Dear sir, Your advice to 43 years of Govt employee of monthly 80000/- in hand salary is not correct at all. If he invest totally around 50000 per month how he will run his house in Rs. 30000/- Advice given is not practical and without proper calculation..
Ans: Your concern about the practicality of investing Rs. 50,000 per month from a Rs. 80,000 salary is understandable. Here’s the rationale behind the original advice, with some adjustments for clarity:
1. Loan Repayment Focus
Initial Loan Repayment Strategy:
Priority: The original advice emphasized clearing the Rs. 8 lakh personal loan first. This strategy is essential to reduce the interest burden and free up more funds for investment.
Repayment Allocation: Allocating a significant portion of your salary towards loan repayment for the first few years is crucial. This might mean tighter budgeting initially.
2. Investment Strategy During Loan Repayment
Balanced Investment Approach:
Gradual Increase: The original advice suggested a more aggressive investment approach post-loan repayment. While repaying the loan, the emphasis should be on minimal but consistent investments.
SIP and NPS Contributions: Initially, a smaller portion of the monthly income can be allocated to SIPs and NPS. Once the loan is cleared, you can increase the investment amount.
3. Managing Household Expenses
Monthly Budget Management:
Expense Allocation: The original plan considered Rs. 30,000 for monthly expenses, which might be tight but manageable with disciplined budgeting. Adjustments can be made to ensure a balanced approach.
4. Long-Term Investment Plan
SIP and PPF Contributions:
SIP Investments: Investing Rs. 20,000 per month in diversified mutual fund SIPs ensures a disciplined approach to wealth accumulation. This amount can be adjusted based on the current financial situation.
PPF Contributions: Allocating Rs. 1.5 lakhs annually to PPF maximizes the tax benefits and provides a safe, long-term investment option.
5. Insurance and Risk Management
Adequate Coverage:
Health Insurance: Ensuring sufficient health insurance coverage is crucial for protecting against high medical costs.
Term Insurance: Adequate term insurance secures your family’s financial future in case of any unforeseen events.
Final Insights
The original advice aimed to provide a comprehensive financial plan that balances loan repayment, household expenses, and investments.
Loan Repayment Priority: Clearing the Rs. 8 lakh loan within 2-3 years reduces interest burden.
Initial Investment Strategy: Start with smaller SIP and NPS contributions during loan repayment.
Expense Management: Allocate Rs. 30,000 for household expenses initially, increasing as loan repayment progresses.
Long-Term Focus: After loan repayment, increase SIP and PPF contributions to meet the Rs. 1 crore retirement goal.
By following this strategy, he can manage his current financial obligations while building a robust retirement corpus.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
