Hi, i am currently 33 and my wife is 31. We have a daughter who's just 5 months old. We have savings of 37 Lakhs in PPF, 20 lakhs in PF, 6 lakhs in NPS and 3.5 lakhs in stocks. We three still live in a rented home in Gurugram whose rent is 53k . We have parental properties of 3 Cr and a few plots. Our combined income is 3.5 LPA per month. Pls suggest me if i should invest in a property in gurugram as the property prices have sky rocketed. If so what should be my budget? We need to also secure my kids future. Can you let us know how should we budget our expenses?

Ans: Here's some guidance on your ideal budget for a property in Gurgaon:

Financial Strength:

Combined Income: Rs. 2.5 lacs per month is a good starting point.
Savings: Rs. 1.5 cr (Rs. 1 cr in MF + Rs. 50 lacs in Stocks) is a significant sum.
Investments: Rs. 1 lac monthly SIP shows strong saving habits.
Challenges:

Dependent Child: Having a child with Cerebral Palsy will require long-term financial planning for their care.
Monthly Expenses: Your current expenses are Rs. 1.35 lacs (including rent).
Considering these factors:

Don't stretch too thin: While you have a good income and savings, prioritize your child's needs and future medical care.
Target a 15-20 year loan term: This keeps your monthly EMI manageable.
Recommended Budget:

Focus on affordability: Aim for a property with a total cost (including registration and other charges) between Rs. 50 lacs - Rs. 1 crore. This translates to a monthly EMI of around Rs. 30,000 - Rs. 60,000 (assuming a 15-20 year loan term).
Location: Consider areas in Gurgaon with good healthcare facilities and accessibility for your child's needs. Explore areas like Sectors 56, 70, 84 or Gurgaon outskirts like Sohna or New Palam Vihar which may offer better affordability.
Additional Tips:

Talk to a Financial Advisor: Discuss your situation with a Certified Financial Planner (CFP) to create a personalized financial plan considering your child's needs and future goals.
Research Property Options: Look for resale flats, builder floors, or upcoming projects in your budget range. Use online portals like MagicBricks or NoBroker to get an idea of prevailing prices.
Factor in Additional Costs: Remember, there are additional costs besides the property price – registration charges, stamp duty, maintenance fees, etc.
Best Regards,

K. Ramalingam, MBA, CFP,


Chief Financial Planner,


www.holisticinvestment.in

Ans: Firstly, you have an impressive income and savings strategy. Your monthly combined in-hand salary is Rs 2.45 lakhs. You have set aside substantial amounts in various investment instruments. This reflects a commendable level of financial discipline and foresight.

Your current investments include provident fund (PF), national pension system (NPS), public provident fund (PPF), mutual funds (MF), sovereign gold bonds (SGB), fixed deposits (FD), and US stocks. You have clearly earmarked funds for your son's education, retirement, and a future property purchase. This strategic approach is excellent.

Investment Allocation Overview

Your current investment allocation includes:

PF: Rs 27,208 per month
NPS: Rs 11,301 per month (employer contribution), Rs 50,000 per year (self-contribution)
PPF: Rs 1.5 lakh per year
MF SIPs: Rs 20,000 per month (combined)
SGB: Rs 58,000
EPF: Rs 7.5 lakh
FD: Rs 43 lakh
US stocks: Rs 1.7 lakh
Your current investments and savings are well-diversified. You are contributing regularly to PF, NPS, PPF, and MFs, which ensures a balanced approach to both growth and stability. Your focus on long-term goals like your son's education and retirement is evident and well-planned.

Evaluating Current Investments for Goals

Property Purchase and Construction

You plan to buy a property worth Rs 1 crore and build a house worth another Rs 1 crore in 2-3 years. You have set aside Rs 43 lakh in FDs for this purpose. This is a sound strategy for maintaining liquidity. However, to meet the property purchase goal, continue adding to your FD to reach the required Rs 2 crore.

Son's Higher Education

For your son's higher education starting around 2032, you have earmarked Rs 1.5 crore. You have allocated mutual funds and insurance policies with a maturity value of Rs 32 lakh. Given the current MF corpus of Rs 57 lakh and regular SIP contributions, you are on the right track. Continue these SIPs and consider increasing the allocation slightly as your income allows.

Retirement Planning

Your PPF, NPS, EPF, and US stocks are designated for retirement. Your contributions to these funds are robust. The regular investments in PPF and NPS, along with EPF, will provide a steady retirement corpus. US stocks add some international diversification, though you might consolidate more into mutual funds for now.

Optimising Investment Strategy

Increase Equity Exposure via Mutual Funds

Your current MF SIPs are Rs 20,000 per month. Given your long-term goals, consider increasing this to Rs 30,000 per month if your budget allows. Actively managed funds provide professional management and the potential for higher returns compared to index funds.

Disadvantages of Index Funds

Index funds track the market and lack flexibility. They can't respond to market changes and may underperform during volatile periods. Actively managed funds, however, offer better opportunities for growth through strategic asset allocation.

Advantages of Actively Managed Funds

Professional managers make informed investment decisions. They can adapt to market conditions and potentially provide higher returns. This is particularly beneficial for your long-term goals like your son's education and retirement.

Regular Funds vs. Direct Funds

Direct funds have lower expense ratios but require more time and expertise. Regular funds, invested through a Certified Financial Planner, offer professional guidance and ongoing support. This helps in making informed decisions and managing your portfolio efficiently.

Maintaining Liquidity for Property Purchase

FDs are a good option for liquidity. Continue your Rs 1.55 lakh monthly FD contributions. This ensures you have enough funds available when you find the ideal plot.

Evaluating Risk and Adjusting Investments

Given your current age and financial goals, a balanced approach between equity and debt is suitable. However, as you approach your goals, consider gradually shifting from equity to debt to reduce risk.

Professional Guidance

A Certified Financial Planner can provide tailored advice. They help in aligning your investments with your goals and managing risks effectively. Regular reviews and adjustments based on market conditions are crucial.

Tax Implications

Keep in mind the tax implications of your investments. Long-term capital gains tax on mutual funds, interest income from FDs, and tax benefits from PPF and NPS contributions should be considered. Consult with a tax advisor for optimal tax planning.

Emergency Fund

Ensure you have an emergency fund covering at least 6-12 months of expenses. This provides a financial cushion for unexpected events.

Insurance Needs

Adequate insurance coverage is essential. Review your life and health insurance policies to ensure they meet your family’s needs. Insurance provides financial security in case of unforeseen events.

Diversification

While you have a diversified portfolio, review your asset allocation periodically. Ensure it aligns with your risk tolerance and financial goals. Diversification helps in managing risk and optimizing returns.

Long-Term Investment Horizon

Given your long-term goals, maintaining a disciplined investment approach is key. Avoid making impulsive decisions based on market fluctuations. Stick to your investment plan and review it regularly with your Certified Financial Planner.

Final Insights

Your financial strategy is well-thought-out and disciplined. Continue your current investment approach with slight adjustments to enhance your portfolio. Increase your SIPs in actively managed mutual funds for better returns. Maintain your FDs for property purchase liquidity. Seek professional guidance for regular reviews and adjustments.

Ensure adequate insurance coverage and maintain an emergency fund. Focus on long-term goals and stick to your investment plan. With disciplined investing and professional advice, you can achieve your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Existing Financial Position
Sources of Income and Expenses:

Monthly income: 2.3 lakhs
Monthly expenditure: Rs 90,000
Home loan EMI: Rs 80,000 (13 years tenure)
Probable payment towards new property: Rs 30 lakhs (can be within one year)
Assets and Investments:

Apartment value: Rs 50 lakhs
PPF: Rs 40 lakhs
PF: Rs 55 lakhs
NPS: Rs 20 lakhs
Mutual Funds: Rs 40 lakhs
Shares and Stocks: Rs 10 lakhs
ULIPs: Rs 10 lakhs
Insurance:

Insurance premium payment by month: Rs 10,000 (Term and Health Insurance)
SIP:

Monthly SIP: Rs 40,000
Education Expenses:

Child's education expense : Rs 1 crore
Retirement Goals
Retirement Plan:

Retirement age: 55 years
Desired monthly income post-retirement: Rs 1 lakh
Analysis and Recommendations
Debt Management:

Firstly, try to repay the home loan.
If possible, prepay the loan to lessen interest burden.
Investment Strategy:

Continue with existing SIPs.
If possible, increase SIPs to enlarge the corpus.
Diversification:

Your investments are very well diversified.
There needs to be a balance between equity and debt.
Education Fund:

Set aside a dedicated fund for children's education.
Use a mix of PPF, mutual funds, and fixed deposits.
Emergency Fund:

Maintain an emergency fund equivalent to 6-12 months of expenses.
Use liquid funds or a savings account for this purpose.
Retirement Corpus:

Calculate the required corpus for Rs 1 lakh monthly income.
Take into consideration inflation and healthcare costs.
Health and Term Insurance:

Take stock of your insurance coverage
Ensure that it is adequate to cover possible medical expenses.
Action Plan
Increase SIPs:

Gradually increase the amount of the monthly SIP.
Mix of large-cap, mid-cap and balanced funds.
Education of Children:

Allocate some mutual funds for education.
Child-specific education plans can be invested in if they are better in terms of returns.
Prepayment of Home Loan:

Utilize excess income and bonus for pre-paying the home loan.
The burden on the tenure and interest decreases.
Regular Review:

Yearly review of your financial plan
Investments alter with the market condition and change in goals.
Final Takeaways
You are doing well on the financial front. Now, increase your SIPs and try to prepay on your home loan. Diversify your portfolio appropriately with adequate insurance coverage. Such disciplined planning with periodic reviews will help you achieve retirement goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner,

www.holisticinvestment.in

Ans: To plan for your future and ensure you’re on track to meet your goals, here’s a strategy that might work well for you:

1. Emergency Fund

First, it’s a good idea to set aside 6-12 months of your expenses (around Rs 7.2 lakh to Rs 14.4 lakh) in something easily accessible, like a savings account or a liquid mutual fund. This way, you’ll have a safety net in case anything unexpected comes up, and you won’t have to dip into your other investments.

2. Debt Management

Home Loan: Keep up with your current EMI of Rs 50,000. Since it’s spread over 10 years, it’s manageable given your income. If you find yourself with some extra cash, consider making lump sum prepayments to shorten the loan period and reduce the interest you’ll pay in the long run.

3. Funding the New Property

You’ll need Rs 40 lakh in a year for your new property. It might be wise to start planning how to use your liquid investments, like mutual funds and stocks, for this purpose. If the market conditions are favourable, you can gradually redeem the required amount to avoid the risks associated with market timing. It’s best to avoid taking on new debt if possible, to keep your finances balanced.

4. Children's Education

You’re looking at about Rs 2 crore for your daughters’ education, and you’ve got a 10-12 year window to prepare.
Dedicated Education Fund: It’s worth starting a specific SIP in equity mutual funds with a long-term horizon. With the power of compounding on your side, you can either reallocate some of your existing SIPs or start new ones to build up this fund steadily. Also, consider Sukanya Samriddhi Yojana (SSY) for each daughter -- it offers a good interest rate and comes with tax benefits.

5. Retirement Planning

You’d like to retire in 15 years with Rs 3 lakh coming in every month. Accounting for inflation, you’re looking at needing a corpus of around Rs 7-8 crore.

• Current Retirement Savings: You already have Rs 85 lakh (from your PPF, PF, and NPS), which will grow over time, but you’ll need to invest more to hit your target.
• Invest Aggressively: Continue with your existing SIPs and think about increasing them each year as your income grows. Ideally, try to invest 30-40 per cent of your monthly income towards retirement.
• Equity Exposure: With your long-term horizon, keeping a high equity exposure (around 70-80 per cent) in your retirement portfolio could help maximise growth.
• NPS Contributions: You might also want to increase your contributions to the NPS for an additional tax-efficient retirement nest egg.

6. Insurance

Make sure your term insurance is enough to cover at least 10-15 times your annual income, which will help secure your family’s future in case anything happens to you. You’ve already got health insurance, which is great -- just review it to ensure it’ll be enough to cover rising medical costs in the future.

7. Tax Efficiency

Use all the tax-saving instruments available to you, like Section 80C, 80D, and 80CCD(1B), to minimise your tax liabilities. Also, consider diversifying your investments into tax-efficient options like ELSS, PPF, and NPS.

8. Review and Adjust

Finally, it’s important to regularly check in on your financial plan, at least once a year, to make sure you’re still on track. If your income, expenses, or goals change, you’ll need to adjust your investments accordingly.

By following this plan, you should be well on your way to achieving your financial goals, securing your children’s education, and retiring comfortably with the income you desire.