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Sunil

Sunil Lala  |193 Answers  |Ask -

Financial Planner - Answered on Apr 29, 2024

Sunil Lala founded SL Wealth, a company that offers life and non-life insurance, mutual fund and asset allocation advice, in 2005. A certified financial planner, he has three decades of domain experience. His expertise includes designing goal-specific financial plans and creating investment awareness. He has been a registered member of the Financial Planning Standards Board since 2009.... more
Asked by Anonymous - Apr 29, 2024Hindi
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Hi sir, i m 40 yr old , I have a fixed deposit of 70 lakhs and monthly income of 5.5 to 6 lakhs a month, and have no emi going on, let me know how to get financial freedom asap so that i can generate a passive income and free my time .

Ans: Since you are young there is no reason to keep money in fixed deposit, convert it into equity mutual funds ans since you earn 5.5 to 6 lakh a month you can start SIP in mutual funds
DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.
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Ramalingam

Ramalingam Kalirajan  |4625 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 15, 2024

Asked by Anonymous - Apr 29, 2024Hindi
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Hi sir, I have a fixed deposit of 70 lakhs and monthly income of 5.5 to 6 lakhs a month, and have no emi going on, let me know how to get financial freedom asap.
Ans: Congratulations on your prudent financial habits! With your substantial fixed deposit and healthy monthly income, achieving financial freedom is indeed within reach.

Understanding Your Goals and Risk Appetite

Assessing your financial situation and goals is the first step towards achieving financial freedom. Let's delve into your aspirations and risk tolerance to tailor a strategy that aligns with your unique circumstances.

Mapping Out a Diversified Investment Strategy

Diversification is key to mitigating risk and maximizing returns. By spreading your investments across various asset classes, you can safeguard your wealth against market fluctuations while optimizing growth potential.

Tailored Investment Approach
Your substantial fixed deposit serves as a stable foundation for your portfolio. However, solely relying on fixed deposits may limit your wealth accumulation potential due to inflation erosion.

Equity Investments: Maximizing Growth Potential
Equity investments, through a well-managed portfolio of carefully selected stocks, mutual funds, or actively managed funds, offer the potential for substantial long-term growth. While they entail higher risk, they historically outperform other asset classes over the long run.

Expert Guidance and Portfolio Management
As a Certified Financial Planner, I emphasize the value of professional guidance in navigating the complexities of the financial markets. Partnering with a competent Mutual Fund Distributor (MFD) who holds a CFP credential can provide you with personalized advice and comprehensive portfolio management services.

Mitigating Risks and Embracing Opportunities
While your current financial position is robust, it's essential to remain vigilant against potential risks and seize opportunities for wealth enhancement. Regular portfolio reviews and adjustments ensure that your investments stay aligned with your evolving goals and market dynamics.

Cultivating Financial Discipline and Patience
Financial freedom is not an overnight achievement but a journey that requires discipline and patience. By adhering to a systematic investment approach and avoiding impulsive decisions, you can steadily progress towards your goal of financial independence.

Conclusion
With your substantial assets and prudent financial management, achieving financial freedom is not a distant dream but a tangible goal within your grasp. By adopting a diversified investment strategy, seeking expert guidance, and staying committed to your long-term objectives, you can embark on a path towards lasting financial security and prosperity.

Best Regards,

K. Ramalingam, MBA, CFP
Chief Financial Planner
www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |4625 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 13, 2024

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Hello Sir! Myself Madeswaran and I am 33 yrs old. I have worked for 10 years and I have no savings and saved nothing. I had 6 Lakhs in my savings 4 years back. Purchased gold for 1 lakh. Purchased car in 2 nd had for 3.5 Lakhs and Lost 3 Lakhs in forex an year back.I am having debt of 1 Lakh now and cleared Rs.50,000. Now my monthly income is only Rs.45,000. I have house expenses of Rs. Rs.30,000 and Loan emi of Rs. 5,000. I give. I am not able to find how the rest of Rs.10,000 money gets drained away. Now I want my financial freedom at the age of 50. What shall I do amd how shall I start. I am also looking for secondary income to get some financial buffer.
Ans: Hello Madeswaran! It's commendable that you're seeking to take control of your finances and work towards financial freedom. Let's assess your current situation and explore steps to get you back on track.

At 33, with a monthly income of Rs. 45,000 and monthly expenses of Rs. 35,000, it's essential to understand where the remaining Rs. 10,000 is being spent. Tracking your expenses diligently can help identify areas where you can cut back and redirect funds towards savings and debt repayment.

Given your previous financial setbacks, it's crucial to prioritize building an emergency fund to cover unexpected expenses and avoid going into further debt. Aim to set aside at least 3 to 6 months' worth of living expenses in a separate savings account as a safety net.

Addressing your existing debt of Rs. 1 lakh should be a priority. Focus on clearing this debt as soon as possible by allocating a portion of your monthly income towards repayment. Cutting back on non-essential expenses can free up additional funds for debt reduction.

Considering your goal of achieving financial freedom by the age of 50, it's important to establish a long-term financial plan. Start by setting specific, achievable goals and creating a budget to track your income and expenses.

Explore opportunities to increase your income through additional sources such as freelance work, part-time jobs, or starting a side business. Generating a secondary income can provide a financial buffer and accelerate your journey towards financial freedom.

Investing in yourself through education, acquiring new skills, or pursuing career advancement opportunities can also enhance your earning potential over the long term.

Finally, seek guidance from a Certified Financial Planner who can provide personalized advice tailored to your financial situation and goals. They can help you create a roadmap for achieving financial freedom and offer support and guidance along the way.

Remember, financial freedom is achievable with determination, discipline, and strategic planning. By taking proactive steps now, you can pave the way for a brighter financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |4625 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 26, 2024

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Hello Sir, I am 26 year old (male, single) and my current in-hand salary is 76K per month. I have been investing in mutual funds since 2019. Currently, I have 5.5L in my mutual fund portfolio with a CAGR of 28%, 7L in stocks, 2.7L in PPF. I also contribute to NPS and APY. My current SIP amount is 18K per month. I have two loans - Education loan which will finish this year and Home loan which started this year in April with an emi of around 22K. I wish to create a F.I.R.E number and become financial independent early. Can you please advice me what I can do differently from above and how I can achieve financial independence as early as possible? Can you please tell me
Ans: Achieving Financial Independence and Early Retirement (FIRE) requires strategic planning, disciplined saving, and wise investment decisions. Let’s break down your current financial situation and explore steps to help you reach your FIRE goal.

Current Financial Snapshot
Income and Investments
In-hand salary: Rs 76,000 per month
Investments:
Mutual Funds: Rs 5.5 lakh with a CAGR of 28%
Stocks: Rs 7 lakh
PPF: Rs 2.7 lakh
NPS and APY contributions
SIP amount: Rs 18,000 per month
Liabilities
Education loan: Ending this year
Home loan: EMI of Rs 22,000 per month starting in April
Setting Your FIRE Number
To achieve financial independence, you need a target savings amount, commonly referred to as the FIRE number. This amount should allow you to live comfortably without working.

Calculate Annual Expenses
Estimate your current monthly expenses, excluding your home loan EMI. Let’s assume other expenses are Rs 30,000 per month.

Total monthly expenses: Rs 52,000 (including EMI)
Annual expenses: Rs 52,000 * 12 = Rs 6,24,000
Determine Your FIRE Number
Using the 25x rule, which suggests saving 25 times your annual expenses:

FIRE number: Rs 6,24,000 * 25 = Rs 1,56,00,000
Evaluating Your Current Strategy
Investment Performance
Mutual Funds: Rs 5.5 lakh at 28% CAGR is excellent.
Stocks: Rs 7 lakh in stocks diversifies your portfolio.
PPF: Rs 2.7 lakh offers tax benefits and stable returns.
NPS and APY: Good for long-term retirement planning.
Debt Management
Education Loan: Ending soon, freeing up additional funds.
Home Loan: EMI of Rs 22,000 is manageable within your salary.
Recommendations for Achieving FIRE
1. Increase Savings and Investments
Redirect Loan Payments: Once your education loan ends, redirect those payments into your investments.
Boost SIPs: Increase your SIP amount progressively as your income increases. Aim for at least 25-30% of your salary in investments.
2. Diversify Investment Portfolio
Equity Mutual Funds: Continue investing in high-growth mutual funds. Consider adding diversified equity funds to balance risk and return.
Stocks: Focus on a mix of high-growth and stable companies. Ensure your portfolio is well-diversified.
PPF: Continue your contributions to PPF for long-term, tax-free returns.
3. Optimize Tax Savings
NPS and APY: Maximize contributions to NPS for additional tax benefits under Section 80CCD.
Section 80C: Utilize the full limit of Rs 1.5 lakh under Section 80C through PPF, ELSS, and home loan principal repayment.
4. Build an Emergency Fund
Reserve Fund: Maintain an emergency fund of 6-12 months of expenses to manage unforeseen situations without disrupting your investments.
5. Prepay Home Loan
Extra Payments: Consider making extra payments towards your home loan principal. This reduces your interest burden and loan tenure, freeing up funds earlier.
Projected Growth and FIRE Timeline
Investment Growth Projection
Assuming a conservative CAGR of 12-15%, your investments can grow significantly over the next 10-15 years.

Future Value of Current Investments
Current Portfolio: Rs 15.2 lakh (Mutual Funds + Stocks + PPF)
Annual SIP Contribution: Rs 2,16,000 (Rs 18,000 per month)
Using a conservative growth rate of 12%:

10 Years: Future Value (FV) of current investments: Rs 47,20,808
15 Years: FV of current investments: Rs 86,82,168
Future Value of SIPs
Using a conservative growth rate of 12%:

10 Years: FV of SIPs: Rs 41,32,082
15 Years: FV of SIPs: Rs 1,00,03,553
Total Future Value
10 Years: Rs 47,20,808 + Rs 41,32,082 = Rs 88,52,890
15 Years: Rs 86,82,168 + Rs 1,00,03,553 = Rs 1,86,85,721
This projection shows you can achieve your FIRE number within 10-15 years with disciplined saving and investing.

Conclusion
Your disciplined approach to saving and investing is commendable. By increasing your SIPs, diversifying your investments, and managing your debts efficiently, you can achieve financial independence early. Regularly review your portfolio and stay committed to your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |4625 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 03, 2024

Asked by Anonymous - Jun 24, 2024Hindi
Money
I am 47 years old. Monthly salary at 2 lakhs. Daughter of 12year old and son of 14 year old Monthly SIP of 30k. PF of 3 lakhs. 5 lakhs in debt/liquid funds/bank. Retirement at the age of 55 is possible with monthly expenses of 1.5lakhs?I also have home loan with 135 EMIs pending of 60000 per month.Suggest how to become economically independent.
Ans: You are 47 years old with a monthly salary of Rs. 2 lakhs. Your daughter is 12 years old and your son is 14 years old. You have a home loan with 135 EMIs of Rs. 60,000 each pending. Your current financial assets include:

Monthly SIP: Rs. 30,000.
Provident Fund (PF): Rs. 3 lakhs.
Debt/Liquid Funds and Bank Savings: Rs. 5 lakhs.
You plan to retire at 55 and wish to maintain monthly expenses of Rs. 1.5 lakhs post-retirement. Let’s analyze and plan your finances to help you achieve economic independence by retirement.

Current Financial Goals
Retire at 55: You have 8 years left until retirement.
Monthly Expenses Post-Retirement: Rs. 1.5 lakhs.
Home Loan: 135 EMIs of Rs. 60,000.
Children’s Education and Future: Planning for their higher education and possibly marriages.
Detailed Financial Assessment
Income and Expenses
Your monthly salary is Rs. 2 lakhs. Let’s break down your expenses:

Home Loan EMI: Rs. 60,000.
Monthly SIP: Rs. 30,000.
Other Monthly Expenses: Approximately Rs. 1.1 lakhs.
This means your total monthly outflow is around Rs. 1.9 lakhs. You have Rs. 10,000 surplus monthly, which can be utilized for savings or investments.

Provident Fund and Debt Investments
Your PF amount is Rs. 3 lakhs, and you have Rs. 5 lakhs in debt/liquid funds and bank savings. These are stable but low-yielding investments. Diversifying your portfolio is essential for growth.

Creating a Robust Retirement Plan
Goal 1: Clearing the Home Loan
Clearing your home loan should be a priority. With 135 EMIs of Rs. 60,000 each, you have approximately Rs. 81 lakhs outstanding. Try to make additional payments towards your loan whenever possible to reduce interest burden and loan tenure.

Goal 2: Building a Retirement Corpus
To maintain Rs. 1.5 lakhs monthly expenses post-retirement, you need a substantial corpus. Let’s look at how to build this corpus over the next 8 years.

1. Maximize SIP Investments
Your current SIP of Rs. 30,000 is a good start. Equity mutual funds, especially diversified ones, offer potential for high returns. As you get closer to retirement, gradually shift some investments to debt funds to reduce risk.

2. Increase Monthly SIPs
If possible, increase your SIP contributions. Every increase will significantly boost your corpus due to the power of compounding. Aim to incrementally increase SIPs as your salary grows or expenses reduce.

3. Invest in a Mix of Funds
A balanced portfolio should include:

Equity Mutual Funds: For growth.
Debt Mutual Funds: For stability.
Hybrid Funds: For a balanced approach.
4. Consider Retirement Funds
Retirement-specific mutual funds are designed to provide regular income post-retirement. They can be a good addition to your portfolio.

Goal 3: Planning for Children’s Education
1. Education Funds
Start dedicated funds for your children’s higher education. Equity funds can be ideal given the 5-10 year horizon. Regularly review and top-up these investments.

2. Systematic Investment Plans (SIPs)
Continue SIPs for children’s education. These regular investments will accumulate a significant corpus over time.

Investment Strategy and Allocation
Diversifying Portfolio
Diversification is crucial to manage risk and ensure steady growth. Your portfolio should include:

Equity Mutual Funds: For high growth potential.
Debt Mutual Funds: For stability and regular income.
Gold: As a hedge against inflation.
PPF/EPF: For tax-free returns and safety.
Avoiding Index Funds
While index funds track the market, actively managed funds can outperform by adjusting the portfolio based on market conditions. Actively managed funds have the potential for higher returns due to professional management.

Benefits of Regular Funds
Regular funds provide the advantage of professional advice. A Certified Financial Planner (CFP) can guide you to choose the best funds, helping you navigate market complexities.

Risk Management
Building an Emergency Fund
Maintain an emergency fund covering 6-12 months of expenses. This provides financial security during unexpected events.

Insurance Coverage
Ensure adequate health and life insurance. This protects your family’s financial future in case of unforeseen events.

Tax Planning
Utilizing Tax Benefits
Maximize tax-saving investments like PPF, EPF, and tax-saving mutual funds. This not only reduces your tax liability but also boosts your savings.

Final Insights
Regular Reviews and Adjustments
Periodically review your financial plan. Adjust investments based on market conditions and changes in your financial goals.

Incremental Increases in Investments
As your salary increases, incrementally raise your investment amounts. This enhances your corpus significantly over time.

Financial Discipline
Maintain financial discipline by sticking to your investment plan. Avoid unnecessary expenditures and focus on your long-term goals.

Retirement Corpus Calculation
Your retirement corpus should be a mix of growth and stable investments. Regularly rebalance your portfolio to ensure it aligns with your risk tolerance and financial goals.

By following this comprehensive plan, you can achieve economic independence and ensure a comfortable retirement.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |4625 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2024

Asked by Anonymous - Jul 09, 2024Hindi
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Im 27M unmarried, I earn 72k per month, I have investment of 1.3lacs Pf, 1.7lacs in Stocks and homeless 7lakhs my expenes monthly 25k including all emi's, may I know how much corpus should I accumulated to get a financial freedom and how long it might take
Ans: It's fantastic that you are thinking about financial freedom at such a young age. At 27, you have a long investment horizon, which is a significant advantage. Let's discuss a strategy to help you achieve financial freedom and how long it might take based on your current situation and goals.

Current Financial Situation
You are 27 years old and earn Rs. 72,000 per month. Your monthly expenses, including EMIs, are Rs. 25,000.

Your current investments include Rs. 1.3 lakhs in PF and Rs. 1.7 lakhs in stocks. You also have Rs. 7 lakhs in savings.

With these details in mind, we can create a plan to help you achieve financial freedom.

Defining Financial Freedom
Setting Goals
Financial freedom means different things to different people. For some, it means retiring early. For others, it means not having to worry about money.

Start by defining what financial freedom means to you. Think about the lifestyle you want and the expenses you might have in the future.

Estimating Corpus
A common approach is to aim for a corpus that can generate enough passive income to cover your monthly expenses.

Assuming you need Rs. 50,000 per month to live comfortably, you would need a corpus that generates this amount without depleting your principal.

Rule of 25
A popular rule of thumb is to save 25 times your annual expenses. This means if you need Rs. 50,000 per month, you need Rs. 15 lakhs per year.

So, you would aim for a corpus of Rs. 3.75 crores (Rs. 15 lakhs * 25).

Investment Strategy
Mutual Funds
Mutual funds are an excellent vehicle for wealth creation. They offer diversification, professional management, and the potential for high returns.

Equity Mutual Funds: These are suitable for long-term goals like financial freedom. They invest in stocks and have the potential for high returns.

Balanced Funds: These funds invest in a mix of equity and debt, providing a balance between risk and return.

Debt Mutual Funds: These funds are less risky and provide stable returns. They are suitable for capital preservation as you approach your financial freedom goal.

Systematic Investment Plan (SIP)
Start a SIP to invest regularly. This will help you accumulate wealth over time through the power of compounding.

Given your ability to save Rs. 47,000 per month (Rs. 72,000 income - Rs. 25,000 expenses), you can start a significant SIP.

Diversification
Diversify your investments across different mutual fund categories to manage risk. This approach will help you weather market volatility.

Regularly review your portfolio and adjust based on market conditions and your financial goals.

Emergency Fund
Before diving into investments, ensure you have an emergency fund. This fund should cover at least 6 months of your monthly expenses.

This will act as a financial cushion in case of unforeseen events. Keep this fund in a liquid savings account or a liquid mutual fund.

Insurance Planning
Ensure you have adequate life and health insurance coverage. This will protect you and your family in case of any unfortunate events.

Life Insurance: A term plan is recommended. It provides a high cover at a low premium.

Health Insurance: Ensure you have a comprehensive health insurance policy.

Power of Compounding
Compounding is the process where the earnings on your investment generate their own earnings. Over time, this can lead to exponential growth of your investment.

By starting early and investing regularly, you can take full advantage of compounding to build a significant corpus for your financial freedom.

Regular Review and Adjustments
Financial planning is not a one-time activity. Regularly review your portfolio and make adjustments as needed.

Keep track of your financial goals and ensure you are on track to achieve them.

Final Insights
You have a solid foundation with a good income and savings potential. With a clear strategy and disciplined approach, you can achieve your financial freedom goals.

Start by setting clear goals for your financial freedom. Invest systematically through SIPs in mutual funds, diversifying across different categories.

Ensure you have an emergency fund and adequate insurance coverage. Regularly review your investments and make adjustments as needed.

You are on the right track to achieve financial freedom. With careful planning and disciplined investing, you can secure a bright financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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