I am 38 year old male, working in an IT company with a monthly take home salary of 3.07L and annual bonus of around 10-12L. I have 3 kids (7 yrs, 1 yr and 1 yr old) and my wife is a home maker. I have a 2bhk flat worth 65L and own two plots - worth 90L and 30L. Have just booked an under-construction 3 bhk flat recently with a housing loan of 1 cr with emi 1.15L- expecting a monthly rent of around 35k after completion in 2026. Have 3L in MF's and started investing 50k per month through SIP. Have 2L in PPF. Have around 8L in equity, which I use it regularly for generating some income through swing trading. Please suggest what is the best way to generate at least 7-8L yearly income in next few years so, it secures my kids education and other yearly expenses like car insurance (13k), term insurance (12k), LIC life insurance (39k) and family health insurance (20k)
Ans: Considering your financial situation and goals, let's delve into a comprehensive plan to generate a yearly income of at least Rs. 7-8 lakhs to secure your children's education and cover essential expenses.
Current Financial Snapshot
You're 38 years old, working in IT with a substantial monthly salary and annual bonus. Your investments include real estate, mutual funds (MFs), PPF, equity for swing trading, and insurance policies. Here’s a breakdown of your assets:
Real Estate: 2BHK flat worth Rs. 65 lakhs, two plots worth Rs. 90 lakhs and Rs. 30 lakhs.
Under-construction Flat: Expected to yield rental income of Rs. 35,000/month after completion in 2026.
Financial Investments: Rs. 3 lakhs in MFs, Rs. 2 lakhs in PPF, and Rs. 8 lakhs in equity used for swing trading.
Liabilities: Housing loan of Rs. 1 crore with an EMI of Rs. 1.15 lakhs.
Goals and Challenges
Your primary financial goals are to generate an annual income of Rs. 7-8 lakhs to secure your children's education and cover annual expenses like insurance premiums and others. Here’s how we can strategize:
1. Optimize Existing Investments
Real Estate:
Rental Income: Once your under-construction flat is completed, it can provide a steady rental income of Rs. 35,000 per month. Ensure the property is well-maintained and rented out promptly to maximize returns.
Equity and MFs:
Review Swing Trading Strategy: While swing trading can be lucrative, it’s volatile and time-consuming. Consider transitioning some equity investments into more stable instruments like diversified MFs for long-term growth without the day-to-day management.
2. Income Generation Strategies
Dividend Income:
MFs with Dividend Option: Invest in equity MFs that offer a dividend payout option. This can provide regular income without the need to sell assets.
Systematic Withdrawal Plan (SWP):
From MF Investments: Set up SWPs from your MF investments to generate a regular income stream. This allows you to withdraw a fixed amount periodically while keeping your investments intact for growth.
Rental Income:
Optimize Rental Yield: Ensure your rental properties are well-maintained and rented out at competitive rates. Consider periodic rent reviews to adjust income with market trends.
3. Insurance and Future Planning
Insurance Policies:
Review Premiums: Assess the adequacy of your insurance coverage and premiums. Consider surrendering underperforming policies (like LIC, ULIPs) if they don’t align with your financial goals and reinvest in more productive avenues.
Estate Planning:
Will and Inheritance: Ensure your estate planning is comprehensive, including the new flat and other assets. This can streamline asset distribution and minimize legal complexities for your family.
4. Long-term Financial Security
Retirement Planning:
Build a Corpus: Continue investing systematically towards retirement goals. Consider diversified avenues like MFs (actively managed), PPF for stability, and potentially explore other growth-oriented investments based on risk tolerance.
Emergency Fund:
Maintain Liquidity: Ensure you have an adequate emergency fund equivalent to 6-12 months' worth of expenses in a liquid form (like savings accounts or short-term deposits).
Final Insights
In conclusion, achieving a sustainable income of Rs. 7-8 lakhs annually requires a balanced approach combining stable investments, optimized real estate assets, and strategic financial planning. By aligning your investments with long-term goals and ensuring adequate risk management, you can secure your children's future and maintain financial stability.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
