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POSTED BY ON January 11, 2013 10:29 am COMMENTS (4)
Hello Everyone,
Request you to please share with me your views on the nitty-gritties of the financial planning tips for my scenario:
Background:
1. I am the sole earning member for my family and have only mother to support. After all the household expenditures(rent, groceries etc), I manage to save around 1-2k every month currently. I just started my career a while back and hence my savings are currently low. I have a few outstanding debt to be paid to relatives (around 7 lakhs) which I had taken a while back to fund education and some emergencies.
2. To begin with my investments till date, I have invested in LIC JeevanSurabhi for 20 yrs with annual premium of 36k.
3. Also, I have taken a Reliance Equity Opportunities SIP (Rs. 6000 p.a) and a RD (Rs. 18,000 p.a)
4. I have a group mediclaim(Rs. 5L), EPF(Rs. 1,250 monthly) and also a PPF(500 monthly).
5. I am also planning to cover my life with a term insurance of about Rs. 75 lakhs soon once I have some money left.
6. I incur around Rs.2000 as Income Tax annually, which I am planning to invest it in the term insurance, ppf and a reliance/franklin ELSS funds for this financial year.
Need:
1. How shall I be able to meet my target of refunding the outstanding debt to my relatives (about 8 lakhs) in a span of say 5-6 years? Are my current investments in line with this requirement?
2. What can I do to have a parallel corpus to go into my own needs like emergency funds, future planning( house, vehicles, marriage etc) ? It seems that clearing my loans itself would take a good amount of time with no funds left for me later.
I would be gratefully happy if I can get some good tips from the veterans of this forum since I really feel I am going nowhere with my financial life at this pace.
Thanks & Regards,
Narayan
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Dear Narayan, please close that Jeevan Surabhi, policy immediately, purchase a term cover of 15 times of your yly income. Stop that RD. Stop 500 Rs. mly into PPF, just invest 500 Rs. yly. Sell other assets like Gold to pay off your relative’s loan.
Start repaying on mly basis to your relatives.
In between create a buffer of 6m expenses.
Thanks
Ashal
I assume you are in mid- or early 20s. This is what I would do
1.your first task should be to get an emergency fund worth about 6 months expenses in a savings bank with a FD sweep option.
2. immediately get term insurance for 15 times your annual income
3. you can arrange with your relatives to pay them a monthly sum to pay off the loan.
I suggest you stop your Reliance SIP, RD and PPF (keep PPF alive by paying bare minimum).
This amounts to 13000 per month. If you squeeze another 340 a month and pay
13340 each month to your relatives your debt is gone (I am assuming there is no interest!) in 5 years.
Use your bonuses and pay hikes to pay it off faster.
pay the balance in RD and SIP to pay off the loan
If you can sell some gold silver or other assets and pay off your loan earlier great
investing the money for 5-6 years and that too some % in equity and expecting a big lumpsum is not realistic. Magic of compounding does not work for short terms.
Spending 5 years to do this is not bad at all. After this you can diligently save and create a corpus for yourself.
@FreeFinancialCalculators & Ashal:
Thanks for the quick info. So, it seems I can just have a buffer fund for next 5-6 years and then build on my corpus after that.. But will it still be possible to build a lucrative corpus after next 5-6 years? I am almost in my mid twenties and have a few usual personal dreams to chase as well (home, bike etc).
don’t worry about your corpus now. get rid of your debt and you can realize your dreams later If you invest as much as you can sensibly. In five years time your salary will be higher and you can invest much more towards your dreams