To create wealth understand where you are.
I am 46 years old and work in the private sector. I will retire by 58. My wife, aged 42, is a homemaker. I have a son studying in Std 8. My mother is financially independent. I have not saved enough despite working all these years. Should I sell my old flat worth ?45 lakh and settle the dues on my loan? I live in a house gifted by my father.
Shunmugam
In order to achieve financial goals, it is important to understand where we are now.
It is always a good idea to spread your investments across asset classes. Now your entire investment is in an illiquid asset, a flat. Real estate prices are likely to be under pressure for a few more years despite the recent interest rate cut. Your decision to sell the flat is, therefore, a good one. If you pre-close your personal and car loans, your monthly surplus will increase to ?39,000. After accounting for the rental income, you will have adequate money to save for your retirement goal. For your son’s graduation you need ?10 lakh. If you allocate ?5.75 lakh and if your portfolio earns 11.8 per cent you can reach the target. To build the corpus for your son’s higher education in eight years, invest a sum of ?14.4 lakh, allocate 60 per cent to equity mutual funds and the rest to fixed deposits and Voluntary PF.
Retirement: Your monthly expenses of ?25,000 will equal ?56,000 when you retire. To reach that goal you need to have a corpus of ?1.32 crore. Your current balance in EPF, along with future contributions and the interest thereon, will grow to ?33.7 lakh. To make up for the shortfall of ?99 lakh, you need to save a sum of ?31,000 every month and the portfolio should earn 11.8 per cent. The surplus, after making these investments, can be invested in land, to diversify the portfolio.
The writer is a financial planner and founder, myassetsconsolidation.com
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