My monthly salary is 8 lakhs, but my work time in a year is not fixed. Sometimes i work 8 months a year sometimes 6 months. I have NRE account. Due to uncertain work nature. I always had doubt to keep some funds standy in account. Due to this fear...

My monthly salary is 8 lakhs, but my work time in a year is not fixed. Sometimes i work 8 months a year sometimes 6 months. I have NRE account. Due to uncertain work nature. I always had doubt to keep some funds standy in account. Due to this fear i never invested . Recently started SIP of about 50k. Please advise what to do. Or what more options i have. I was also thinking to buy a flat to later rent out. Or buy a land for future sale out.. i am confused for my life.

Ans: I understand your concerns about the uncertain nature of your work and the impact it may have on your financial stability. It's commendable that you've taken the step to start SIPs despite these challenges.
It's natural to feel overwhelmed when faced with decisions about investments, especially when considering factors like fluctuating income and future financial security. As a Certified Financial Planner, I'm here to offer guidance and support as you navigate through these choices.
Instead of letting fear hold you back, consider taking a balanced approach to investing:
• Emergency Fund: Given the irregularity of your income, it's essential to maintain a sufficient emergency fund in your NRE account to cover living expenses during lean months. This provides a safety net and peace of mind.
• Diversified Investments: Explore investment options beyond traditional avenues like real estate. Consider a diversified portfolio of mutual funds or other investment vehicles that offer liquidity and flexibility to accommodate your variable income.
• Professional Advice: Consult with a Certified Financial Planner to develop a personalized financial plan tailored to your unique situation. They can help you assess your risk tolerance, set realistic goals, and create a roadmap for achieving financial stability and growth.
• Avoid Hasty Decisions: While buying property may seem appealing, it's crucial to weigh the pros and cons carefully. Real estate investments come with their own set of challenges and may not always align with your financial goals or risk profile.
Remember, uncertainty is a part of life, but with careful planning and informed decision-making, you can navigate through it successfully. Don't hesitate to seek support from professionals who can provide guidance and clarity along the way.

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

Asked on - May 09, 2024 | Answered on May 09, 2024

Thank you sir

Ans: Welcome :)

Ans: It is wise to plan your future carefully, especially with 10 years left before pension. Your approach already shows strong responsibility. I will provide a detailed and practical 360-degree solution to help you create a secure future.

» Your current financial situation looks stable
– Working in a PSU bank provides job stability and pension benefits.
– You have around Rs 33 lakhs in savings (LIC + VPF).
– Physical assets include gold worth Rs 20 lakhs and two plots worth Rs 30 lakhs.
– You have a running home loan, ending in 10 years.
– Monthly take-home salary is Rs 1 lakh.
– Dependents include wife, daughter (11th standard), and son (7th standard).
– Term insurance of Rs 1 crore is active.

» LIC policy maturity is good
– The LIC policy will give around Rs 13 lakhs in two years.
– LIC policies have high charges and lower returns.
– But since maturity is near, do not surrender now.
– Use the maturity proceeds to build better investments later.

» Voluntary Provident Fund (VPF) is a solid pillar
– VPF balance of Rs 20 lakhs will grow until retirement.
– VPF offers tax benefits and safe returns.
– Continue contributing regularly till retirement.

VPF is a good foundation for your retirement corpus.

» Physical assets need careful attention
– Gold worth Rs 20 lakhs can be kept as an emergency hedge.
– Avoid selling it now unless extreme need arises.
– The two plots worth Rs 30 lakhs should not be considered for regular income.

These are better kept for long-term legacy or future security.

» Home loan strategy
– The home loan will close in the next 10 years.
– Continue paying EMIs diligently.
– Avoid prepayments unless extra funds are available.
– Clearing the home loan at pension age is a good target.

Owning your home fully by retirement reduces liabilities.

» Term insurance is sufficient
– Your Rs 1 crore term policy provides adequate life protection.
– This covers your dependents in case of any unforeseen event.
– No need to buy additional term cover now.

Continue the policy till retirement.

» Focus on child’s education planning
– Your daughter is in 11th and son in 7th standard.
– Education costs will rise significantly in 5–10 years.
– Start a systematic plan for their education.

Start a separate mutual fund SIP focused on their education.
– Aim to invest Rs 15,000 to Rs 20,000 monthly now.
– Prefer actively managed equity mutual funds for growth.
– Avoid index funds since they don’t select quality stocks.

Actively managed funds reduce risk and aim for better returns.

» Retirement corpus building
– Post retirement, monthly income should cover your expenses.
– Current take-home salary is Rs 1 lakh.
– Plan for a retirement income of around Rs 50,000–Rs 60,000 per month.
– VPF and pension will provide a base.
– Additional savings should bridge the gap.

Start regular SIP in actively managed equity mutual funds.
– Begin with Rs 20,000 monthly SIP.
– Increase this gradually over time.

Avoid direct fund plans due to lack of expert guidance.

Regular mutual fund plans via MFD and CFP give proper monitoring.

» Emergency fund is essential
– Keep an emergency fund equal to 6 months of expenses.
– In your case, around Rs 6 to 8 lakhs.
– Maintain this in safe fixed deposits or liquid funds.

Do not touch this unless real emergencies arise.

» Do not hold LIC or ULIP policies for wealth creation
– LIC policies are not efficient for building wealth.
– High charges and low returns reduce long-term gains.

At maturity, surrender LIC and invest proceeds in mutual funds.

ULIPs also have high costs and poor liquidity.

Reinvest their proceeds in better investment options.

» Debt component is also important
– Invest part of your savings in debt mutual funds.
– They provide regular returns and low volatility.
– Good for stability as you approach retirement.

Consider investing Rs 5,000–10,000 monthly in debt funds.

» Tax planning is important
– VPF contributions are tax-exempt under Section 80C.
– Term insurance premium is also tax-exempt under 80C.
– For mutual funds, equity gains above Rs 1.25 lakh attract 12.5% LTCG tax.
– Debt fund gains follow income tax slab rules.

CFP helps track tax impacts to save legally.

» Avoid unnecessary liabilities
– Do not take new loans now.
– Avoid consumer loans or credit card borrowing for non-essential needs.

Focus only on clearing the home loan and building savings.

» Small milestone setting helps motivation
– Aim to fully pay home loan before retirement.
– Gradually build Rs 50–60 lakhs in mutual funds over 10 years.
– Start by increasing SIP by 10% annually.

Small achievements build confidence.

» Annual portfolio review is necessary
– Monitor your savings yearly with a CFP.
– Check mutual fund performance.
– Adjust asset allocation if needed.
– Rebalance between equity and debt based on your age and goals.

CFP provides structured review and correction.

» Avoid app-based quick investment platforms
– They are risky and not regulated well.
– Stick to platforms registered with SEBI.
– Certified Financial Planners help in selecting right platforms.

This ensures safety and long-term growth.

» Inflation impact consideration
– Inflation erodes purchasing power yearly.
– Ensure your savings grow above inflation.
– Actively managed equity funds are best for this.

They select growth stocks to beat inflation.

» Health insurance is important
– You should have a family health insurance of at least Rs 15–20 lakhs.
– Covers medical emergencies and avoids draining savings.

Renew health insurance annually without lapse.

» Prepare for dependent’s long-term needs
– After children become independent, your expenses reduce.
– But education and marriage planning remain key targets.

Keep a separate corpus for each child.

» Avoid annuities as a retirement solution
– Annuities lock your money with low returns.
– Liquidity is poor.

Actively managed mutual funds provide better flexibility and returns.

» Take professional help for tax filing
– Complex investments require proper tax filing.
– Certified Financial Planners help avoid tax mistakes.

This ensures better compliance and tax savings.

» Finally
Your financial situation is stable but needs structure.

Continue VPF and term insurance without lapse.

Plan Rs 15k–20k monthly SIP for children’s education.

Start Rs 20k SIP for your retirement corpus.

Build an emergency fund of Rs 6–8 lakhs now.

Avoid LIC or ULIP after maturity.

Let CFP help in monitoring and periodic corrections.

Avoid new loans and maintain discipline.

With consistent effort, your future financial health will improve steadily.

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

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