Plan your spending, savings, investments with goals in mind
I’m in a government job with a monthly salary of ₹72,000 (without any deduction) hopefully, from July, it will increase to ₹84,000 per month. Currently, after all expenses, I save ₹50,000 per month. My job offers no pension, but a monthly deduction of contributory provident fund (CPF) started in May.
I’m almost 25 years old. I plan to buy a house in the next 12-15 years, a sports utility vehicle in the next 3-4 years, go on a vacation to Europe in the next 5-7 years plan for my sister’s wedding in the next 9-10 years.
For retirement, I’m looking at an income of at least ₹60,000 per month with an increment of 12% per year, accounting for inflation.
I started investing in January 2018 my investments are as follows:
I have invested ₹2,000 per month each in these SIPs…
1. ABSL Tax Relief 96 Reg-G
2. Axis LT Equity Reg-G
3. HDFC Taxsaver Reg-G
In March 2019, I added SIPs of ₹2,000 per month each in more funds…
4. Axis Bluechip Reg-G
5. Axis Small Cap Reg-G
6. Kotak Emerging Equity Reg-G
7. Mirae Asset Emerging Bluechip Reg-G
8. SBI Focused Equity Reg-G
In December 2020, I also started a public provident fund (PPF) contribution of ₹5,000 per month.
Please tell me if my investments are suitable for my goals (timelines for each may be extended by 1-2 years). Please suggest any changes, if necessary.
—Name withheld on request
There are several good points to note in your query. Most important of them is that you have started a journey of prudent investing at a very early age. You will do well to continue along this road of asset-allocated, well-balanced approach of taking reasonable risks with your investments.
You are also doing a good job of envisioning your future financial requirements. You should go a step further assign a numerical value—a target amount—for each of these goals. That will help you plan better be confident about your finances. Once done, you should segregate your investments into portfolios that are allotted to each of these financial targets. When you do that, you will be able to asset allocate to these portfolios better.
Regarding your retirement, assuming you retire in another 30 years, you can calculate the target amount you would need to save for (assigning an amount value to this financial goal as well). An inflation percent of 12% is too high, you can go with a future inflation rate of around 8% for your calculations. With that in mind, for a ₹60,000 per month requirement, lasting another 30 years of post-retirement life, your retirement target would be a little over ₹9 crore.
To reach such a target, you would need to save invest ₹25,000 a month starting now. You can slowly increase it through the intervening years.
The investment choices you have made in the form of mutual funds are fine. However, since you are investing for the very long term, make sure that you get your portfolio reviewed periodically to ensure that you stay on target.
The key is to always be cognizant of future financial goals plan your spending, savings investments starting now. You are well on the way to doing that.
Srikanth Meenakshi is co- founder, Primeinvestor.
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