ma Shashikant takes a look at three case studies here.
Age: 26
Earnings: Rs 600,000 per annum
Investments: Only tax saving
I have two younger sisters aged 16 and 18. I will have to foot their wedding expenses (when they are around 22). I also have to provide for their education now. How do you suggest I go about it?
- Basavaraj Kodgalli
Inculcate in your sisters the sense of freedom and responsibility, and the joys of monetary freedom. Ensure that they study using an educational loan, which they will repay when they earn. Make sure they are able to earn before they marry.
I do not know if I am crossing the line here, but I think each one of us must earn and take care of ourselves. Give them the chance to make their lives.
If you insist on doing it yourself, and if it costs Rs 500,000 to conduct a wedding today, you need to provide for Rs 13 lakh (Rs 1.3 million) in nine years, assuming an inflation rate of 4%.
So at an annual return of 8%, you need to save Rs 100,000 a year. Given your income, I am not sure whether it is realistic.
I think you should get practical. Encourage your sisters to chip in as well. Begin to save. It will always help.
Age: 27
Earnings: Rs 7,000 net per month
Family: Parents and a sister who earn the same as I do
Once my sister gets married, I will be the sole earner. Where can I invest to be sure of timely and steady returns without too much of a risk?
- Yogesh
To be able to earn a decent income from your investments, the first rule is, you should have accumulated it in the first place. Let's say you need to substitute your sister's income after she is married.
At 7,000 per month, this works out to an 8.5% return on an investment of Rs 10 lakh (Rs 1 million).
Have you accumulated this saving? If yes, no hassle. If not, you are better off trying to augment your income, rather than seeking an investment return.
Please put money aside in a bank deposit for your sister's wedding. You have only a year to go and you cannot take risks with the money in the short term. It is good to start making investments. Don't be lured into investment tips in the equity market.
Begin with safe investments, like the post office monthly income scheme and bank deposits. Create a corpus. Then consider monthly income schemes of mutual funds to augment your income. If you are ready to take risks later, get into equity.
Age: 25 (wife), 28 (husband)
Earnings: Rs 22,000 per month (total income)
Family: One child of 9 months
Investments: Joint LIC policy of Rs 300,000
We pay a rent of Rs 4,000. How should we plan for our own home, child's education, marriage and our retirement?
- Nandani
Create a basic safety net:
- Invest in some deposits
- Open a PPF account
- Hold some RBI bonds
Make sure you have a basic corpus that is safe and stable. This should account for 20% of your investment portfolio.
Insurance should protect your child's future. Compute the needs of the child until her employment/ marriage.
Make sure you have a pure term policy that covers her needs. At your age you should be able to get a good cover at a lower premium.
Consider housing, given the tax sops and the easy home loans. Make sure you do not make housing a disproportionate part of your portfolio. Remember, you will not earn any income from that investment.
Begin a child care plan for your child. Invest every month with a mutual fund or a pension plan for your kid. Allocate a sum for yourself as well.
Ensure that you have some amount of your savings in equity, because you have time on your side.
Even if you manage to save Rs 5,000 a month and continue for the next 30 years, you will have accumulated a tidy sum. The trick is to save every month, month after month.
As you earn more, expand the portfolio into many other assets, including gold and derivatives.
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