Latest news with #SureshSadagopan
Hindustan Times
5 days ago
- Business
- Hindustan Times
Buying a house in your 40s or 50s: Which is the smarter financial move?
A Reddit post by a 53-year-old who lost his job has sparked discussion about the ideal time to buy a home. He shared that he purchased a ₹2 crore house seven years ago without taking a loan. Now, even after losing his job, he lives stress-free by relying on a Systematic Withdrawal Plan (SWP) to cover his expenses. His advice: don't rush into homeownership in your early 40s. Instead, take calculated risks, explore better career opportunities, and focus on building a solid financial foundation through investments. 'There's no need to hurry. Don't fall for FOMO,' he cautioned. The Reddit user compared his situation to a friend who bought a home 15 years ago and is still paying EMIs. His advice to younger people is to focus on saving, investing, and taking career risks instead of rushing to buy a house too early out of fear of missing out. "Don't rush into buying a house in your early 40s. Take risks, explore better job opportunities, and focus on investing as much as you can. Once you've built a strong financial base, then consider buying a home," the post said. "Life is meant to be enjoyed, not just spent repaying EMIs and loans. Yes, owning a home is important, but there's no need to hurry. Don't fall into the trap of FOMO," the post read. Others, however, are of the opinion that by the time you're 55, a home is more for your children than for yourself. Also Read: Key considerations for first-time homebuyers: Netizens say watch out for black mold and noisy open kitchens Reddit users agree that building a financial corpus is crucial when planning to buy a home. One user shared that they bought their first flat at 30 and repaid the loan within five years. They later purchased a second flat at 37 and are now working to clear that loan within two years. 'I'm earning decent rental income from my first property,' the user noted, emphasizing how early investments can yield long-term financial benefits. Another user highlighted that the value of homeownership goes beyond just utility. 'What about the emotional and legacy value a home provides?' they asked. For those who can afford it or are willing to take little risk, they argued, buying a home is worth it. 'At 55, the house is for your kids, not for yourself,' they said. Also Read: From Sholay to Bengaluru South: Can a name change revive Ramanagara's real estate market? Financial advisors say that the decision to buy a home depends on several personal and financial factors. 'People buy homes in their 30s or 40s, but some do it even in their late 50s. A lot depends on when you settle down, get married, and have children,' Suresh Sadagopan, a financial advisor, said. Family needs and the desire for stability, especially related to children's education, often influence the timing of a home purchase. Buying a home too early in one's career can create challenges. Limited budgets may force buyers to settle for smaller homes or locations far from the city centre, which may not be ideal in the long term. 'EMI planning is also critical,' Sadagopan advised. If both partners are earning and sharing the EMI, it works well. But in cases where the loan burden is high, say, for a ₹2.5 crore property where the couple contributes ₹50 lakh from savings and pays ₹70,000–90,000 each per month, it can become risky. 'If one person loses their job, the pressure becomes immense,' he said. Expensive properties also come with additional costs like stamp duty, registration, furnishing, and brokerage, which often are not recoverable. He advised homebuyers to exercise caution, especially when making big-ticket purchases. 'Don't try to do everything at once. You can furnish your home gradually over two to three years,' he said. He outlined two common approaches to homebuying. One involves purchasing an entry-level home early and upgrading later by building equity; the other is to wait, save diligently, and buy a dream home in one go. 'For those who struggle with financial discipline, buying early and leveraging equity for an upgrade later may be the smarter choice,' Sadagopan added.
Mint
01-05-2025
- Business
- Mint
Got a salary hike? Here's how a step-up SIP mutual fund strategy can help you save smarter
With salary appreciation letters being distributed, mutual fund distributors are suggesting individuals consider using a step-up systematic investment plan (SIP). This advanced SIP automatically enhances the SIP amount by a set percentage or value at every SIP anniversary. After every anniversary, you can save an additional 5-10-15% to ensure your savings increase in line with your income. You can also choose to increase the amount, such as ₹ 500, ₹ 1,000, or more, automatically without having to trigger an enhancement in the SIP amount. 'Step-up SIPs avoid the lethargy involved in converting salary increases lying idle in the bank account to investments. It ensures one saves 5-10% additional without any manual intervention, instead of increasing expenses in tandem with salary raises,' says Suresh Sadagopan, founder of Ladder7 Wealth Planners. The seamless approach of saving more each year helps investors avoid wasting time weighing the pros of increasing lifestyle expenses or managing within the same means. For example, imagine an investor saving ₹ 10,000 each month for 60 months under a normal SIP. She would have accumulated ₹ 6 lakh, which would grow to ₹ 7.74 lakh if one extrapolates using an estimated return of 10%. However, if she uses a 5% step-up every year, the accumulated amount increases to ₹ 6.63 lakh, which grows to ₹ 8.47 lakh in the same 60 months at the same 10% returns. 'We have observed that investors somehow manage the expenses when an elevated amount is automatically invested. Psychological aspect of managing within the means forces even the undisciplined to save for their goals that require a probably 5-7% additional SIP amount every year,' Sadagopan adds. While step-up SIPs offer benefits, some advisors caution about the long-term impact, especially when salary increases do not meet expectations or living expenses rise due to ageing parents and growing children. Healthcare costs are anticipated to rise 13% in 2025, per Aon's Global Medical Trend Rates Report 2025. Also, personal expenses double as a child crosses 5-year buckets, while school fees are rising at the rate of 18-20% annually in metros. Nevertheless, if you find this tool useful to ensure you do not fall out of the habit of saving and wish to use it for enhanced savings, exercise caution with the percentage or amount increase, especially if you approach investing the DIY way– just like 101.1 million SIPs accounts using the direct plan route (non-commission based online or through fintech). Note that once you set a higher SIP limit at each anniversary, you cannot reduce the SIP amount under the step-up SIP. 'Those with a 50,000 step-up SIP might start feeling the pinch in the fourth or fifth enhancement when the SIP amount increases to ₹ 65,000 per month,' says Sadagopan. In the third or fourth year of a step-up SIP, the accelerated SIP amount may be difficult to manage from a cash flow perspective. 'With DIY investors, managing the additional cash flow is a challenge, in case one forgets the SIP anniversary date, when the higher amount kicks in,' says Ajay Sehgal, founder and managing director of Allegiance Financial. If the balance is not maintained in the bank account according to the enhanced amount, SIP bounce charges of ₹ 350- ₹ 700 will be applicable. These charges could reduce mutual fund returns to the extent of penal charges. To avoid this, set reminders for your step-up SIP anniversary or use an app with built-in technology. If funds are scarce, you can pause or stop the SIP. 'To reduce the amount of the step-up SIP, one needs to close the existing SIP mandate and then apply for a fresh SIP mandate with the optimum amount of SIP instalment. However, the cancellation request should be sent seven business days prior to the day of the SIP date,' says Sehgal. Also, while starting a fresh SIP, remember to quote your existing folio number with a fund house to ensure you are able to trace all your units of a particular fund under the same folio, even if the SIP dates are different. Another disadvantage of step-up SIPs is that investors tend to ignore portfolio reviews and alter their investments based on the scheme's performance. While no charges are incurred in cancelling an SIP and restarting a fresh one, there is a way to ensure that you do not face the hassle of maintaining a higher cash flow. Instead of opting for an in-built step-up SIP, one can add an additional SIP based on the actual increase. This ensures you save the higher amount based on the scheme's performance, and you aren't taken by surprise. 'You can align the additional SIP based on the date of appraisals, your cash flow and the date that you would prefer,' says Sehgal. First Published: 1 May 2025, 12:32 PM IST
