Just married and in a financial soup?

 My husband earns Rs 20,000 a month and out of that, gives Rs 15,000 to my in-laws for running the house. That leaves him with just Rs 5,000.

 I earn Rs 10,000. Out of this, Rs 2,000 goes towards the car installment loan. With the balance, I have to pay my cell phone day and Rs 100 per day for petrol to the office and back.

I plan to open a PPF account and deposit Rs 3,000 every month in it.

What is your opinion on our current situation?

- Ruchi

Hi Ruchi,

Let's say you and your husband are going to retire after 30 years and then live a retired life of another 30 years.

If you earn 8% (that is what you will get from the Public Provident Fund) on your investments and plan to spend about Rs 20,000 every month (in today's prices) during the retirement period, you might need about Rs 2.60 crore on the day you retire to fund your retirement.

I have assumed inflation at 5.5% per annum. To get that, you will need to save about Rs 17,400 every month for the next 30 years.

These are mathematical conclusions.

• Money tips for young couples

The good news is that we, as human beings, will learn to live within our means. So, it's possible for you to spend less now as well as live within a smaller budget during your retirement. That's one of the choices many of us have to make.

Yet, I believe that you have reason to be optimistic. You are young. You have time on your side. More importantly, you are conscious of your need to save and invest. As time passes by, you will earn more and be able to save more.

Two suggestions for you.

With a long-term horizon, you can use equity to earn substantially more than what PPF earns today.

Learn about mutual funds as a vehicle. Lot of investors have a love-hate relationship with them. They are good tools if you understand them well.

If you are wary about investing in shares directly, then you can invest in a diversified equity mutual fund that has a good track record. These are mutual funds that invest in the shares of companies of various sectors.

Secondly, be aware of advisors who claim to give you free advice. There is no free lunch. They will try to convince you to invest in mutual funds and buy insurance schemes for which they are getting the highest commissions.  
 

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