Hi Anil, I have no finance management experience but want to learn to manage. I earn 1.5 lpa in hand salary with no investment. I save my money and use it to pay for installments for my 3 bhk flat I have booked worth 1.25cr. I have made 50%payment and 50% is remaining with no loan yet. Please guide me what I can do to have a great future? Thanks!

Ans: Please do not take such decision immediately. It is a good thing that you want to secure your children's future. But as of now, i dont see any such need to sell off your flat. your children may not need this much of money for their education or they may need more. Both the other houses can be rented out and the rentals can be invested in mfs. These funds may be tagged only to their education. Any additional requirements can be funded through education loans.

Ans: You have a monthly income of Rs. 41,000. You send Rs. 22,000 to your parents, which shows a strong sense of responsibility. After rent and expenses, you manage to save around Rs. 1,000 to Rs. 2,000 per month. You also have an SIP of Rs. 4,000 and an investment of Rs. 40,000 in equities. Additionally, you pay Rs. 40,000 annually for a LIC policy with a cover of Rs. 1 crore. Your financial journey has begun, but you need a strategy to strengthen it further.

Budgeting: The Foundation of Financial Management
Budgeting is key to managing your finances better. Since your current savings are limited, a strict budget can help you find areas where you can cut costs. For example, you could look into reducing discretionary spending like eating out or entertainment. Saving small amounts from these areas can gradually build up your emergency fund.

Track Your Expenses:
Keep a detailed record of your monthly spending. This helps you identify where you can cut back.

Prioritize Saving:
Even small amounts saved every month can grow over time. Aim to increase your savings by Rs. 500 to Rs. 1,000 per month.

Reevaluate Your Rent:
Consider looking for a more affordable place to live if possible. Saving on rent can significantly impact your budget.

Reviewing Your SIP and Equity Investments
You have wisely started investing in an SIP and equities at a young age. This habit can yield significant returns over time. However, it’s essential to ensure your SIP is aligned with your financial goals.

Increase SIP Gradually:
Try to increase your SIP contributions by Rs. 500 to Rs. 1,000 every year. This small step can make a big difference over time.

Diversify Your Equity Portfolio:
If your Rs. 40,000 investment in equities is concentrated in a few stocks, consider diversifying. Spreading your investment across different sectors reduces risk.

Consider Actively Managed Funds:
Actively managed funds can potentially outperform the market. This offers better growth prospects compared to index funds.

Insurance and Risk Management
You have a Rs. 1 crore LIC policy, which is a significant step towards securing your financial future. However, it’s essential to review the policy’s terms and its alignment with your overall financial plan.

Reevaluate Your LIC Policy:
Evaluate if the annual Rs. 40,000 premium fits your current financial capacity. Consider if the policy provides value beyond just life cover.

Consider Term Insurance:
Term insurance is usually more cost-effective than traditional LIC policies. It provides the same coverage at a lower cost, allowing you to invest the savings.

Health Insurance:
If you don’t have health insurance, consider getting a basic plan. Medical emergencies can drain your savings quickly.

Building an Emergency Fund
An emergency fund is a must-have for financial stability. It provides a safety net in case of unforeseen expenses or job loss. Aim to build a fund that covers at least three to six months of your expenses.

Start Small:
Begin by saving a portion of your Rs. 1,000 to Rs. 2,000 monthly surplus. Gradually increase this amount as your income grows.

Keep It Accessible:
Ensure the money is easily accessible, but separate from your regular savings. A dedicated savings account is ideal.

Future Planning: Goals and Investments
At 23, you have time on your side. It’s the right time to think about your long-term goals, like buying a house, further education, or retirement. Early planning can help you achieve these goals more comfortably.

Set Clear Financial Goals:
Define what you want to achieve in the next 5, 10, and 20 years. This will guide your investment choices.

Consider Retirement Planning:
Even though retirement seems far away, starting early ensures you have a comfortable nest egg. Consider starting a PPF or NPS account to begin this journey.

Invest in Skill Development:
Investing in your skills can lead to better job opportunities and higher income. This, in turn, strengthens your financial position.

Managing Debt Wisely
Currently, you have no mention of loans or credit card debt, which is positive. However, managing debt is crucial as you progress in your career and take on more responsibilities.

Avoid High-Interest Debt:
If you ever need to take a loan, avoid high-interest options like personal loans or credit card debt.

Use Credit Cards Responsibly:
If you use a credit card, pay the full balance each month to avoid interest charges.

Regular Review and Adjustment
Your financial plan should not be static. As your income increases or life circumstances change, revisit your budget, investments, and goals.

Annual Review:
Make it a habit to review your financial plan every year. Adjust your SIPs, budget, and goals based on your current situation.

Stay Informed:
Keep yourself updated on financial products and market trends. This knowledge helps you make informed decisions.

Finally
Strengthening your financials at this stage is a wise decision. By budgeting, saving, and investing thoughtfully, you can build a strong financial foundation. With time and discipline, you’ll be well on your way to achieving your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Starting your career is a milestone, and managing finances wisely is essential. You’ve done well to think about financial planning early. Let’s outline how to create a strong financial foundation with your current income.

Assessing Your Financial Situation
Salary: Rs 3 lakhs annually, or Rs 25,000 per month.

Expenses: Rs 15,000 monthly, leaving Rs 10,000 for savings and investments.

No Financial Liabilities: This gives you the freedom to focus on building wealth.

Key Financial Priorities
1. Build an Emergency Fund
Reserve for Unexpected Expenses: Save at least 6 months of expenses (around Rs 90,000).

Where to Park It: Keep it in a high-interest savings account or a liquid mutual fund.

Start Small: Save Rs 2,000 monthly until the fund is complete.

2. Protect Your Health
Health Insurance is Critical: Purchase a basic health insurance plan with adequate coverage.

Start with Affordable Premiums: A basic policy will safeguard against unexpected medical costs.

Include Parents: If you support your parents, consider family floater insurance.

3. Set Financial Goals
Short-Term Goals: Plan for travel, gadgets, or courses within 1-3 years.

Medium-Term Goals: Build funds for a vehicle or higher education within 3-7 years.

Long-Term Goals: Plan for wealth creation and retirement over 10+ years.

4. Start Investing Early
Utilise the Power of Compounding: Starting now will maximise your returns over time.

Mutual Fund SIPs: Begin with Rs 3,000-5,000 in equity mutual funds through SIPs.

Active Fund Selection: Choose funds managed by professionals for consistent growth.

5. Manage Taxes Smartly
Section 80C Deductions: Invest in PPF, ELSS, or term insurance to save on taxes.

File Returns Promptly: Keep track of Form 16 and file your income tax returns on time.

Avoid Complex Instruments: Start with simple, tax-saving tools that suit your needs.

6. Avoid Common Financial Pitfalls
Control Lifestyle Inflation: Avoid unnecessary expenses as your income grows.

Limit Credit Card Usage: Pay bills on time to avoid debt traps.

Stay Away from Guaranteed Returns Plans: These often provide low returns and lack flexibility.

7. Develop Financial Discipline
50-30-20 Rule: Allocate 50% for needs, 30% for wants, and 20% for savings.

Track Expenses: Use apps or spreadsheets to monitor spending habits.

Increase Savings with Increments: Save a higher portion of future salary hikes.

8. Plan for Retirement
Start with NPS or PPF: Small contributions today will grow significantly over time.

Invest in Equity for Long-Term: Equities outperform other asset classes in the long run.

Avoid Annuities: They have low returns and limited flexibility.

Steps for Immediate Action
Open a health insurance policy immediately.

Start an SIP in equity mutual funds with Rs 3,000-5,000 monthly.

Begin creating an emergency fund by saving Rs 2,000 monthly.

Allocate Rs 10,000 annually to a tax-saving instrument like ELSS or PPF.

Use salary increments to increase investments systematically.

Final Insights
Starting early puts you at a great advantage. Your disciplined savings and wise investment decisions will create wealth over time. Stick to your goals, review your progress annually, and adjust as needed. Work with a Certified Financial Planner for personalised advice as your income and goals grow.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment