Hello, I am a SAP consultant working in a MNC and have 7 years of experience . I am earning 26 LPA, and my wife earns 17 LPA. How we can achieve financial freedom in next 8-10 years so that we don't have to work. We are also planning to have a...

Hello, I am a SAP consultant working in a MNC and have 7 years of experience . I am earning 26 LPA, and my wife earns 17 LPA. How we can achieve financial freedom in next 8-10 years so that we don't have to work. We are also planning to have a baby till next year considering his/her education as well. Right now I have 5 lakhs in stock, 2 lakhs in MF's and 3 months emergency fund in FD. How much we have to save each month and what are instruments we can invest that amount in?Could you please help on this. Thanks in advance

Ans: Firstly, congratulations on your successful careers and your upcoming journey into parenthood. It's commendable that you're planning ahead for financial freedom and your child's future education. Let's devise a strategic plan to achieve your goals and secure your family's financial well-being.

Assessing Your Current Financial Position
Your combined income of ?43 lakhs per annum and existing savings provide a solid foundation for your financial journey. Now, let's analyze how you can optimize your savings and investments to reach your target of financial freedom within the next 8-10 years.

Setting Clear Financial Goals
Define your financial goals with clarity, considering factors such as early retirement, your child's education, and maintaining a comfortable lifestyle. Establishing specific targets will guide your savings and investment strategy effectively.

Determining Monthly Savings Target
To achieve financial freedom within 8-10 years, calculate the amount you need to save each month. Consider factors such as your current expenses, future financial obligations, and desired lifestyle during retirement.

Exploring Investment Avenues
Diversify your investments across multiple asset classes to maximize returns while managing risk effectively. Explore options such as:

Equity Mutual Funds: Invest in a diversified portfolio of equity mutual funds to capitalize on the growth potential of the stock market over the long term.

Debt Instruments: Allocate a portion of your savings to debt instruments such as fixed deposits (FDs) or bonds for stability and income generation.

Gold: Consider adding gold to your portfolio as a hedge against inflation and market volatility.

Emphasizing Emergency Fund and Insurance
Maintain an adequate emergency fund equivalent to 6-12 months of living expenses in a liquid instrument like FDs or savings accounts. Additionally, ensure you have adequate life and health insurance coverage to protect your family against unforeseen events.

Planning for Child's Education
Start planning for your child's education by investing in instruments specifically designed for education savings, such as education-oriented mutual funds or the Sukanya Samriddhi Yojana (SSY) for a daughter's education.

Reviewing and Adjusting
Regularly review your financial plan, monitor your investments' performance, and make adjustments as needed to stay on track towards your goals. Consider consulting with a Certified Financial Planner to fine-tune your strategy and ensure alignment with your objectives.

Conclusion
In conclusion, achieving financial freedom and securing your family's future requires careful planning, disciplined savings, and strategic investments. By setting clear goals, optimizing your savings, and diversifying your investments across asset classes, you can work towards a future of financial security and independence.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

My wife and I are around 34 years old. Both are working in IT earning around 2.60l p.m. We have 2 kids(boys), one is studying 2nd class and the other one is 6 months old. Below are our expenditure and savings: Term insurance- 57k p.a for 6 years Life insurance -18k p.a for 6 yrs Own house(brought an independent house at 51l, now it costs - 1cr)-15l Home loan for next 3 years -47k p.m School and transportation fee for the elder boy -1.10l p.a Planning to send day care for a younger boy -20k p.m Monthly expenses -45k p.m Bought 3 plots at 40l(2 to 5 years back for incase any future needs) now costs 50l Our pf bal- around 23l till now Stocks- 7l(invested around 5l in 1 year , profit at 2l) Gold jewellery -220 grams Cash on hand 30l No additional medical insurance apart from the company provided (8l p.a) My wife is planning to work for the next 5 yrs, I will work for 10yrs(these are rough figures as we are working in IT). Need advice on following main things and also please provide suggestions on other things as well, how can we save and invest to get high returns so that we can secure our future financially: 1. Schooling and higher studies for 2 boys(Short and long term education plan for kids. With drawl based on the need in the emergency and pay, please suggest which scheme/plan suits for this). 2. Retirement plan(how can we plan, thinking to utilize here pf amount, suggest any other things as well). 3. Emergency Fund creation plan(where can we invest and withdraw if immediately required). 4. Medical health insurance after retirement(currently a company providing 16l from both of us, how can we plan for future medical emergencies for family). As we have coh 30l, is it worthy to take independent house g+1 -1.4cr (1.1 house loan with we can show tax benefit for both of us in future, 25k p.m rental income, thinking in such a way that it's useful for kids studies, later it may help as pension after retirement. Also in the future land prices may increase high.) or invest somewhere else to get high returns and withdrawal periodically based on our needs. Please provide your valuable suggestions on above 4 points and investment of coh 30l which gives us high returns. It helps us to organise things in a better way for our future. Thank you in advance.

Ans: You and your wife, both aged 34, are in a solid financial position, each earning Rs. 1.30 lakhs per month in the IT sector. You have two young children, one in 2nd class and the other just 6 months old. Your family’s financial situation involves various assets and liabilities, including real estate, stocks, gold, and insurance policies. You’ve taken significant steps to secure your future, but with some strategic guidance, you can optimise your financial planning further.

Financial Analysis
Income and Expenses
Monthly Income: Rs. 2.60 lakhs (combined)
Monthly Expenses: Rs. 45,000
Home Loan EMI: Rs. 47,000
Daycare Fees: Rs. 20,000
School Fees: Rs. 1.10 lakhs annually (approx. Rs. 9,167 monthly)
Assets
Term Insurance: Rs. 57,000 per annum
Life Insurance: Rs. 18,000 per annum
Home Value: Rs. 1 crore (current)
Plots Value: Rs. 50 lakhs
PF Balance: Rs. 23 lakhs
Stocks: Rs. 7 lakhs (profit Rs. 2 lakhs)
Gold: 220 grams
Cash on Hand: Rs. 30 lakhs
Liabilities
Home Loan Balance: Rs. 15 lakhs (3 years remaining)
Key Financial Goals
Children’s Education
Retirement Planning
Emergency Fund Creation
Medical Insurance Post-Retirement
Detailed Financial Planning
Children’s Education
Short-Term Education Plan

Your elder son’s school fees and upcoming daycare expenses for your younger son necessitate a dedicated fund. You can utilise short-term debt funds or fixed deposits for this purpose. These are low-risk options that ensure the money is available when needed without much volatility.

Debt Funds: These are mutual funds that invest in fixed income securities like bonds and treasury bills. They provide better returns than savings accounts and fixed deposits while maintaining low risk.
Fixed Deposits: These are safer but typically offer lower returns compared to debt funds. They are good for very short-term needs.
Long-Term Education Plan

For higher education, investing in equity mutual funds is advisable. Equity mutual funds offer high returns over a long period, making them suitable for goals that are 10-15 years away. Starting a Systematic Investment Plan (SIP) in these funds can help in averaging the cost of investment and compounding over time.

Equity Mutual Funds: These funds invest in stocks and aim for high growth. While they are riskier, they also offer the potential for higher returns over the long term.
SIP: A Systematic Investment Plan allows you to invest a fixed amount regularly in mutual funds. It helps in averaging out the purchase cost and harnessing the power of compounding.
Recommended Strategy

Short-Term: Invest in debt funds or fixed deposits for immediate schooling needs.
Long-Term: Start SIPs in equity mutual funds for higher education goals.
Retirement Planning
Utilise PF Wisely

Your Provident Fund (PF) balance is a significant asset. Continue contributing to your PF, as it’s a safe and tax-efficient way to build your retirement corpus. The power of compounding will help grow this amount substantially by the time you retire.

Diversified Investment Portfolio

In addition to PF, consider diversifying into equity mutual funds for better growth. These funds provide higher returns compared to traditional savings schemes. Adding some balanced or hybrid funds can help mitigate risks while still aiming for growth.

Retirement Corpus Calculation

Estimate your retirement corpus considering your desired retirement age, lifestyle, and inflation. Use this to set a monthly investment target. Regularly review your investments and adjust your SIP amounts to ensure you stay on track to meet your retirement goals.

Balanced/Hybrid Funds: These funds invest in a mix of equity and debt. They are less risky than pure equity funds but offer better returns than debt funds.
Regular Review: Periodically assess your investments and adjust based on performance and changing financial goals.
Recommended Strategy

EPF/PPF: Continue contributions to your Employee Provident Fund (EPF) and consider opening a Public Provident Fund (PPF) for additional tax-saving benefits.
Mutual Funds: Invest in equity and balanced mutual funds via SIP.
Emergency Fund Creation
Importance of Emergency Fund

An emergency fund is essential for unexpected expenses like medical emergencies, job loss, or urgent home repairs. Aim to save 6-12 months of expenses.

Investment Options

Keep your emergency fund in liquid funds or a high-interest savings account. These options offer easy access and reasonable returns.

Steps to Build

Start by setting aside a fixed amount every month. Automate this transfer to ensure consistency. Use part of your current cash on hand (Rs. 30 lakhs) to create this fund.

Liquid Funds: These mutual funds invest in very short-term instruments and provide liquidity with better returns than savings accounts.
High-Interest Savings Accounts: Offer immediate access and higher interest rates compared to regular savings accounts.
Recommended Strategy

Target Amount: Save 6-12 months of living expenses in liquid and easily accessible funds.
Investment Options: Use liquid funds and high-interest savings accounts.
Medical Health Insurance Post-Retirement
Assess Current Coverage

You currently have Rs. 16 lakhs coverage from your employers. This is good, but consider additional personal health insurance for comprehensive coverage. This ensures you’re protected even after retirement.

Long-Term Health Insurance

Look for family floater health plans that cover you, your wife, and your children. Choose a plan with lifetime renewability and adequate sum insured. Also, consider critical illness insurance for added protection.

Family Floater Plans: These plans cover all family members under a single policy. Ensure it offers sufficient coverage for all members.
Critical Illness Insurance: Provides a lump sum payout if diagnosed with specified serious illnesses. This can help cover costs not covered by regular health insurance.
Recommended Strategy

Personal Health Insurance: Opt for a family floater plan with lifetime renewability and a higher sum insured.
Critical Illness Insurance: Consider adding this for extra coverage against serious illnesses.
Investing Rs. 30 Lakhs Cash on Hand
Avoid Real Estate Investment

Instead of buying another house, which ties up funds and incurs maintenance costs, invest in financial instruments that offer liquidity and growth. Real estate investment, while potentially profitable, lacks the flexibility and liquidity you might need.

Investment Options

Equity Mutual Funds: For long-term growth. Allocate a significant portion to these funds. They offer higher returns and can be withdrawn partially when needed.

Debt Funds: For stability and moderate returns. Good for medium-term goals and partial withdrawals.

Hybrid Funds: Balance between equity and debt. Lower risk compared to pure equity funds but higher returns than debt funds.

Systematic Withdrawal Plans (SWP): Invest lump sum in mutual funds and withdraw a fixed amount regularly. Useful for supplementing income post-retirement.

Equity Mutual Funds

Long-Term Wealth Building: These funds are ideal for creating long-term wealth. Investing Rs. 30 lakhs here can yield significant returns over 10-15 years.
Partial Withdrawals: You can withdraw money partially when needed, providing flexibility.
Debt Funds

Stability and Returns: They offer more stability and are suitable for medium-term goals.
Safety: Less volatile than equity funds, making them a safer option for conservative investors.
Hybrid Funds

Balanced Growth: These funds offer a mix of safety and growth, making them suitable for medium to long-term investments.
Risk Mitigation: Less risky than pure equity funds, they provide a balanced approach to investing.
Systematic Withdrawal Plans (SWP)

Regular Income: Invest a lump sum in mutual funds and withdraw a fixed amount regularly.
Post-Retirement: SWPs can provide a regular income stream, supplementing your retirement corpus.
Recommended Strategy

Equity Mutual Funds: Invest a significant portion for long-term wealth building.
Debt Funds and Hybrid Funds: For medium-term stability and growth.
SWP: To create a regular income stream post-retirement.
Final Insights
You’re in a strong financial position with a good income and diverse assets. Focus on clearing your home loan and maintaining your insurance.

Prioritise building an emergency fund and investing in mutual funds for your children’s education and your retirement. Avoid additional real estate investments. Instead, leverage equity and debt mutual funds for liquidity and growth.

Regularly review and adjust your financial plan to stay on track. Consider working with a Certified Financial Planner to optimise your strategy and ensure you meet your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You’re 39 years old, working in IT. You have around Rs. 60 lakh in savings across stocks, mutual funds, FD, and PF. You live in a rented home and have a 4-year-old daughter. You also feel job uncertainty due to skill changes and market pressure. You want a path toward financial freedom, and a normal, stable future. That is both wise and timely.

Let’s now look at a step-by-step, 360-degree financial plan. This is structured for your current life, responsibilities, risks, and goals.

? Build a Strong Emergency Fund Immediately
– This is your safety net during job loss or health issues.
– Keep 6 to 12 months of expenses as liquid cash.
– Don’t keep it in a savings account.
– Use liquid mutual funds with overnight redemption feature.
– This amount should be separate from your other investments.
– Use only when there is a real emergency.

? Evaluate Your Current Rs. 60 Lakh Portfolio
– Split your portfolio mentally into three buckets:
Short-term, medium-term, and long-term goals.
– You may be holding random investments now.
– That won’t help you during uncertainty.
– Map each rupee to a clear goal and timeline.
– Do not mix emergency funds, daughter’s goals, and retirement.
– Separate them properly, then track and invest accordingly.

? Avoid Index Funds and Direct Plans
– If any portion is in index funds, review them closely.
– Index funds lack downside protection.
– They fall as much as the market does.
– They also cannot outperform market returns.
– This is risky when job income is uncertain.
– Shift to actively managed mutual funds.
– These are managed by experts who adjust holdings.
– That gives better risk control and return potential.

– If any investments are in direct mutual funds, reconsider them.
– Direct plans don’t offer guidance or reviews.
– Wrong funds can silently eat your savings.
– Invest through regular plans via a Certified Financial Planner.
– You will get better fund selection, tracking, and peace of mind.

? Don’t Depend Too Much on Stocks
– Stocks are very risky without proper planning.
– If you hold individual stocks, check the exposure.
– Avoid more than 10-15% of your portfolio in direct stocks.
– Stock values can drop sharply and delay your goals.
– Mutual funds offer better diversification and monitoring.
– Gradually shift stocks into mutual funds via a plan.

? Recheck Your Life and Health Insurance
– Life insurance is vital if you have dependents.
– Get a term insurance plan of proper value.
– Ideally, cover 10 to 15 times your yearly income.
– Check if you already hold any ULIP or traditional LIC.
– If yes, check if they are insurance cum investment plans.
– Those plans offer poor returns.
– If suitable, surrender and shift to mutual funds instead.
– Also take a good health insurance plan for you and your family.
– Relying only on office health cover is not safe.

? Daughter’s Education and Marriage Goals
– Start separate SIPs for these two goals now.
– Keep education and marriage planning fully independent.
– Use a mix of large-cap and balanced mutual funds.
– Your daughter is only 4 years now.
– So you have 10 to 15 years for these goals.
– That gives enough time to grow money safely.
– Avoid FDs for long-term goals. Returns won’t beat inflation.
– Track each SIP and review yearly with a CFP.

? Focus on Retirement Planning Now
– Retirement needs should not be ignored.
– You don’t have any inherited property or assets.
– That makes it more important to create your own nest egg.
– PF alone won’t be enough.
– Use diversified equity mutual funds for retirement investing.
– Keep this investment separate from your other goals.
– Begin with a decent SIP, increase it every year.
– Use step-up SIP facility to increase savings slowly.
– Don’t withdraw from this portfolio for other reasons.

? Manage Risk of Job Uncertainty
– IT job market is volatile today.
– Upskill wherever possible to stay relevant.
– But financial planning must prepare for gaps in income.
– Keep 12 months of cash if job is highly uncertain.
– Review household spending and cut unwanted expenses.
– Avoid new loans, gadgets, or luxury items.
– Don’t commit to any large EMIs.
– Be cautious and financially conservative for now.

? Don’t Fall for High-Risk Investments
– Avoid cryptocurrency, trading apps, and stock tips.
– Also avoid peer-to-peer lending or chit funds.
– Many of these look tempting but can cause heavy loss.
– You can’t afford losses at this stage.
– Stick with mutual funds and secure instruments only.

? Plan Cash Flow, Not Just Assets
– Investment planning is not only about returns.
– It’s about cash flow for your goals.
– List when you will need money and how much.
– Allocate investments based on these timelines.
– Don’t lock long-term money in short-term plans.
– Also don’t invest short-term money in long-term risky funds.

? Review Portfolio Once a Year
– Don’t check returns daily or weekly.
– Set a yearly review with a Certified Financial Planner.
– Check if asset allocation is on track.
– Check if goals are moving as planned.
– Adjust SIP amounts if income or goal size changes.

? Don’t Depend on FD for Future
– FD may feel safe but gives low returns.
– FD returns may not beat long-term inflation.
– That reduces your purchasing power.
– Keep only short-term needs in FD.
– For all other goals, use mutual funds.
– Mutual funds are flexible, goal-based, and tax efficient.

? Tax Planning Should Support Goals
– Don’t invest only for tax saving under 80C.
– Instead, use ELSS funds that also grow wealth.
– Tax saving should not reduce liquidity or flexibility.
– Take guidance to plan both tax and wealth together.

? Stay Away from Real Estate for Now
– Buying house for investment is not wise now.
– It will block your money and limit flexibility.
– It will also bring EMIs and maintenance.
– Rental income is not reliable for early retirement.
– Focus only on liquid, well-managed investments.

? Protect Your Family With Proper Nominations
– Make sure all your investments have proper nominees.
– Write a Will if you have dependents.
– It avoids problems in case of any unfortunate events.
– Ensure your spouse or family knows about investments.

? Watch Mutual Fund Taxation Carefully
– Equity funds held over 1 year attract 12.5% tax on gains above Rs. 1.25 lakh.
– If sold within 1 year, 20% tax is applicable.
– Debt fund gains are taxed as per your tax slab.
– Plan redemptions carefully to reduce tax burden.

? Focus on One Goal at a Time
– Don’t try to do everything at once.
– Prioritise emergency fund, daughter’s education, then retirement.
– Avoid scattered investing with no link to goal.
– Be focused and consistent.

? Emotional Discipline is the Key
– Don’t panic during market crashes.
– Don’t stop SIP when markets fall.
– Wealth is built by staying invested.
– Continue SIPs even during income pressure.
– That builds your habit and long-term success.

? Setup SIPs for Simplicity
– Manual investing can get skipped or delayed.
– Setup SIP auto-debits through a trusted advisor.
– That ensures discipline and peace of mind.

? Track Your Progress, Not Just Returns
– Many investors chase high returns and lose track.
– Your focus should be on goal completion.
– Use goal-based dashboards for tracking.
– Review with a CFP yearly for alignment.

? Finally
– You are already doing better than you think.
– You have Rs. 60 lakh saved without property support.
– You are supporting your daughter and still saving.
– Now you need direction and structure.
– Start with proper planning of each rupee.
– Shift from random savings to goal-specific SIPs.
– Avoid index funds and direct mutual funds.
– Use regular mutual funds through a Certified Financial Planner.
– Strengthen your emergency fund and protect your income.
– Reassess risks, manage portfolio, and continue upskilling.
– A calm and steady approach will secure your family’s future.
– You still have 15-20 active years to build strong wealth.
– Start acting today with more clarity and confidence.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment