Hi sir, I want to buy a house but my bad I had no knowledge of saving money and till date not done any!!! I am 34 yrs and working in manufacturing industry, have two daughters aged 4 and 15 months old!! Can u please help me ???? and give the best ways to save money and have house.... My CTC is 9.63LPA.

Ans: It's great that you're thinking about financial planning at 33. Let's craft a strategy tailored to your needs and goals.

Emergency Fund:
Goal: Build an emergency fund equal to 6-12 months of living expenses.
Action: Allocate a portion of your savings monthly until you reach this target. Aim to have this fund in a liquid and easily accessible account.
SIPs & Investments:
Current SIP: 5k/month
Action: Consider increasing your SIP amount as your income grows. Diversify investments across equity, debt, and other asset classes to manage risk and achieve growth.
Home Purchase:
Goal: Buy a house.
Action: Start saving for a down payment. Consider your current expenses and see where you can cut back or increase savings. Also, explore home loan options to understand the amount you'd need to borrow and the EMI you'd be comfortable with.
Retirement Planning:
Goal: Secure your retirement.
Action: Start an SIP specifically for retirement. The earlier you start, the better. Consider allocating a portion of your monthly savings to this SIP.
Insurance:
Goal: Protect yourself and your loved ones.
Action: Ensure you have health insurance, life insurance, and if possible, disability insurance. Review and update coverage as your circumstances change.
Additional Income:
Goal: Increase income streams.
Action: Explore opportunities for side hustles, freelancing, or upskilling to boost your income.
Budgeting:
Goal: Manage expenses effectively.
Action: Create a monthly budget to track income and expenses. This will help you identify areas where you can save more.
Remember, financial planning is not a one-time activity. It's an ongoing process that requires regular review and adjustments as your life circumstances change. It's also essential to consult with a Certified Financial Planner to ensure your plan aligns with your goals, risk tolerance, and financial situation.

Ans: To begin, congratulations on your diligent efforts as a software engineer and your commitment to planning for your future. It's commendable that you're thinking ahead about homeownership and seeking advice on financial planning.

Given your current situation, with a steady income and manageable expenses, you're in a good position to save for your house goal. Your SIP in a tax-saving fund is a wise move for optimizing your taxes while also working towards your goal.

Considering a time horizon of 3-4 years, it's essential to balance growth potential with risk. While your father's support is valuable, it's prudent to plan primarily based on your own resources.

For the remaining funds, you might consider a diversified investment approach. Since you've already utilized the 80C benefit, explore other avenues like mutual funds, debt instruments, or balanced funds. These can offer a mix of growth and stability, aligning with your medium-term goal.

Be cautious about direct investments without professional guidance. Working with a Certified Financial Planner can provide personalized advice and help navigate the complexities of the market, maximizing returns while minimizing risks.

Avoiding real estate as an investment option is wise, given its illiquidity and potential volatility. Instead, focus on liquid assets that offer flexibility and easier access to funds when needed.

Remember, consistency is key. Continue to monitor your investments regularly, adjusting them as needed based on market conditions and your evolving financial situation.

Your proactive approach to financial planning sets a strong foundation for achieving your homeownership goal. Keep up the disciplined saving and investing, and you'll be closer to realizing your dream.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Current Financial Situation

You are 28 years old with a monthly in-hand salary of Rs 1 lakh. You are currently paying off personal loans, which will be completed by October. Your current investments include Rs 5,000 in ELSS mutual funds, Rs 5,000 in a LIC moneyback policy, and Rs 6,000 in gold.

Post-Debt Investment Strategy

Once your loans are cleared, you will have more disposable income. This is an excellent opportunity to reallocate your funds towards achieving your goals.

Building a House Fund

Increase SIP in Mutual Funds:

Post-October, consider increasing your ELSS SIP. Additionally, diversify into other mutual funds like large-cap, mid-cap, and multi-cap funds. This will help you build a substantial corpus over time.
Liquid Funds for Short-Term Goals:

Park a portion of your savings in liquid funds. This ensures liquidity while earning better returns than a savings account.
Fixed Deposits (FDs):

Consider investing a part in FDs for a fixed return. This adds stability to your portfolio.

Retirement Planning

Diversified Mutual Funds:

Continue with your ELSS for tax benefits and long-term growth. Also, add balanced funds and debt funds to ensure a stable return.
Public Provident Fund (PPF):

Start investing in PPF for safe, long-term returns and tax benefits. It has a lock-in period but offers attractive interest rates.
National Pension System (NPS):

Invest in NPS for retirement. It offers market-linked returns and additional tax benefits under Section 80CCD(1B).

Reevaluate LIC Policy

LIC moneyback policies typically offer lower returns. Consider switching to term insurance for higher coverage at a lower premium. Redirect the savings into mutual funds for better returns.

Gold Investments

Gold is a good hedge but typically offers lower returns. Keep it as a smaller portion of your portfolio. Diversify into other assets for better growth.

Final Insights

To buy a 3BHK in a metropolitan city, you need a disciplined savings and investment approach. Increase your mutual fund SIPs post-debt, start a PPF and NPS, and reevaluate your LIC policy. Diversifying your investments will help you build a substantial corpus for both your house and retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You are in a strong position, earning a combined income of Rs. 3.5 lakh per month. This is a good starting point to plan your future financial goals, such as buying a home worth Rs. 1.5 crore. Since you don’t have savings right now, your priority should be to build a solid financial foundation first.

Saving for the Home
You mentioned the goal of saving Rs. 40-50 lakh before buying the house. This is a practical approach because it helps you reduce the loan burden and increase your chances of securing a better mortgage rate. Here’s how you can go about it:

Emergency Fund: First, start by setting aside an emergency fund of around Rs. 6-8 lakh. This fund should cover 6 months of your expenses in case of unexpected events. You and your wife should have access to this fund in liquid forms like a savings account or liquid mutual funds.

Building Savings: You have the capacity to save a substantial amount. With your current income, you can aim to save Rs. 1 lakh to Rs. 1.5 lakh each month. You should consider directing this amount into systematic investment plans (SIPs) in equity mutual funds, given your 5-7 year horizon before buying the house.

Investment Strategy
Given your goal of saving Rs. 40-50 lakh over the next few years, here’s how you can structure your investments:

Equity Mutual Funds for Long-Term Growth: Invest in actively managed equity funds with a long-term view. Equity funds have the potential to generate higher returns over the long term. Choose funds focusing on large-cap and flexi-cap categories, as they offer a good mix of stability and growth potential.

Debt Mutual Funds for Stability: For the portion of savings you want to keep relatively safe, consider debt mutual funds. They provide better returns than savings accounts and fixed deposits, while keeping the risk lower than equity funds. This will balance out your portfolio and reduce the volatility in your savings.

SIPs: Set up SIPs for both types of funds. This will allow you to invest systematically, building wealth gradually, without trying to time the market. You could split Rs. 1 lakh into Rs. 70,000 in equity and Rs. 30,000 in debt funds, but feel free to adjust as per your risk tolerance.

Keep Track of Progress: Given your high savings rate, you should be able to accumulate Rs. 40-50 lakh in 3-4 years, assuming an average return of around 10-12% from equity investments.

Mortgage and Home Loan
Once you accumulate the required savings for the down payment, you can start looking for a home loan. Ideally, a down payment of 20-30% (around Rs. 30-45 lakh) is recommended. With your combined monthly income of Rs. 3.5 lakh, you should be eligible for a home loan. Ensure that your monthly EMI does not exceed 35-40% of your combined income, so that it remains manageable.

Key Points to Keep in Mind
Avoid Over-leveraging: Do not stretch your budget to the limit. Stick to your planned savings and down payment target. This will ensure that you do not end up with too high an EMI that affects your cash flow and lifestyle.

Review Your Expenses: Track your monthly expenses and cut down on non-essential spending. The money saved can be redirected towards your house savings or investments.

Spouse’s Income Utilization: Your wife’s income can also be used for the savings plan, particularly in the early years of your marriage. This can help you build the corpus faster.

Loan Eligibility: Once you have saved for the down payment, get in touch with banks to understand your loan eligibility. Keep a good credit score and avoid large purchases or credit card debts.

Final Insights
The combination of aggressive savings and systematic investments in equity and debt funds will allow you to reach your goal of Rs. 40-50 lakh within a few years. By setting aside a portion of your income for SIPs and maintaining a disciplined approach, you can gradually accumulate wealth and achieve your dream of buying a home. Moreover, always ensure that you keep a check on your lifestyle expenses to ensure that your savings rate remains high.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

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