My age is 47. I have a salary of 2.4L per month post taxes. My savings totals up to 3Cr is cash (PF, fixed deposits etc all included) and stand to inherit another 1CR in cash from parents. I dont have any loans. I have an own house with loans paid for and a car that is 9 years old but good condition. Apart from this i stand to inherit some property (house + land) value of which would be approx 5CR. i have 2 kids - 12 and 15. My elder one will be going for Engineering college in 2 years time. My parents are largely sufficient on their own. I have just 2 major dreams of owning a BMW worth 50L and travelling the world. I work in software industry and worried about my job. But i am confident of doing anything else beyond software if i loose my job. My assumption is 10L for old car, 20L from my savings and 20L loan. Can i buy a BMW?
Ans: Congratulations on your impressive financial stability and well-thought-out future plans. Your situation reflects years of hard work and careful planning. Let’s assess whether you can comfortably buy a BMW worth Rs 50 lakh and still manage your other financial goals.
Current Financial Situation
You have a robust financial portfolio:
Monthly Salary: Rs 2.4 lakh post taxes
Savings: Rs 3 crore (including PF, fixed deposits, etc.)
Inheritance: Rs 1 crore in cash and approximately Rs 5 crore in property (house + land)
No current loans
Own house and car in good condition
Two children (ages 12 and 15)
Financial Goals
Buying a BMW worth Rs 50 lakh
Funding your children’s education
World travel
Evaluating Your Financial Goals
Buying a BMW
Your plan for purchasing a BMW involves:
Selling your old car for Rs 10 lakh
Using Rs 20 lakh from savings
Taking a Rs 20 lakh loan
Children’s Education
Your elder child will start engineering college in two years, which will require significant funds. Assuming your younger child will follow a similar path, it's essential to plan for these expenses.
World Travel
Traveling the world is a dream that will require a substantial budget, but with careful planning, it is achievable.
Financial Assessment
Buying a BMW
Given your financial situation, purchasing a BMW is feasible. Here’s why:
Down Payment and Loan: Using Rs 20 lakh from savings and a Rs 20 lakh loan is a practical approach. Your monthly salary can comfortably handle the EMIs.
Future Savings Impact: Even after spending Rs 20 lakh from your savings, you will have Rs 2.8 crore left, plus the expected inheritance of Rs 1 crore.
Children’s Education
Planning for Higher Education: Start an education fund for each child. Invest in a mix of safe instruments and equity for higher returns.
Estimate Costs: Engineering education can be expensive. Plan for tuition, accommodation, and other expenses.
World Travel
Budgeting for Travel: Create a travel fund. Decide on destinations, duration, and frequency of your travels. Budgeting will help you estimate the required amount.
Invest for Travel Goals: Allocate a portion of your investments specifically for travel. This ensures your travel fund grows over time.
Investment Strategy
Diversify Your Investments
Equity and Mutual Funds: Increase your equity and mutual fund investments. They offer higher returns over the long term, helping you grow your wealth.
Debt Instruments: Maintain some investments in fixed deposits, bonds, and other debt instruments for stability.
Education Fund
Systematic Investment Plan (SIP): Start SIPs in mutual funds dedicated to your children’s education. SIPs in diversified equity funds can help in accumulating a substantial corpus.
Education Loans: Consider education loans to spread out the financial burden. This can preserve your savings for other goals.
Emergency Fund
Maintain an Emergency Fund: Ensure you have an emergency fund that covers at least 6-12 months of expenses. This provides a safety net in case of job loss or other unforeseen events.
Earning More with BMW and World Travel
Leveraging the BMW
Business and Professional Use: Use the BMW for business purposes if applicable. It can enhance your professional image and possibly lead to more business opportunities.
Renting Out: Occasionally rent out your BMW for events or special occasions. This can help offset the maintenance costs.
World Travel
Travel Blogging or Vlogging: Share your travel experiences through a blog or vlog. Monetize your content through ads, sponsorships, and partnerships.
Freelancing While Traveling: If your job permits, consider freelancing or consulting while traveling. This can provide additional income and fund your travels.
Tax Considerations
Tax on Car Loan
Interest Deduction: Interest on a car loan is not tax-deductible. Factor this into your financial planning.
Tax on Investments
Capital Gains: Be mindful of capital gains tax on your investments. Plan your withdrawals and reinvestments to minimize tax liability.
Tax-Saving Instruments: Utilize tax-saving investments under Section 80C, such as PPF, ELSS, and NPS, to reduce your tax burden.
Conclusion
Based on your current financial situation and future plans, you can comfortably buy a BMW worth Rs 50 lakh and still achieve your other financial goals. Here’s a summary of the action points:
Buy the BMW: Use Rs 20 lakh from savings, sell your old car, and take a Rs 20 lakh loan.
Plan for Education: Start dedicated education funds for your children through SIPs in mutual funds.
Build a Travel Fund: Allocate a portion of your investments for world travel.
Diversify Investments: Balance between equity and debt instruments for growth and stability.
Maintain an Emergency Fund: Ensure you have enough savings to cover unforeseen expenses.
Your disciplined approach to savings and investments, combined with careful planning, will help you achieve financial independence and fulfill your dreams. If you need personalized advice or assistance in structuring your investment portfolio, feel free to reach out. I’m here to help you optimize your investments and achieve your financial objectives.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
