Money Matters

Managing your money can be tricky. Send your queries and top- notch industry leaders will help you resolve any issue.

Investment

Sumanth Bhardwaj Mudigonda: I am a 26-year-old pilot from Mumbai and going to marry next year. My current take-home salary is ` 24 lakh a year. It will rise to ` 35 lakh (per annum) in the next 24 months and to ` 55 lakh in another two years. After that, there will be 2-4 per cent rise every year. The freebie I get for myself and my wife is free travel. My current expenses include a monthly house rent of ` 22,000 and a car EMI of ` 20,000 for another 58 months. Kindly tell me how much I should save so that I am secure.

Ashish Shanker, Executive Vice President and Head, Investments, Motilal Oswal Private Wealth Management, replies:

It is truly said that compounding is the eighth wonder of the world and you are likely to be a beneficiary. Starting early ensures that time is on your side and financial goals will be achievable. After taking into account house rent and car EMI, your current surplus stands at Rs 19 lakh per annum. It could increase even more as you are expecting pay hikes in the coming years. Your priority must be to own a house and purchase of a term insurance. While purchasing the house, cap the EMI to 30-35 per cent of your salary so that it does not cause any stress or affect the current cash flow. As a rule of thumb, one should attempt to save 30-35 per cent of one’s income to ensure that one builds a habit of saving and resorts to living within one’s means. These savings can be invested through SIPs and will help you meet future goals such as marriage, insurance, child care and retirement. As age is on your side, a higher equity allocation can be taken to generate higher returns over the years. The portfolio’s equity component can be toned down as the years progress, and the portfolio can take a more balanced shape.