I am 31 years of age and have been working in Dubai for the last one year. My monthly income is Rs 70,000. I have no responsibilities as of now and can invest up to 60 per cent of my income. I want to finance my younger brother’s higher studies about three-four years from now. I am not sure if he will study in India or go abroad. How can I plan for the same?
The time horizon of your brother’s educational requirements is three-four years. As this is short-term in nature, you should invest in debt-based mutual funds. By saving 60 per cent of your monthly income every month for four years, you will be able to create a corpus of nearly Rs 20-22 lakh. If there is a shortfall, borrowing options for the same can be considered.
Since you are working abroad and the educational requirement might materialise abroad, the money should be invested in a foreign country to minimise the exchange rate risk at the time of redemption. Alternatively, if you wish to invest in India, make sure the investments are being made from the non-resident external account. This will ensure the money can be easily repatriated.
I am an MNC employee with a monthly takehome salary of Rs 30,000, with an annual increase of three per cent. My age is 28 years and I plan to work for another 30 years. My only investment till now has been an LIC endowment policy for Rs 3 lakh. I plan to invest regularly in a mix of debt and equity options, with primary allocation for Public Provident Fund and National Savings Certificates and, to some extent, mutual funds. My investible surplus is Rs 7,500 a month (expected to increase by about 10 per cent annually). My primary aim is to buy a flat in Delhi (about Rs 50 lakh) and medical expenses. Given my current income, what amount of loan would I be eligible for? Alternatively, how should I invest the surplus amount so as to increase my loan eligibility, or, to liquidate my investments while buying the house and take a loan for the remaining amount?
First and foremost, you should protect your wealth from any untoward incident. This can be done by keeping aside three months of your mandatory expenses as reserve to meet any contingencies. Individual health cover should be obtained to cover illnesses. Life insurance cover by way of a term plan should also be taken to protect the family. After all this is done, the focus should shift to accumulating wealth to fulfill your responsibilities. If you require the house in three-four years, the investments for the same should be made in hybrid mutual funds as the goal is mid-term.
PPF and NSC have a minimum lock-in period and their maturity horizon is also more than three-four years. Thus, these might not be the best available options. If the requirement of a house is seven-eight years away, equity as an asset class should be selected for accumulating the corpus. Based on your income, you should be eligible for a loan around three-four times of your annual income. Therefore, depending on the time frame of your goal, create a corpus and borrow for the balance amount.
The writer is a certified financial planner. You can send your queries to yourmoney@bsmail.in
