I am 34 years antique, married and have a three-year-old daughter. I work in the IT industry and in five years I plan to buy a novel house that I will need ₹20 lakhs. Currently, my wife and I are saving almost ₹60,000 per month. We’re close ₹20 lakh in bank fixed deposits (FD) and ₹4 lakh in our Employee Provident Fund (EPF). What steps should I take to have the right financial plan?
-Name suspended on request
Everyone who earns and saves should have a financial and investment plan. The key is to have a structure of financial goals and invest based on those goals. From your query, it appears that there are three goals, i.e., your daughter’s education, buying a novel house and retirement. Since all your goals are long-term, you may consider changing your place of residence ₹12 lakh from mutual fund equity FD. The rest of the money in the FD can still be your emergency fund. Suggesting equity mutual funds is based on the desire to ensure that your money is managed by experienced and professional fund managers. Mutual funds as an investment avenue are intended for investors of all ages, regardless of risk appetite and investment experience. Therefore, you can certainly include mutual funds in your overall investment plan without much concern.
You will achieve your goals if you invest ₹10 lakh from fixed deposits in mutual funds for the next 5 years and assuming an average rate of return of 12% per annum (per annum), then you will have approximately ₹17.62 lakh for house purchase. For others ₹2.38 thousand you can invest ₹3,000 per month under Systematic Investment Plans (SIPs) for 5 years. For your daughter’s education, assuming you want to accumulate a corpus ₹1 crore, you can achieve this goal by doing SIP ₹21,000 for the next 15 years.
Similarly, if we assume that your monthly expenses are approx ₹75,000 and if you plan to retire at the age of 58, you will need approx ₹6.88 crore in pension which you can enjoy after retirement for 27 years i.e. till the age of 85. To build this corpus for retirement, you need to invest ₹46,000 every month for the next 24 years. We have not included your EPF balance and its future value as we do not have details of your monthly contributions. The fact is that now you will be left with this ₹36,000 monthly savings will lend a hand you reach the corpus ₹5.37 crores. The above details are based on some of the information provided in the inquiry and certain assumptions. A personalized financial and investment plan will lend a hand you better achieve your financial goals.
Harshad Chetanwala is the co-founder of MyWealthGrowth.com
Posted: May 8, 2024, 6:14 pm EST
