Sir, My age is 40. I have a family with Mom, Dad, 2 daughters aged 13 years and my wife. I am the only source for income in my family. I am a business person and average monthly profit is approx 2 to 3 lakhs. There are lots of ups and downs in the...

Sir, My age is 40. I have a family with Mom, Dad, 2 daughters aged 13 years and my wife. I am the only source for income in my family. I am a business person and average monthly profit is approx 2 to 3 lakhs. There are lots of ups and downs in the business and profits are not consistant. So I am doing daily SIP of 5000 in HDFC Top 100 growth. Till date the MF is approx 9 lakhs. I have purchased a flat of Rs 1cr. With an home loan of 40 lakhs. Current EMI is 35000, tenure 20 years started last year. I have taken 2 health insurance policies, one for my mom and dad and another for us. Total yearly premium is 1.25 lakhs. My monthly expenses are approx 1.5 lakhs. I am bit worried about Daughters higher education as they wish to pursue MBBS. Secondly I need to save for my retirement. I wish to retire at 55. Please suggest if I am on right track or I need to change my investment patterns?

Ans: Current Financial Overview

You have a monthly profit of Rs 2-3 lakhs from your business, but it fluctuates. You have a daily SIP of Rs 5000 in HDFC Top 100 growth, amounting to Rs 9 lakhs till now. You have a home loan of Rs 40 lakhs with an EMI of Rs 35,000 for 20 years. Your monthly expenses are around Rs 1.5 lakhs, and you have two health insurance policies with a total annual premium of Rs 1.25 lakhs.

Goals and Concerns

Daughters' Higher Education: Both daughters wish to pursue MBBS.
Retirement Planning: Aim to retire at age 55.
Education Planning

Estimate Costs: MBBS education can be expensive. Estimate the total cost considering tuition, books, and other expenses.

Dedicated Education Fund: Start a dedicated SIP for your daughters’ education. Consider a combination of equity and debt mutual funds for stability and growth.

Retirement Planning

Current Investments: Your daily SIP in HDFC Top 100 growth is a good start. Continue this but also diversify.

Additional Investments: Consider starting SIPs in a mix of large-cap, mid-cap, and multi-cap funds. This will balance risk and growth.

Retirement Fund: Calculate the corpus needed for retirement at age 55. Factor in your lifestyle, inflation, and life expectancy.

Insurance Coverage

Health Insurance: Your existing health insurance for your parents and family is crucial. Ensure coverage is adequate for medical emergencies.

Term Insurance: Consider taking a term insurance plan to cover your family’s financial needs in case of any unforeseen event.

Debt Management

Home Loan: Your EMI of Rs 35,000 is manageable given your income. Try to prepay whenever you have extra funds. This will reduce the loan tenure and interest burden.
Emergency Fund

Build an Emergency Fund: Keep at least 6-12 months of expenses in a liquid fund or savings account. This will help during business downturns.
Final Insights

Your current investments and insurance coverage are good, but diversification and dedicated funds for education and retirement will strengthen your financial plan.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: It’s great to see that you’re thinking proactively about your financial situation. You've done well with your current investments and planning. Let’s review your financial status and provide some detailed advice to help you optimize your investment strategy.

Compliments on Your Achievements
Firstly, congratulations on owning a flat in Bangalore and clearing your home loan. It’s commendable that you have a robust term insurance cover and health insurance for your family. Your disciplined approach to investments is impressive.

Current Financial Overview
Salary and Expenses:

Monthly salary: Rs. 1.5 lakhs
Monthly expenses: Rs. 65,000
Car EMI: Rs. 40,000
Monthly investments: Rs. 30,000
Investments:

Mutual funds: Rs. 7.5 lakhs
Stocks: Rs. 4.5 lakhs
Provident Fund (PF): Rs. 3 lakhs
National Pension System (NPS): Rs. 3 lakhs
Insurance:

Term insurance: Rs. 1.5 crore
Health insurance: Rs. 7 lakhs
Parents covered under corporate health insurance
Dependents:

Parents and an 8-year-old daughter
Evaluating Your Financial Plan
Insurance Coverage
Your term insurance cover of Rs. 1.5 crore is a good start. Given your dependents, it’s crucial to ensure this coverage is sufficient. The amount should cover any outstanding liabilities, provide for your child’s education, and support your family’s living expenses in your absence.

Your health insurance cover of Rs. 7 lakhs is also a good safety net. However, considering rising medical costs, it might be wise to review this periodically and consider enhancing it if needed.

Investment Distribution
You have diversified your investments across mutual funds, stocks, PF, and NPS. This is a smart approach as it balances risk and return. Let’s delve deeper into each category:

Mutual Funds
With Rs. 7.5 lakhs in mutual funds, you’ve made a solid start. It's essential to assess the types of funds you’re invested in. A mix of equity and debt mutual funds can provide growth and stability. Given your age, a higher allocation to equity funds can help in wealth creation.

Stocks
Your Rs. 4.5 lakhs in stocks indicate you have a direct exposure to the equity market. This can offer high returns but comes with higher risk. Regularly reviewing your stock portfolio and staying informed about market trends is crucial. Consider consulting a Certified Financial Planner for expert advice.

Provident Fund (PF)
Your PF of Rs. 3 lakhs is a good retirement safety net. It’s a secure and tax-efficient investment. Continue to contribute regularly to benefit from the power of compounding.

National Pension System (NPS)
Your NPS investment of Rs. 3 lakhs is also a wise choice for retirement planning. It offers tax benefits and helps build a retirement corpus. Make sure you’re taking advantage of the maximum tax benefits under Section 80CCD.

Monthly Investments
Investing Rs. 30,000 per month is a disciplined approach. However, given your financial goals and dependents, let's evaluate if this is sufficient and how it can be optimized.

Car EMI and Expenses
Your car EMI of Rs. 40,000 per month on a corporate lease is a significant expense. Ensure it fits well within your budget without straining your finances. Your monthly expenses of Rs. 65,000 include supporting your parents, which is a commendable responsibility.

Suggestions for Optimizing Your Financial Routine
Increase Savings and Investments
Emergency Fund:

Ensure you have an emergency fund that covers 6-12 months of expenses. This provides a safety net for unexpected expenses.
Increase Monthly Investments:

If possible, increase your monthly investments. Even a small increment can significantly impact your long-term wealth creation due to compounding.
Review and Diversify Mutual Funds
Equity Funds:

Focus on adding more to equity mutual funds for long-term growth. Look for funds with a good track record and consistent performance.
Debt Funds:

Maintain a portion in debt funds for stability and lower risk. This balances your portfolio and reduces overall risk.
Systematic Investment Plan (SIP)
SIP in Mutual Funds:
If not already done, consider starting a Systematic Investment Plan (SIP) in mutual funds. It helps in averaging out the investment cost and reduces the impact of market volatility.
Rebalancing Your Portfolio
Regular Review:

Periodically review and rebalance your investment portfolio. This ensures your asset allocation remains aligned with your financial goals and risk tolerance.
Professional Guidance:

Consulting with a Certified Financial Planner can provide tailored advice and help in making informed decisions. They can assist in optimizing your investment strategy.
Tax Planning
Utilize Tax Benefits:
Make sure you’re utilizing all available tax benefits. Investments in PF, NPS, and specific mutual funds can provide tax deductions.
Planning for Daughter’s Education
Child Education Fund:
Start a dedicated investment plan for your daughter’s education. Education costs are rising, and early planning can ease future financial pressure.
Preparing for Retirement
Increase Retirement Savings:

Gradually increase your retirement savings. Consider additional contributions to PF and NPS.
Retirement Fund Allocation:

Diversify retirement investments across various instruments to balance growth and security.
Health and Life Insurance
Review Insurance Needs:

Regularly review your insurance coverage. Ensure it’s adequate to cover rising healthcare costs and your family’s needs.
Increase Health Cover:

Consider increasing your health insurance cover if necessary. A top-up health insurance plan can be a cost-effective way to enhance coverage.
Managing Existing Investments
Mutual Funds
Ensure you’re invested in a mix of growth-oriented equity funds and stable debt funds. This balance helps in achieving long-term goals while managing risk.

Stocks
Regularly review your stock portfolio. Stay updated with market trends and make informed decisions. Diversify to reduce risk.

Provident Fund and NPS
Continue regular contributions to PF and NPS. These are crucial for your retirement planning and provide tax benefits.

LIC, ULIP, and Investment cum Insurance Policies
If you hold LIC, ULIP, or other investment cum insurance policies, review their performance. These often come with high charges and might not offer the best returns. Consider surrendering underperforming policies and reinvesting in mutual funds.

Financial Discipline
Maintaining financial discipline is key. Avoid unnecessary withdrawals from your investments. Stick to your planned investment routine and regularly review your financial plan.

Final Insights
Your current financial planning shows you’re on the right track. However, there are areas for improvement and optimization. Increasing your monthly investments, diversifying your portfolio, and consulting with a Certified Financial Planner can help in achieving your financial goals more effectively.

Make sure to regularly review and rebalance your investments. Ensure you’re making the most of tax benefits and maintaining sufficient insurance coverage. Planning for your daughter’s education and your retirement is crucial.

Your disciplined approach and proactive planning are commendable. Keep up the good work and stay focused on your financial goals. With the right strategy and professional guidance, you can secure a financially stable future for yourself and your family.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in