Ask Morningstar: What do you do when your savings get wiped out?

By Himanshu Srivastava |  24-01-23 | 
 

I am 46 and all my savings have dried up to to ill health of my mother. I plan to retire by 60, so have 14 years. My monthly expenses are Rs 50,000 and around 60% of my earnings. Where must I invest to start?

I am truly sorry for the difficulties you have encountered and the toll it has taken on your financial stability.

You have provided no information - assets, liabilities, dependents, investing goals such as child's education, whether your spouse earns, forms of income, etc. You state that you want to save money for retirement, but did not specify the corpus you want to accumulate.

Here are some broad suggestions.

Retirement: Despite the fact that you are behind schedule in planning for retirement—which is understandable given your family obligations—on the positive side, 14 years is still a sufficient investment horizon to generate a reasonable retirement fund if planned carefully. Do read Focus on Financial Independence.

Savings: After the monthly expenses of Rs 50,000, which is 60% of your earnings, you would be left with around Rs 33,000 per month. Should you invest this money every single month (via a systematic investment plan, or SIP), you will be able to accumulate a corpus of Rs 1.21 crore at the end of 14 years. This is based on the assumption of an annualised return of 10%. If you increase your investment by 10% every year, your corpus will swell to Rs 2.19 crores. The message being: the more you manage to invest, the larger the accumulated corpus. So try to cut down on discretionary spending as much as possible.

Health insurance: Not just for you, but for the entire family. Do read Why your corporate medical cover is insufficient.

Emergency Fund: This will ensure that your investments continue uninterrupted. D0 read 4 things an Emergency Fund is NOT.

Take help: I sincerely request you to speak with a financial adviser to develop a specific investment strategy that is in line with your risk appetite and retirement goals. He will assist you in choosing the appropriate asset allocation mix, assess your portfolio on a regular basis, and make changes, as necessary. This will ensure that you are headed in the right direction.

Articles authored by Himanshu Srivastava

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Registered readers can post their queries by accessing the Ask Morningstar tab. Our team will answer SELECT queries relating to mutual funds, portfolio planning and personal finance. While we provide broad guidelines, we suggest you consult a financial adviser before making investment decisions.

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ninan joseph
Jan 26 2023 08:23 PM
 If the reader is reading this forum, you need to do the following urgently.

1. Your salary or income is around 1,00,000 (approx) and your expenses is 50,000. I am sure with an income of 1lack per month, you will be liable for tax, so ensure you invest in PPF or NPS which ever is convenient and this will be your retirement corpus. Not a single penny should be paid as tax. Ensure that. Next with the surplus, do a Recurring Deposit. Have multiple recurring deposit, one will be for emergency fund with shorter tenor and second max tenor one.


2. Analyse your monthly expense of 50,000. Take out all the unwanted expenses. If rental is a major expenses and if you are staying in the metro. Move out, you could stay in sharing accomodation and send your family and kids to your home town which will be less expensive. You need to conserve cash. Yes it will be difficult, but if you can do it.
3. If you own a car and comute in this, stop this and take public transport. If your partner is willing to work, ask her to get some job. This will be an additional source of income.

Remember investing in equity market is only after you have your basics done.
the priority will be
1. FD/PPF/NPS.
2. Term Insurance if you are the only working member. This is critical and if your family is dependent on you.
3. If you have medical cover from your company, and your family is younger, you could try postponing this for one year. But once the shorter term RD is done, you should buy one.
4. Only after all this, think of equity or mutual fund.
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