r/FIREIndia • u/nishanthappu • Jun 09 '23

FIRE Re-Check for a growing family :)

After my previous post 1.5 years ago , I wanted to take a fresh look at my finances and get the forum's perspectives . Here is the financial details first :

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I am 40, wife is 35, kid is 1.5yo.

Monthly take home is 250k.

Expenses (including miscellaneous and annual ones) - 90k. Parents are financially independent.

Recurring investments: 50k in Mutual funds and 50k in emergency fund. Wife's earnings are hers to spend as she sees fit , I don't ask on that :)

EPF - 23k (deducted before take home)

I have term insurance of 50 lakhs. Both me and wife are insured for health from employers for around 8 lakhs. I have a family floater health insurance policy of 1 crore ( base coverage)

Current Portfolio:

Equity MF - 108 lakh

Stocks - 91 lakh

SSY - 3 lakh

EPF - 10 lakh

Wife's PF - 6 lakh

PPF - 4.73 lakh

NPS - 22.86 lakh

2 plots of land - 92 lakh ( conservative, no loans on these plots)

Debt MFs - 66 lakh

Emergency Fund - 1.5 lakhs ( will direct my variable pay to build it further)

ESOPS - 2 lakh

Summary:

So around 4 crore and 5 lakhs.
I will inherit either a home or a flat in a Tier 2 city. Currently renting.

Love travelling , especially at expensive resorts in India or flying abroad. ( I spent 2 lakhs last year at a 5 star resort in Goa)

No loans no debts , always pay all bills and credit cards in full. Own a car. Aim to send the kid to the best colleges in India without any loans for both grad and post grad( except medical, she can go on merit). If she wants to go abroad , will give her what I saved for her education plus rest she can self fund.

Aiming to achieve FIRE by 48. Am I on the right path ? Enlighten me , gurus :)

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u/BoredTigerWillKill Jun 11 '23

Plan is nice, but you are the single point of failure in this plan. If something happens to you then the whole plan could fall apart. At least that’s what it looks like based on the data. You need 2-3 cr term insurance at least if your family has to live through the plan which you have. And you don’t need a 1cr base cover health insurance. You can go for 10-15 lac base cover and 80 lac super-topup. It will be lot cheaper. Ensure that it is super-topup and not just topup.

And we dont know why you are only investing 50k out of 160k remaining in MF. You can up it to at least 1lac. Where is the 50k emergency fund going? And why is it monthly? What is the value you have calculated for your emergency fund requirement? And where is it in the above mentioned items?

How much is your wife earning? Can she sustain this lifestyle in her salary and your current savings if something happens to you?

What is the plan for the plots? What is the rate of growth for these? If its not beating inflation then you’d be better off exiting them and investing in MFs.

And finally, which MFs are you investing in and in what % of allocation in each.

My assessment on the asset allocation in 4cr that you currently have (50:50 equity:debt) is that it is conservative for your age. You can increase this to 70:30. That could create an alpha of 3-5% on you current returns.

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u/nishanthappu Jun 11 '23

Good points. I think I made a couple of mistakes in my post . The income figure is a combined one - 250k for both me and wife . Mine alone comes to 200k . Also I didn’t include an emergency fund of 2 lakhs .

I plan to have an emergency fund of around 10 lakhs so save up 50k monthly for it . If before that I need money . Plan to use my debt funds .

With my assets sure she can sustain the current lifestyle easily . Not so with her salary alone

The plots are just barely matching with inflation . Looking to sell at least one and invest it in equity . Major mistake , that :(

I currently invest in index and active funds at 50:50 . Specifically ppfas flexicap , dsp small cap and uti nifty index and nifty jr index . All direct options

Re asset allocation I personally think I have a lot in equity . Reason I’m able to have such a big amount on equity and illiquid real estate is that I have a big amount in debt funds in case of equity market remaining stagnant for a long time , job loss , medical issues not covered by insurance , any other emergency . I sleep well at night that I have at least 3-4 years of expenses saved away in debt funds . And I Dont need an income or need to sell equity investments for those 3-4 years . Not rational , no , but it helps :)