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Hi! I am a 23 year old female. I earn 1.12 lakhs/month before taxes as salary. I am only earning individual at my home. We have a house loan of 38 lakhs of 18 years that almost started 5 years ago. We used to pay 29k EMI on a loan of 28 lakhs initially but after my father's business faced huge losses, we took additional 10 lakhs loan and after defaulting on EMIs and taking a 9 month break in between, we finally pay 45k EMI on 38 lakhs loan.
I have different SIPs of 9k amount that after 3-5 years would mature. For example, in one SIP I pay 5k/month. So after 5 years I would get (300000 + 60000 bonus) on it.
I have to pay monthly expense of 10k/month and I pay back a few more lenders amounting to 15k/month.
After all the expenses I save almost 25-30k/month. I have around 2.5 lakhs in savings.
I want to save a minimum of 10-15 lakhs in 2-3 years for my marriage and family.
Can you suggest how should I start my financial planning/what investments can I do to have good returns (I'm a medium risk-taker) in next 2-3 years so I can start building my family's future and have a plan for paying off the loans?
Ans: Assessing Your Current Financial Situation
Before diving into financial planning, let's assess your current financial situation. You're 23, earning a substantial monthly salary of 1.12 lakhs before taxes. However, it seems you're facing some financial challenges, primarily due to your family's housing loan and previous business losses. Your EMI for the housing loan has increased to 45k/month after additional borrowing and a break in payments.
You've also mentioned various SIPs, monthly expenses of 10k, and repayment of other lenders amounting to 15k/month. Despite these commitments, you manage to save around 25-30k/month, which is commendable.
Setting Financial Goals
Your primary financial goal is to save 10-15 lakhs in the next 2-3 years for your marriage and family. Additionally, addressing the housing loan and building a secure financial future for your family are crucial objectives.
Creating a Financial Plan
Emergency Fund:
Start by building an emergency fund to cover unexpected expenses. Aim to save at least 6-12 months' worth of living expenses, considering your family's financial situation. Keep this fund in a liquid and accessible account.
Repaying High-Interest Debt:
Prioritize paying off high-interest debt, such as personal loans or credit card debt, to reduce financial burden and interest expenses. Since you're saving a significant portion of your income, allocate a portion towards accelerating debt repayment.
Optimizing Investments:
Given your medium risk tolerance, consider a balanced investment approach. Diversify your portfolio across various asset classes, including equity, debt, and possibly real estate.
Equity Investments: Since you have a relatively short investment horizon of 2-3 years, consider equity mutual funds with a blend of large-cap, mid-cap, and balanced funds. These can potentially offer higher returns while managing risk.
Debt Investments: Given the stability they offer, consider investing in debt mutual funds or fixed-income securities. These can provide steady returns and help balance the overall risk in your investment portfolio.
Real Estate: While you haven't mentioned real estate as an investment option, it's worth considering for long-term wealth accumulation. However, ensure thorough research and due diligence before investing in property.
Systematic Investment Plans (SIPs):
Continue with your existing SIPs, as they provide a disciplined approach to investing. However, reassess the funds you're investing in to ensure they align with your financial goals and risk tolerance. Aim for a diversified portfolio of SIPs to mitigate risk.
Budgeting and Expense Management:
Review your monthly expenses and look for areas where you can potentially reduce costs. Redirect the saved amount towards your savings and investment goals. Additionally, consider discussing financial responsibilities and budgeting with your family to collectively manage expenses.
Seeking Professional Guidance:
Consider consulting with a Certified Financial Planner to tailor a financial plan that aligns with your goals and risk profile. They can provide personalized advice and guidance to optimize your financial journey.
Conclusion
In summary, building a solid financial plan requires a systematic approach, goal setting, and disciplined execution. By focusing on building an emergency fund, repaying high-interest debt, optimizing investments, and managing expenses, you can work towards achieving your short-term and long-term financial goals. Remember, consistency and patience are key virtues in the journey towards financial security.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in