Mint, Hindustan Times and NDTV, bring you a personal finance show, “Let’s Talk Money”. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, senior anchor, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV.
Annada Ranade, 50, consultant from Pune asks:
My annual CTC (cost to company) is R20 lakh. Monthly requirements are R30,000, monthly hosing loan repayment is R25,000 (total loan left is R10 lakh). Total savings: R4 lakh.
We have not been able to save till date because of the treatment costs of our terminally ill son. We finally lost him in 2006 after a fight of 20 years. My husband closed his consulting business to look after our son, as my income was more steady. Please advise an aggressive savings plan to make up for the lost time.
Halan: Seems like a rough life, Annada. I am going to make a strategy which has two parts, Plan A and Plan B. If Plan A fails, we have Plan B still to go.
You are able to generate R70,000 of savings a month. I recommend two sets of funds for you. Let’s start with a balanced fund, that’s safer. We have a choice of two — HDFC Prudence and DSPBR Balanced; the other you should look at is Fidelity Equity; it’s a safe, conservative fund.
What if markets sink and savings are not good enough? Then what happens is my plan B.
According to your email, you have one house that is fully-owned and a second one on which you are still paying EMIs, and which will be fully-owned in a few years. One house you will put on rent—rent is a nice, inflation-adjusted source of income; as inflation increases, rent also goes up. So that’s one source for your monthly income.
Second, if you are left with nothing and your investments don’t do well, the house that you are living in can be put into a reverse mortgage. It’s a new product in India, it’s like a loan against your house, but reverse EMI. The house will belong to the bank and while you are alive your needs are taken care of by the reverse mortgage product.
Kiran, 35, marketing, Hong Kong: I plan to return home by the end of next year. I have been a conservative investor placing a major portion of my savings in fixed deposits (70 per cent). Of the rest, I have invested 20 per cent in mutual funds and 10 per cent in equities. We have a plot on which I want to construct a house on my return. My saving propensity is R60,000 per month for the next 15 months. Where should I invest this?
Natarajan: Let’s look at each need. You need to construct a house which will cost Rs 15 lakh. First, be prepared that it will cost you at least 20 per cent more than that your estimate.
Start putting aside your R60,000 for building a long-term corpus. A good diverisfied mutual fund from DSP Blackrock, HDFC, Birla Sunlife will work. Choose from 5-star rated funds from valueresearchonline.com or consult the Mint 50 list.
For house construction, use existing savings and money lying in FDs (fixed deposits) and buffer it up with a loan.
Next, look at liquidating stocks or funds that have crossed the 1-year holding period. But don’t do this till you actually need the money — and you will not need it all together.