I'm 30 years old married with no children. I just took a personal loan of 11 lakhs with 28,799 as Emi for 4 years, my first Emi will start from June. I also have to repay 250,000 to My friend which I have to repay in the month of December. My salary is 150,000 per month and I get 130,000 in hand after deduction. I have 0 savings . I haven't invested anywhere so Im thinking of investing somewhere ie. Mutual funds/PPF. I'm not sure where to invest and how much to invest and how long to invest. Need some suggestions so I can have a stable life and savings
Ans: It's commendable that you're seeking guidance to establish a stable financial foundation. Let's work together to create a structured plan tailored to your current circumstances and future goals.
Understanding Your Current Financial Landscape
Age: 30 years
Marital Status: Married, no children
Monthly Net Income: Rs. 1,30,000
Personal Loan: Rs. 11 lakhs with an EMI of Rs. 28,799 for 4 years
Pending Repayment: Rs. 2,50,000 to a friend by December
Savings: None currently
Investments: None currently
Immediate Financial Priorities
Emergency Fund: It's crucial to build an emergency fund equivalent to at least 3-6 months of your monthly expenses. This fund acts as a financial cushion during unforeseen circumstances.
Debt Repayment: Prioritize repaying the Rs. 2,50,000 owed to your friend by December. Simultaneously, ensure timely EMI payments for your personal loan to maintain a good credit score.
Budget Allocation Strategy
With a monthly net income of Rs. 1,30,000, here's a suggested allocation:
Personal Loan EMI: Rs. 28,799
Friend's Loan Savings: Allocate Rs. 42,000 monthly from June to November to accumulate Rs. 2,50,000 by December.
Emergency Fund: Start with Rs. 10,000 monthly until you reach the desired corpus.
Investments: Begin with Rs. 10,000 monthly through SIPs in mutual funds.
Essential Expenses: Allocate the remaining amount for household and personal expenses.
Building Your Investment Portfolio
1. Mutual Funds:
Systematic Investment Plans (SIPs): Start with Rs. 10,000 monthly. SIPs allow you to invest a fixed amount regularly, benefiting from rupee cost averaging and compounding over time.
Fund Selection: Diversify across various categories:
Large Cap Funds: 40% allocation. These invest in established companies, offering stability.
Flexi Cap Funds: 30% allocation. These provide flexibility to invest across market capitalizations.
Mid Cap Funds: 20% allocation. These target medium-sized companies with growth potential.
Small Cap Funds: 10% allocation. These focus on smaller companies, offering higher growth but with increased risk.
2. Public Provident Fund (PPF):
Investment: Consider investing Rs. 5,000 monthly.
Benefits:
Tax Efficiency: Contributions up to Rs. 1.5 lakhs annually are eligible for tax deductions under Section 80C.
Safety: Backed by the Government of India, offering a fixed interest rate.
Long-Term Growth: Ideal for retirement planning due to its 15-year lock-in period.
Insurance Coverage
Life Insurance: It's essential to have a term insurance plan with a sum assured of at least 10-15 times your annual income. This ensures financial security for your dependents in unforeseen circumstances.
Health Insurance: Secure a comprehensive health insurance policy covering hospitalization and critical illnesses for yourself and your spouse.
Monitoring and Adjusting Your Plan
Annual Review: Reassess your financial plan annually to accommodate changes in income, expenses, and life goals.
Increase Investments: As your income grows or debts are repaid, consider increasing your SIP amounts to accelerate wealth accumulation.
Avoid Premature Withdrawals: Let your investments grow uninterrupted to maximize returns through compounding.
Final Insights
Establishing a strong financial foundation requires discipline and consistent effort. By prioritizing debt repayment, building an emergency fund, and initiating investments, you're setting the stage for long-term financial stability and growth. Remember, the key is to start now, even with modest amounts, and gradually build upon your investments as your financial situation improves.
Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment