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40-Year-Old Business Owner: Am I on Track for Retirement and Children's Higher Education?

Ramalingam Kalirajan |7101 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 16, 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 Rajeev on Jun 18, 2024Hindi

Sir, My age is 40. I have a family with Mom, Dad, 2 daughters aged 13 years and my wife. I am the only source for income in my family. I am a business person and average monthly profit is approx 2 to 3 lakhs. There are lots of ups and downs in the business and profits are not consistant. So I am doing daily SIP of 5000 in HDFC Top 100 growth. Till date the MF is approx 9 lakhs. I have purchased a flat of Rs 1cr. With an home loan of 40 lakhs. Current EMI is 35000, tenure 20 years started last year. I have taken 2 health insurance policies, one for my mom and dad and another for us. Total yearly premium is 1.25 lakhs. My monthly expenses are approx 1.5 lakhs. I am bit worried about Daughters higher education as they wish to pursue MBBS. Secondly I need to save for my retirement. I wish to retire at 55. Please suggest if I am on right track or I need to change my investment patterns?

Ans: Current Financial Overview

You have a monthly profit of Rs 2-3 lakhs from your business, but it fluctuates. You have a daily SIP of Rs 5000 in HDFC Top 100 growth, amounting to Rs 9 lakhs till now. You have a home loan of Rs 40 lakhs with an EMI of Rs 35,000 for 20 years. Your monthly expenses are around Rs 1.5 lakhs, and you have two health insurance policies with a total annual premium of Rs 1.25 lakhs.

Goals and Concerns

Daughters' Higher Education: Both daughters wish to pursue MBBS.
Retirement Planning: Aim to retire at age 55.
Education Planning

Estimate Costs: MBBS education can be expensive. Estimate the total cost considering tuition, books, and other expenses.

Dedicated Education Fund: Start a dedicated SIP for your daughters’ education. Consider a combination of equity and debt mutual funds for stability and growth.

Retirement Planning

Current Investments: Your daily SIP in HDFC Top 100 growth is a good start. Continue this but also diversify.

Additional Investments: Consider starting SIPs in a mix of large-cap, mid-cap, and multi-cap funds. This will balance risk and growth.

Retirement Fund: Calculate the corpus needed for retirement at age 55. Factor in your lifestyle, inflation, and life expectancy.

Insurance Coverage

Health Insurance: Your existing health insurance for your parents and family is crucial. Ensure coverage is adequate for medical emergencies.

Term Insurance: Consider taking a term insurance plan to cover your family’s financial needs in case of any unforeseen event.

Debt Management

Home Loan: Your EMI of Rs 35,000 is manageable given your income. Try to prepay whenever you have extra funds. This will reduce the loan tenure and interest burden.
Emergency Fund

Build an Emergency Fund: Keep at least 6-12 months of expenses in a liquid fund or savings account. This will help during business downturns.
Final Insights

Your current investments and insurance coverage are good, but diversification and dedicated funds for education and retirement will strengthen your financial plan.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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