I am 49 years old i have two properties present worth 2.75 cr giving a monthly rent of 45000. I also have an outstanding home loan of Rs. 40lacs. My monthly salary 1.30 lacs. I have a two kids aged 19 and 13. Need to create a 2 cr corpus in the next 10 years can you please suggest
Ans: You’re 49, with a goal to build a Rs. 2 crore corpus in the next 10 years. With a monthly salary of Rs. 1.30 lakhs and two properties worth Rs. 2.75 crore, generating a monthly rent of Rs. 45,000, you have a solid foundation. Your outstanding home loan of Rs. 40 lakhs needs attention as well. Here’s a detailed financial plan to help you achieve your goal.
Understanding Your Financial Situation
Your financial situation is stable with multiple income sources. Let’s break down your assets and liabilities:
Monthly Salary: Rs. 1.30 lakhs
Rental Income: Rs. 45,000
Home Loan: Rs. 40 lakhs
Properties’ Value: Rs. 2.75 crore
Step 1: Assessing Current Expenses and Savings
Firstly, assess your monthly expenses. Your children are 19 and 13, so education and living expenses might be significant.
Monthly Salary After Tax: Approx Rs. 1.10 lakhs (assuming 15% tax rate)
Total Monthly Income: Rs. 1.55 lakhs (including rental income)
Monthly Expenses: Estimate to include home loan EMI, household expenses, children's education, etc.
Step 2: Debt Management
Your outstanding home loan of Rs. 40 lakhs is crucial. Paying off this loan faster can save you significant interest.
Increase EMI Payments: If feasible, increase your monthly EMI. This will help reduce the principal amount quicker.
Lump-Sum Payments: Use bonuses or extra income to make lump-sum payments towards your home loan.
Step 3: Emergency Fund
Before investing, ensure you have an emergency fund. This should cover 6-12 months of expenses.
Emergency Fund: Set aside Rs. 6-12 lakhs in a liquid fund for emergencies.
Step 4: Investing in Mutual Funds
Mutual funds are a great way to build a corpus due to their compounding benefits and professional management.
Advantages of Mutual Funds
Diversification: Mutual funds invest in a variety of assets, reducing risk.
Professional Management: Fund managers make informed decisions.
Compounding: Reinvested returns generate more returns over time.
Liquidity: Easy to buy and sell as needed.
Categories of Mutual Funds
Equity Funds: High returns but higher risk. Suitable for long-term goals.
Debt Funds: Lower risk and returns. Good for stability.
Balanced Funds: Mix of equity and debt. Moderate risk and returns.
Creating a Diversified Mutual Fund Portfolio
Equity Funds: Invest 60-70% in diversified equity funds. Focus on large-cap and multi-cap funds for stability and growth.
Debt Funds: Invest 20-30% in debt funds for stability. Consider corporate bond funds or gilt funds.
Balanced Funds: Invest 10-20% in balanced funds for moderate risk and returns.
Step 5: Systematic Investment Plan (SIP)
Start a SIP to invest regularly. This ensures discipline and benefits from rupee cost averaging.
Monthly SIP Amount: Aim to invest Rs. 50,000 per month in mutual funds. Adjust as needed based on expenses and income.
Step 6: Reviewing Your Investments
Regularly review your investments to ensure they are on track.
Annual Review: Assess your portfolio’s performance annually.
Rebalancing: Adjust the allocation if needed to maintain desired risk level.
Step 7: Tax Planning
Optimize your investments for tax efficiency.
ELSS Funds: Invest in Equity Linked Savings Schemes for tax benefits under Section 80C.
Other Tax-Saving Instruments: Consider PPF, EPF, and NPS for additional tax benefits.
Step 8: Planning for Children’s Education
Ensure you have a plan for your children’s higher education. Set aside a separate fund for this purpose.
Children’s Education Fund: Invest in child-specific mutual funds or a combination of equity and debt funds based on the time horizon.
Step 9: Retirement Planning
Your retirement plan should be robust to ensure you maintain your lifestyle.
Retirement Corpus Goal: Rs. 2 crore
Investment Strategy: Continue investing in a mix of equity and debt funds.
Retirement Accounts: Contribute to EPF, PPF, and NPS for additional retirement savings.
Step 10: Insurance
Ensure you have adequate insurance coverage to protect your family.
Life Insurance: Adequate term insurance to cover liabilities and provide for your family.
Health Insurance: Comprehensive health insurance to cover medical expenses.
Final Insights
Creating a Rs. 2 crore corpus in 10 years is achievable with disciplined planning and regular investments. By leveraging mutual funds and following a strategic investment plan, you can achieve your financial goals.
Action Plan Summary
Assess Expenses: Calculate monthly expenses and savings.
Manage Debt: Pay off home loan faster.
Emergency Fund: Set aside Rs. 6-12 lakhs.
Mutual Fund Investments: Diversify across equity, debt, and balanced funds.
SIP: Start a monthly SIP of Rs. 50,000.
Review Investments: Regularly review and rebalance portfolio.
Tax Planning: Optimize investments for tax efficiency.
Education Planning: Create a separate fund for children’s education.
Retirement Planning: Continue building retirement corpus.
Insurance: Ensure adequate life and health insurance coverage.
By following this plan, you can build a solid financial foundation and achieve your goal of a Rs. 2 crore corpus in the next 10 years.
Best Regards,
K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in