I'm 28 years old. I have a Rs 22.5 lakh home loan with 28 years pending. I have been doing pre-payment of 20,000 per month and have reduced it to 20L. It will be paid off in next 5 years if I continue the pre-payment. I have 15,000-20,000 SIP which I paused for 2 years and have started again (total portfolio 4.5L). I have stocks worth 1.5L, EPF worth 1.5L. I have 4,000 per month for NPS (total 1.5L), 3203 per month Term Life Insurance. I have 6 months backup in FD and save 40,000-50,000 per month. I want to buy a plot worth 10L in next 1.5-2 years. How should I optimise to reach 1cr net worth till 35 years of age?
Ans: You have shown great commitment to savings and debt repayment. Let’s now look at a 360-degree approach to build a Rs 1 crore net worth by 35.
Your age gives you a strong advantage. But careful steps are needed. Let’s break this into simple, clear points.
Analysing Your Current Financial Position
You are 28 years old with 7 years to reach the goal.
You have a Rs 20 lakh home loan pending, aggressively being paid down.
Existing mutual funds: Rs 4.5 lakh. Stocks: Rs 1.5 lakh. EPF: Rs 1.5 lakh.
NPS balance: Rs 1.5 lakh. Term life insurance in place (good protection).
Emergency fund of 6 months in fixed deposits (well-planned).
Your savings potential is strong at Rs 40,000–50,000 per month.
Planned expense: Rs 10 lakh for a plot in 1.5–2 years.
SIPs were paused but now resumed (positive sign of financial discipline).
Prioritising Financial Goals Clearly
Goal 1: Repay the home loan in 5 years.
Goal 2: Buy a Rs 10 lakh plot in 2 years.
Goal 3: Reach Rs 1 crore net worth by age 35.
These goals are competing. Planning is needed to balance all.
Asset growth is limited if major funds are used for debt and property.
Rethinking the Plot Purchase Plan
A Rs 10 lakh plot will block wealth creation for now.
Property won’t grow fast in 5–7 years. It ties up capital.
Also, it creates maintenance costs and legal work.
Instead, you can grow faster in mutual funds over 7 years.
You may postpone the plot purchase till your net worth is stronger.
Reassess whether the plot is a need or just a want.
If mandatory, keep it below Rs 6 lakh. Fund balance into SIPs.
Plot purchase and home loan together slow down wealth creation.
Accelerating Home Loan Repayment: Pros and Cons
Prepayment reduces your loan term and interest cost.
But your loan is for 28 years, so EMIs are low.
The interest rate is likely 8%-9%, equity can beat that.
Over-prepaying may reduce long-term compounding opportunities.
Instead, repay enough to close in 7–8 years, not 5.
Free the Rs 20,000 prepayment for investments after 5–7 years.
Keep mandatory EMIs going as planned, with some prepayment buffer.
Restructuring Your Monthly Savings Allocation
Savings of Rs 40,000–50,000 can be optimised as follows:
Rs 15,000 SIP (already restarted) – continue consistently.
Increase SIP by 10% every year to beat inflation.
Rs 20,000 prepayment for home loan – continue till cleared.
Rs 5,000 NPS – long-term retirement goal (keep contributing).
Rs 4,000–5,000 to short-term debt fund or FD for plot savings.
Rs 5,000 surplus to emergency fund, top it up to 9 months.
Future bonuses or hikes – allocate 70% to SIPs, 30% to plot/loan.
Optimising Mutual Fund Portfolio
Focus on actively managed funds only, not index funds.
Index funds have no flexibility in falling markets.
They mirror the market both upwards and downwards.
Actively managed funds have experienced fund managers.
These managers shift sectors and stocks based on market conditions.
Active funds give better downside protection than index funds.
Invest in a mix of flexi cap, mid cap, and small cap funds.
These styles give you growth and some risk balance.
Stay with regular plans through a Certified Financial Planner.
Direct plans lack professional guidance and periodic reviews.
CFP-led guidance adjusts your portfolio based on your life stage.
Regular plans offer personalised service, market alerts, and handholding.
Your financial journey will be smoother with proactive adjustments.
Should You Continue With Stocks?
Your stocks of Rs 1.5 lakh may be in random sectors.
Unless you follow markets daily, move stocks to equity funds.
Equity funds give diversification and better risk management.
Active funds offer sector rotation, which stocks don’t.
Stocks may give big returns but carry bigger losses too.
Transfer stock funds to mutual funds slowly to avoid sudden taxes.
Plot Purchase: Fund Allocation Plan
If plot purchase is non-negotiable, save Rs 4,000–5,000 monthly.
Keep this money in liquid or ultra short debt funds.
Avoid equity as tenure is short (less than 2 years).
Don’t use your emergency fund for this plot.
Don’t stop SIPs to fund the plot either.
If plot can wait 5–6 years, equity can help it grow.
Otherwise, it limits your journey to Rs 1 crore.
Review of NPS and EPF Contributions
NPS is a retirement tool, not for your Rs 1 crore goal.
But it gives tax benefits. Continue Rs 4,000 monthly.
EPF is a slow-growing but safe retirement tool.
Continue EPF through your salary. Don’t withdraw early.
Retirement corpus and net worth goal should be separate.
Emergency Fund Adequacy
Your 6-month emergency fund is solid.
Slowly build it to 9 months over 2 years.
Keep it in short term debt funds or FDs.
Avoid using it for the plot or loan prepayment.
Role of Term Insurance and Health Insurance
You already have term insurance. Ensure it covers 15–20 years’ income.
Also, take Rs 10–15 lakh family floater health insurance.
Health insurance protects your net worth from sudden expenses.
Review coverage every 3–4 years as your needs change.
Tax Planning and Mutual Fund Taxation
Equity mutual funds will have LTCG tax of 12.5% beyond Rs 1.25 lakh gains.
Short-term equity fund gains are taxed at 20%.
Debt funds will be taxed as per your slab.
Tax-efficient withdrawals will help protect your net worth goal.
A Certified Financial Planner will guide you on tax harvesting.
How to Reach Rs 1 Crore in 7 Years?
Your goal needs focused equity exposure, not blocked assets.
Plot and home loan prepayments slow down corpus growth.
7-year compounding in equity funds could multiply your wealth.
SIPs of Rs 15,000–20,000 with annual step-up will help.
Windfalls like bonuses or gifts must go into equity.
Avoid new loans or liabilities till you reach Rs 1 crore.
Review your net worth every year. Adjust SIPs accordingly.
Have clear cut goals – net worth first, real estate later.
Recommended Action Plan for the Next 2 Years
Continue Rs 20,000 home loan prepayment for 2 years.
Simultaneously save Rs 5,000 monthly in a debt fund for the plot.
Maintain Rs 15,000 SIPs in active mutual funds.
Review SIPs every 6 months with a Certified Financial Planner.
Postpone the plot purchase if your financial flexibility reduces.
Direct any job increments towards SIPs first, then other goals.
After home loan repayment, divert Rs 20,000 towards SIPs.
Build your net worth mainly through equity, not property.
Possible Roadblocks and How to Manage Them
Inflation will reduce your money’s future value.
SIP increases each year will fight inflation.
Job loss or income drop is another risk. Emergency fund covers this.
Market volatility will test your patience. Stay invested.
Don’t pause SIPs again unless for emergency reasons.
Plot appreciation is slow in short term. Don't rely on it.
Emotional buying decisions on property must be avoided.
Steps to Review Your Progress
Every January, check your total investments and home loan status.
Calculate your total assets minus liabilities.
This gives your net worth figure. Aim for steady yearly growth.
Compare with your Rs 1 crore target. Adjust SIPs if needed.
Engage a Certified Financial Planner for annual reviews.
Stay flexible but disciplined in your financial behaviour.
Finally
You have great savings potential at a young age.
Your financial discipline already shows in your loan prepayment and SIP restart.
But property purchase and early loan closure will slow down wealth creation.
If you optimise your SIPs and control real estate investments, Rs 1 crore is achievable.
A balanced approach of debt repayment, disciplined investing, and moderate lifestyle can help.
Stay consistent in your SIPs, increase them yearly, and avoid unnecessary expenses.
Use a Certified Financial Planner to stay on track.
They will guide you through market changes, tax planning, and portfolio adjustments.
Avoid index funds and direct mutual funds as they lack flexibility and guidance.
Regular funds through an experienced MFD with CFP give proactive portfolio management.
Focus on long-term wealth, not short-term property.
You are on the right path. Stay consistent and patient.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
