I was recently quoted in Economic Times WEALTH (15-21 July 2024) in the Q&A section where a panel of experts answers readers’ questions related to various aspects of their personal finances.
The exact question and the answer –
Here is the text version of the query and the reply –
Q – I am 41 years old, married with a wife and a child. I lost my job a month ago. My savings are as follows: FDs: ₹8.5 lakh; mutual funds: ₹46 lakhs (₹21 lakhs in equity and ₹25 lakhs in debt); government schemes: ₹47 lakhs (₹26 lakhs in PPF and ₹21 lakhs in EPF) and rental income: ₹20,000 per month. I have no liabilities, and my monthly expenses are around ₹60,000. How can I sustain my family expenses until I get a job? Can you suggest the order of withdrawal for my monthly expenses?
A – Your monthly expenses are Rs 60,000. Out of this, the monthly rental income will take care of Rs 20,000 worth of expenses. Your question is how to provide for the remaining Rs 40,000 monthly expenses till the time you get back to job.
From your asset base, the Rs 47 lakh parked in EPF+PPF are practically untouchable. So, we leave that as it is. The equity funds of Rs 21 lakh are also (I assume) earmarked for the long-term goals and hence, not to be withdrawn from.
As of now, you have two accessible debt components in your portfolio – Rs 8.5 lakh in bank FDs and Rs 25 lakh in debt funds. What is not known here is whether the debt funds you hold are from pre-tax-change era and whether they carry the indexation benefit or not. If the debt funds qualify for the tax-efficient indexation benefit, then it might be a good idea to keep them as it is and let it compound.
In such a scenario, you can look at making partial periodic withdrawals from your Rs 8.5 lakh FDs. If you have small FDs, then start liquidating them first for expense fulfillment. Given the residual monthly expense of Rs 40,000 (after rentals), the FD portfolio itself gives you a long runway to support your family’s expenses for comfortably 20+ months or till you get a job. And if you had been considering FDs as part of Emergency Fund / Liquidity reserve, then this is the exact scenario (job loss) where Emergency fund is to be utilized.
I am hoping that you already have a standalone health insurance which isn’t linked to your employment/employer. If not, then it is important to urgently cover this base. The same should be done in case of life insurance if possible.