I am a 40-year-old salaried individual earning a monthly salary of Rs 2.75 lakh, while my wife brings home Rs 1.35 lakh per month. She manages our household expenses, allowing me to focus on saving and investing for our future.
My current plan involves allocating Rs 1.5 lakh per month towards SIP investments with the goal of reaching a corpus of Rs 4 crore by 2035 for retirement. Additionally, I have funds invested in PPF and PF, as well as funds set aside for my daughter’s education. I also plan to invest Rs 50,000 per month in stocks of my US-based employer, which are offered at a 5% discount.
I need to save Rs 3 lakh per year for my PPF and daughter’s SSY, which I intend to cover using my annual bonus. I am also considering purchasing a 3 BHK property with a loan of Rs 90 lakh, with the remaining Rs 75,000 per month earmarked for the EMIs.
Looking ahead, I am aware of the EMI payments that will continue for the last 10 years of the loan. I have faith that I will have additional income opportunities post my 50s. If not, I will rely on the corpus generated from my SIP investments to close the loan. I welcome any suggestions for adjustments to my financial plan.
Advice by Mayank Bhatnagar, Co-founder and COO, FinEdge
Being a double-income household, it is important to calculate your key financial ratios. The Reserve Surplus ratio tells you if you are creating enough surplus after taking your monthly expenses into account and your Savings to Surplus ratio would tell whether you are investing optimally from your monthly surplus. Your goal of building a Rs 4 crore corpus by 2035 through SIPs is achievable with the right approach and greater understanding of your personalised financial situation.
Assuming an annualised return of 12%, your current SIP allocation of 1.5 lakh can help you get to about Rs 3.5 crores. However, if you step up your SIP by 5% every year, you can surpass your target amount with ease.
Diversifying investments effectively can mitigate risks, however, over-diversification may lead to underperformance. Achieving the right balance of diversification and asset allocation requires a great investing process, rooted in hyper-customisation, collaboration, and high goal orientation. This helps an investor to ‘Invest with Purpose’ by aligning investments to important financial objectives.
When considering conservative investment instruments like PPF or SSY, their timeline should ideally match the investment horizon of the goals they are intended to serve. However, adopting an overly conservative approach for long-term objectives can undermine the principles of optimal investing. It risks falling short of outpacing inflation and achieving meaningful growth in the longer term.
Have a plan to maximise your down payment for house purchase and minimise your loan amount such that you have a comfortable Debt-to-Income ratio. Ideally, your EMI obligations should not exceed 20% of your monthly income. It would be prudent to start planning for the goal of Home loan repayment and a portion of your investible surplus in PPF can be redirected to equity funds to enable building a long term corpus for this goal.
Long-term wealth creation relies on staying invested despite market fluctuations. Collaborate with a trusted investment expert who would help you stay on track for your financial goals despite market vagaries and keeps a check on any irrational investing behaviour.
The discipline to remain focused and committed to your goals is fundamental to achieving investing success, and partnering with an investing expert can significantly enhance your journey of financial freedom!