If you are in transferable job buy land and construct latter.
I am 31 and work for a public sector bank. My wife is a homemaker and my daughter is two.
The job is transferable and my bank provides me with leased accommodation at the place of posting. I am eligible for a housing loan of ?20 lakh at simple interest rate of 7 per cent, and a car loan of ?7 lakh at the same interest.
Since I get leased accommodation, should I buy a house at all? Will it be advisable to buy a car?
I wish to save for my daughter’s education and her marriage too. In addition, I will need adequate funds when I retire. Please suggest a suitable plan to enable me to attain all these goals.
Deepak Khandelwal
Taking a decision on buying house isn’t easy. Besides, you will, of course, need accommodation after retirement as well.
The best way to tackle the situation is to buy a land parcel and hold it till retirement, preferably in a gated community. Gated communities would protect your plot from any possible encroachment.
Car: You may be better off not buying a car as you have to constantly keep moving to different places of posting.
Daughter’s education: The present cost of ?7 lakh will be ?20.6 lakh by the time she is ready for higher education, if inflation is factored in.
To reach the target, save ?3,600 every month for the next 16 years. If you build a portfolio in the ratio 60:40 in equity and debt respectively, you can reach the target with a portfolio return of 12 per cent (same assumed for other goals).
Daughter’s marriage: Her marriage, presumed to be about ?20 lakh currently, will amount to cost you ?88 lakh after 22 years, if inflation is 7 per cent (the same rate of inflation has been assumed for all goals). Save ?6,900 every month for the next 22 years.
Retirement: You will need ?14.9 lakh annually for your expenses from the age of 58. To derive such an income, you should have a corpus of ?3.5 crore.
Invest ?8,800 (including your investments in the pension fund) every month for the next 27 years.
In the pension fund, go for the ‘life cycle’ option or make an asset allocation of 60:40 in equity and debt respectively, till you reach the age of 45.
The writer is a financial planner and founder, myassetsconsolidation.com