinder your returns compared to mutual funds.
Why Avoid Direct Funds: If you have been considering direct mutual funds, it’s important to know they can sometimes result in missed opportunities or inadequate management due to the absence of a professional advisor. Regular funds, when invested through a trustworthy MFD with CFP credentials, can outperform direct funds because they offer better fund selection, continuous monitoring, and timely adjustments.
Managing Assets and Liabilities
You have various assets: property in your hometown, two rental houses bringing in Rs. 10,000 per month, equity investments worth Rs. 5 lakhs, Rs. 8 lakhs in cash, and agricultural land that is barren.
What You Can Do
Maximize Rental Income: Rs. 10,000 from two houses is a modest amount. You may want to assess if there is potential to increase this rent over time. If you feel that these properties are not providing enough returns, consider renting out the home or plot in your hometown as well. Since you don’t have plans to live there right now, renting these out may provide a steady cash flow that can offset your living expenses in India or abroad.
Reassess Agricultural Land: The agricultural land isn’t generating any income, which can be a missed opportunity. You might want to explore leasing it out to someone who can cultivate it. Even a nominal rent could be beneficial, as the land is otherwise lying idle. This would also reduce maintenance costs and make the land more productive.
Strengthen Equity Portfolio: You have Rs. 5 lakhs in equity investments. While this is a good start, considering the potential of equity to generate inflation-beating returns over the long term, you could aim to increase this allocation. Since equities can provide better returns than ULIPs and insurance policies, focusing on this area will help in wealth accumulation for future needs.
Evaluate Gold as an Investment: If you have any idle gold investments, you might want to consider their value. Gold can act as a hedge against inflation, and selling or leveraging it in times of emergency could provide you with immediate liquidity. This can be an option for medical expenses or any abrupt changes in your income.
Retirement Planning and Building a Safety Net
Since you are 47, it’s important to start thinking about building a retirement corpus, especially if you return to India soon. You should aim for a financial plan that provides income stability for the long term.
What You Can Do
Continue Building Emergency Fund: Given the uncertainties in your job, focus on creating a solid emergency fund. Ideally, this should cover 12-18 months of your expenses in case of job loss or a sudden need to return to India. With your living expenses at Rs. 1.25 lakhs monthly, you would need a fund of Rs. 15-20 lakhs. This will give you a cushion while searching for jobs or setting up income streams back home.
Build Your Retirement Portfolio: A retirement corpus should be a top priority at this stage. You can create a mix of investments, focusing on debt and equity mutual funds to balance risk and returns. Avoid relying heavily on insurance products like ULIPs, as they may not provide the liquidity and returns you need for retirement planning. Regular SIPs in diversified equity funds can grow your portfolio faster than ULIPs.
Ensure a Stable Post-Retirement Income: Since you own properties and have rental income, you already have a base for post-retirement income. You can further enhance this by investing a part of your equity or savings into high-dividend-paying stocks or mutual funds. Also, systematically investing into debt mutual funds closer to your retirement will ensure a predictable income stream.
Job Uncertainty and Transitioning Back to India
Since there is a chance you may need to return to India abruptly, it's essential to have a plan that ensures financial security during the transition.
What You Can Do
Build a Buffer for the Transition: You may not find a job in India or abroad right away. Therefore, it’s important to create a transition fund to cover at least six months of living expenses. This should be separate from your emergency fund. This buffer will allow you to take the time to find a suitable job without financial stress.
Explore Freelance/Consulting Work: Given your experience in sales and marketing in the healthcare sector, you may want to explore opportunities for freelance consulting or remote work. These jobs can give you flexibility and a backup income source.
Invest in Upskilling: Now might be a good time to invest in upskilling or gaining certifications that can improve your chances of finding a new job in India or abroad. Explore courses that are in demand within your industry and sector, whether in digital marketing, healthcare innovations, or related fields.
Final Insights
You are in a challenging yet manageable situation. Your key focus should be on building a solid emergency fund, reviewing your insurance-based investments, and increasing your equity exposure. Since job security is uncertain, preparing for a possible return to India is essential. Maximize your income sources, whether through increased rent or alternative job opportunities like freelance consulting.
You already have a solid asset base, but liquidity and future income stability are crucial. Ensure that your investments are aligned with long-term growth goals and provide flexibility in case of sudden changes in your employment status.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/
Asked on - Sep 23, 2024 | Answered on Sep 23, 2024
I have TATA AIA Fortune Pro with Fund name - Whole Life Mid Cap Equipty Fund for which the last premium was on May 2022 and is matured now (out of lock-in period). The policy had a premium of 75k per annum for 5 years. The term is 15 years and maturity date is May 2033. Present valuation is 9.2 Lakhs. Shall I surrender this for some urgent cash and some part as Equity investment with higher returns? I am unable to get the surrender value in the portal. Do you have any suggestions to continue with this or to surrender?
Ans: If you urgently need cash and the Tata AIA Fortune Pro policy has completed its lock-in period, you may consider surrendering it. However, since the policy term is until 2033 and mid-cap funds can potentially offer good long-term returns, weigh the opportunity cost. To get the surrender value, you should contact Tata AIA directly or visit a nearby branch.
If you decide to surrender, you could allocate a portion to higher-return investments like equity mutual funds while keeping some in liquid or short-term debt funds for immediate needs.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/
If you decide to surrender, you could allocate a portion to higher-return investments like equity mutual funds while keeping some in liquid or short-term debt funds for immediate needs.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
Instagram: https://www.instagram.com/holistic_investment_planners/
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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