I have a son who is 30 years old and is unmarried.He is earning a salary of Rs.100000 net per month and I am asking him to invest in property now but he is saying staying in rental till the age of 45 is better than paying in EMI.According to me paying the EMI now and completing the EMI at 45 is better option.Please advice.

Ans: You've built a strong financial foundation with your savings and investments. This is impressive, considering your current financial obligations and future goals. Let's take a detailed look at your situation and assess whether you should buy the property now or wait.

You earn Rs 1.13 lakhs monthly, and have substantial investments:

Rs 28 lakhs in mutual funds.
Rs 10 lakhs in PPF.
Rs 26 lakhs in EPF.
Rs 25 lakhs in gold.
Rs 20 lakhs in LIC.
Rs 2 lakhs in FD.
You also invest Rs 60,000 per month in various saving schemes.

Monthly EMI and Financial Stability
Purchasing a property worth Rs 1.30 crore will require a significant monthly EMI. If we assume an EMI of Rs 75,000 for 30 years, let's evaluate if this fits into your current financial structure.

Income and Expenses:
Your monthly income is Rs 1.13 lakhs. Deducting Rs 75,000 for EMI, you’ll have Rs 38,000 left for other expenses and investments.

Understanding Your Expenses
Your current monthly investments total Rs 60,000. After accounting for the EMI, it’s essential to ensure your remaining income covers your living expenses, savings, and unexpected costs.

Emergency Fund
An emergency fund is vital. Ideally, you should have 6-12 months of expenses saved. With Rs 2 lakhs in FD, consider increasing this fund to cover unforeseen expenses. This ensures financial stability without disrupting your EMI payments.

Assessing Investment Allocation
Mutual Funds:
You have Rs 28 lakhs in mutual funds. Mutual funds are versatile and offer potential growth. Ensure your portfolio is diversified across equity, debt, and hybrid funds to balance risk and return.

PPF and EPF:
Your PPF and EPF balances are Rs 10 lakhs and Rs 26 lakhs respectively. These are safe, long-term investments providing assured returns. They are also excellent for retirement planning.

Gold:
Gold worth Rs 25 lakhs adds stability and acts as a hedge against inflation. However, its returns are generally lower compared to other investment options.

LIC:
With Rs 20 lakhs in LIC policies, evaluate the performance and returns. If these are investment-cum-insurance policies, consider surrendering and reinvesting the amount in mutual funds for better growth.

FD:
Your Rs 2 lakhs in FD is a good start for an emergency fund. Ensure you have sufficient liquidity for emergencies.

Cash Flow and Loan Eligibility
Given your current financial commitments, paying a Rs 75,000 EMI might strain your cash flow. It's crucial to maintain a balance between your loan repayments and daily living expenses.

Impact on Lifestyle
Evaluate how a high EMI impacts your lifestyle. You must comfortably manage your expenses, investments, and future needs without financial stress.

Benefits of Waiting
Waiting to buy the property can provide several benefits:

Increased Savings: Allow more time to save, reducing loan amount and interest paid.
Market Conditions: Property prices may stabilize or fall, offering better deals.
Financial Cushion: Build a stronger financial cushion, reducing the burden of EMI.
Power of Compounding in Mutual Funds
Investing consistently in mutual funds harnesses the power of compounding. Over time, even small investments can grow significantly. This can enhance your financial stability and provide substantial returns.

Diversification and Risk Management
Diversifying your investments across different mutual funds reduces risk. Balancing between equity, debt, and hybrid funds helps manage market volatility and provides steady returns.

Mutual Fund Categories
Equity Funds: High risk, high reward. Suitable for long-term growth.
Debt Funds: Lower risk, stable returns. Ideal for short to medium-term goals.
Hybrid Funds: Mix of equity and debt. Balanced risk and return.

Advantages of Mutual Funds
Professional Management: Managed by experts, providing better growth opportunities.
Liquidity: Easy to buy and sell, offering flexibility.
Diversification: Reduces risk by investing in a variety of assets.
Tax Benefits: Certain funds offer tax advantages under sections like 80C.
Potential Risks
Market Volatility: Equity funds are subject to market fluctuations.
Credit Risk: Debt funds carry the risk of issuer default.
Interest Rate Risk: Affects bond prices and, consequently, debt funds.
Reassessing LIC Policies
Evaluate your LIC policies. If they are investment-cum-insurance, consider surrendering them. The amount can be reinvested in mutual funds for better returns and flexibility.

Future Goals and Planning
Your financial planning should align with future goals like your daughter’s education and marriage. Ensure your investments are structured to meet these goals without straining your current finances.

Creating a Balanced Portfolio
Your portfolio should balance risk and reward. A mix of equity, debt, and hybrid funds provides growth and stability. Regularly review and adjust your portfolio to align with your goals and market conditions.

Certified Financial Planner
Engage with a Certified Financial Planner to tailor a financial strategy. They provide personalized advice, ensuring your investments align with your goals and risk tolerance.

Final Insights
Buying a property is a significant decision. Evaluate your financial stability, future goals, and current commitments before proceeding. Ensure you maintain a balance between loan repayments and living expenses. Waiting might provide better financial security and opportunities.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: Your Financial Snapshot

Age: 39 years old
Monthly salary: Rs. 1.6 lakh
Monthly rent: Rs. 50,000
Yearly investments: NPS (Rs. 6 lakh), PPF (Rs. 1.5 lakh), SSY (Rs. 1.5 lakh)
Family: One 4-year-old child

Appreciating Your Financial Discipline

You're making good investments for the future
Balancing rent with savings shows financial responsibility
Planning for your child's future is commendable

Rent vs. Buy Analysis

Buying a flat means owning an asset
But it also comes with additional costs
Consider property taxes, maintenance, and repairs

EMI Considerations

EMIs might be similar to your current rent
But they often increase your overall expenses
Factor in down payment and other buying costs

Financial Flexibility

Renting allows more flexibility with your money
You can invest the extra cash in other ways
This might give better returns than property

Job Mobility

Owning a house can limit job opportunities
Renting allows you to move easily for better jobs
This flexibility can be valuable for career growth

Child's Education Planning

Your child's education needs will increase soon
Buying a house might limit funds for this
Consider if you can manage both house EMI and education costs

Investment Diversification

Your current investments are mostly in debt instruments
Consider adding some equity-based investments
This can provide better long-term growth

Tax Benefits

Both rent and home loan EMIs offer tax benefits
But home loan benefits are usually higher
Consult a tax expert for detailed benefits

Emotional Factors

Owning a home provides a sense of security
But it shouldn't come at the cost of financial stress
Balance emotional and financial aspects in your decision

Finally
Buying vs renting depends on many factors. Consider your long-term goals, financial situation, and job stability. A Certified Financial Planner can help you make the best decision for your situation.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in

Ans: Given your father's current salary of Rs. 69,000, opting for the flat in Thane at Rs. 48 lakh with a 10-12 year EMI may strain his finances. A larger EMI could impact his savings and future expenses. The Ambarnath flat at Rs. 33 lakh offers more space (2 BHK) at a lower cost, which would result in more manageable EMIs and less financial stress.

It may be wiser to choose the Ambarnath flat for better affordability and financial stability.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: You are doing well as a single parent. Managing EMIs, savings, and a child’s future alone is a big task. You are already making smart choices. Let’s now analyse your situation with a 360-degree approach.

We will go point-by-point to assess your options and give clarity on your plan.

Understanding Your Current Financial Snapshot
You are 42 years old and a single parent.

Your monthly income is Rs 2.5 lakh. That gives you a strong cash flow.

You have two home loan EMIs. One EMI is Rs 60K, loan outstanding is Rs 35 lakh.

Another EMI is Rs 40K, loan outstanding is Rs 2 lakh. This loan will close soon.

You have investments worth Rs 32 lakh in stocks and Rs 10 lakh in mutual funds.

You are planning to sell one property later, not now.

You are thinking of buying a higher-value property.

You want to know the safe EMI amount to leave room for investing for your child and travel.

First Let’s Review Your Current EMI Outflows
Your total EMI outflow is Rs 1 lakh per month.

After closing the Rs 2 lakh loan, your EMI will drop by Rs 40K.

You will be left with only Rs 60K EMI, which is manageable.

Your EMI-to-income ratio now is 40%. This is on the higher side.

Once the second loan is cleared, the ratio comes down to 24%. Much better.

Ideally, EMI should not exceed 30% of your monthly income.

Evaluating the Plan to Buy a Higher Value Property
Buying a higher-value property now may stretch your finances.

You already have two properties. One will be sold later.

Your stock and mutual fund portfolio is sizeable. That is a good sign.

However, committing to another large EMI now may limit flexibility.

You also need to keep room for your child’s future.

Education, college, or overseas education may need large funds.

If you increase EMI now, you will need to cut investments.

That is not ideal, especially at this life stage.

Disadvantages of Real Estate as a Financial Move Now
Real estate has low liquidity. You cannot access money quickly in emergencies.

Selling property takes time. Also, buyer demand is uncertain.

Maintenance costs, taxes, and documentation are ongoing burdens.

Capital appreciation is slow. Returns may not match mutual fund growth.

You may face emotional and legal issues while selling later.

As a Certified Financial Planner, I don’t suggest real estate now.

You already own two properties. That gives enough exposure.

Ideal EMI You Should Be Comfortable With
Your monthly income is Rs 2.5 lakh.

Maximum EMI should be 25% to 30% of monthly income.

That means, safe EMI should be Rs 60K to Rs 75K.

This keeps space for lifestyle, investing, and emergencies.

Since you already pay Rs 60K, avoid increasing it beyond Rs 75K.

If you buy a higher-value property, EMI may exceed Rs 1 lakh again.

That will squeeze investment for your child’s education.

Let Us Focus on Your Child’s Future Goals
This should be your top priority now.

If your child is in school, you have around 6 to 10 years for college.

Education, especially abroad, may need Rs 30 lakh to Rs 60 lakh.

You must start structured SIPs now to build this.

Don’t delay this by locking money in real estate.

Create goal-based mutual fund portfolios.

Invest in actively managed equity funds through a Certified Financial Planner.

Why You Should Not Invest in Index Funds or Direct Plans
Index funds are passive. They copy an index and cannot beat it.

Actively managed funds have expert managers to beat market returns.

You get better results when a CFP monitors and rebalances your plan.

Also, if you invest in direct funds, there’s no guidance or monitoring.

Many investors in direct funds panic during market falls.

With regular plans through MFD and CFP, you get emotional support.

You stay disciplined and goal-focused.

Suggested Structure for Your Investments Now
Let us plan from a 360-degree view.

1. Emergency Fund

Keep 6 months of expenses in liquid mutual funds or savings.

This is important for a single parent.

Don’t touch this for EMI or travel.

2. Child’s Education

Start a long-term SIP right away.

Based on age, target corpus, and time left.

Your current MF investment is Rs 10 lakh. Grow this for child’s needs.

3. Retirement Plan

Don’t delay this goal.

Your current age is 42. Start a dedicated SIP for retirement.

Minimum 20 years left to retire. Use this time well.

4. Occasional Travel

For travel, create a separate short-term fund.

Invest in ultra-short-duration mutual funds.

Do not use credit cards or break investments.

When Should You Sell One Property?
You said you plan to sell one property. Timing is key.

Wait until loan is cleared and market is favourable.

Use part of proceeds to prepay existing home loan.

Use balance to invest in mutual funds for child and retirement.

Do not use entire amount to buy another high-value property.

Keep your financial flexibility intact.

Should You Close the Rs 2 Lakh Loan Now?
This loan is small and almost over.

You may prepay it now if there’s no penalty.

That will reduce EMI burden and improve monthly savings.

Other Points You Must Review
Life Insurance

Buy a pure term insurance of at least Rs 1 crore.

Single parents must protect child’s future.

Avoid ULIPs or investment-linked policies.

Health Insurance

Take minimum Rs 10 lakh health cover for you and child.

Add critical illness cover if possible.

Don’t rely only on employer-provided policy.

Travel Planning and Lifestyle Budget
Allocate a fixed monthly amount for travel savings.

Build a travel fund slowly over the year.

Use this fund only for planned vacations.

Don’t mix travel and child’s education fund.

Behavioural and Emotional Decisions to Watch Out
Property gives emotional comfort. But it limits flexibility.

Mutual funds give freedom and growth.

Don’t buy property just for prestige or fear of rent.

Focus on child’s safety and your own retirement.

Finally
Your current EMI outgo is high. Limit it to max Rs 75K per month.

Avoid buying a higher-value property now.

First clear existing loan and focus on child’s goals.

Build mutual fund portfolio with goal-based SIPs.

Don’t invest in index funds or direct funds. Choose regular funds with CFP guidance.

Sell one existing property later. Use that to prepay loan and invest wisely.

Keep emergency fund, life insurance, and health cover in place.

Set separate budgets for travel and education.

Don’t stretch finances just to add another property.

With current income and discipline, your goals are achievable.

Stay consistent, review every year with a Certified Financial Planner.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

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