ot a question about your money? What you should or should not do with it?
Our expert Uma Shashikant has the answers.
My wife and I earn around Rs 23,000 per month and our monthly expenditure is around Rs 16,000 (including Rs 1,500 towards a vehicle loan).
I have a debt of Rs 1,00,000 which I want to repay in 18 months.
My only investment is in an LIC policy.
Can you tell me how to go about organising my finances and saving for my six month old baby?
- Vidyanand
You have a healthy savings ratio of about 33% of your income, which is good. Try and keep it that way so that you are able to invest.
Clear the loan first, with all that you can save. I do not know if the debt has an interest cost, or it is borrowed from family/friends. If it has no interest element, repay it in smaller installments, while beginning to invest the rest of your money.
If there is an interest being charged, it is better to pay off quickly.
Invest in a child care plan for your child. Even Rs 500 a month, invested regularly, will go a long way. The key is to invest regularly. As for health and retirement, choose insurance plans that help you cover and have annuity options.
Since you will have requirements for money in early stages of your life, don't go overboard on investment options that require regular large money commitments.
Choose an equity mutual fund (a fund that invests in the shares of various companies) or a tax saving equity scheme (an equity fund with a tax benefit). Try to invest a fixed amount every month. To understand how these schemes work, read Invest in an ELSS fund.
In another 10 years, you will have higher levels of income and lower capital costs to incur. You can enhance your savings even further, at that time.
I am 26 and earn a gross monthly income of Rs 25,000 every month.
Here are my expenses:
LIC premium: Rs 95,000 every year
Car loan: Rs 3,372 per month
Monthly expenses: Around Rs 4,000 a month (if I really cut corners)
My brother wants to buy a home of Rs 34 lakh (Rs 3.4 million) and I have to chip in some of the amount.
What should I do?
- Kusumadhar Pandey
Your insurance premium is almost 40% of your take home pay. Do not buy any more insurance. In this stage of your life, you will have several situations of unexpected expenses, and you may find it tough to set aside the premium payment.
You can consider a short-term mutual fund investment, with a dividend option, into which you can invest Rs 8,000 every month. If you choose a growth option, you will have to pay a short term capital gains tax when you withdraw the amount.
Choose a dividend option that matches your premium payment quarterly or half yearly. Use the accumulated amount to pay your periodic premium.
To understand more about growth and dividend schemes and the tax impact, read The best mutual fund scheme for you.
The budget provides you with a maximum of Rs 1,00,000 as savings that you can make every year that can be deducted from your taxable income. Most insurance policies are included.
To see the entire list of tax-saving instruments, read All about Section 80C.
Since you already have a Rs 95,000 investment, Rs 5,000 is all that is left. Use it to invest in an equity linked saving scheme. To understand how these schemes work, read Invest in an ELSS fund.
Your monthly expense is unrealistic, as you have pointed out. You can begin to save, perhaps small amounts. Get a sustainable expense and saving pattern in place, so you are sure you can have a long term view on your investments.
We are a recently married couple, I am 25 and my husband, 27. We have a combined monthly income of Rs 25,000.
Our monthly expenses are never beyond Rs 10,000.
Though we inherited our own house, we want to keep aside Rs 5,000 every month to do it up and buy whatever we need for it.
Where should we invest the balance Rs 10,000.
- Astha
You must be some allowance for unexpected expenses. You should consider keeping 30% to 40% of what you save, in a short-term mutual fund. You can withdraw the money whenever you need.
Read, Tired of your savings account? Try this.
The rest you could invest in equity, for the long term. If you have a tax liability, choose a tax saving equity scheme. To understand how these schemes work, read Invest in an ELSS fund. You will be able to save for your future, as well as save taxes.
To see the various tax-saving options open to you, read All about Section 80C.
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