Hi,
My friend's monthly 1.05 Lakh, he have opted for 10K VPF so, in hand it is 95k.
I have 2L of gold loan, 6L of car loan (EMI -23K), Life insurance 7.6K.
Have invested 50k in mutual fund, 50k PPF. Since he is staying in rent and the land values keeps appreciating, he have planned to buy a land worth 45L and built a house in another 30-35L.
He have stopped contributing to Mutal fund and PPF from this month, aiming to close gold loan in next 10 months adding some more money. Started saving 10k from last month for emergency fund (20k currently I have for EF). No other saving.
For home, he have planned to withdraw PF+VPF = 8L and apply for home loan. How can the finance manager efficiently and closed all the loans. If the land is not purchased now, it would be doubled in few months, so purchasing land cannot be given up.
Ans: Monthly take-home is Rs. 95,000 after VPF.
EMI for car loan is Rs. 23,000. Gold loan to be cleared in 10 months.
Life insurance premium is Rs. 7,600 monthly. This is likely an endowment.
Emergency fund is only Rs. 20,000 now. It is low for current risk.
No other savings currently. All new savings are paused.
???? Loans and Liability Impact
Gold loan of Rs. 2 lakhs is a short-term concern. Targeted to close in 10 months.
Car loan of Rs. 6 lakhs is a medium-term burden. EMI is high for cash flow.
Planning a home construction worth Rs. 75–80 lakhs is too ambitious now.
Land cost alone is Rs. 45 lakhs. Construction will add Rs. 30–35 lakhs.
Even if Rs. 8 lakhs PF+VPF is withdrawn, loan requirement is still very high.
EMI for a Rs. 60–65 lakhs home loan could cross Rs. 50,000 monthly.
With car loan and insurance, monthly fixed outgo will be more than Rs. 80,000.
Very little buffer left for regular life and emergencies.
???? Assessment of Current Assets
Mutual fund: Rs. 50,000. It is still early. But stopping SIP is not ideal.
PPF: Rs. 50,000. Cannot be withdrawn now without penalty.
Emergency fund: Rs. 20,000. Target should be Rs. 2 lakhs minimum.
Gold loan is on pledged jewellery. It is not a liquid asset anymore.
So total usable savings are very limited.
???? Review of Insurance
Monthly Rs. 7,600 for life insurance seems to be for traditional endowment.
These policies give poor returns over time.
You may review if surrender is possible after 3 years.
Instead, get a term plan. Cost is low. Cover can be 15 to 20 times income.
Balance amount can be invested in mutual funds through MFD + CFP.
???? Land Purchase Assumption and Risks
Planning to buy land now assuming price will double soon.
This is a risky mindset. Land value may not double.
No regular income from land. No tax benefits. No liquidity.
Loan on land does not offer Section 80C or 24(b) benefits.
Construction may delay. Cost may rise. EMI pressure will increase.
Cash flow stress can affect lifestyle and peace of mind.
???? Priority-Based Action Plan
?? First: Build Emergency Fund
Save Rs. 10,000 every month for emergency fund.
Target should be Rs. 2–3 lakhs. This is first defence against life shocks.
Until this is ready, no big commitment should be taken.
?? Second: Close Gold Loan
Finish gold loan repayment in 10 months as planned.
Freeing the pledged jewellery will give emotional comfort.
You can even pause jewellery schemes now to save more.
?? Third: Review Car Loan
EMI is Rs. 23,000. It is high considering your income.
Check if you can prepay small amounts yearly.
Or check for refinancing at a lower interest.
Reduce EMI burden before taking another loan.
?? Fourth: Review Insurance
Endowment gives poor return, around 4% to 5%.
If policy is more than 3 years old, check surrender value.
Stop and invest balance in mutual fund via MFD with CFP.
Get a term cover of Rs. 1 crore at least. Premium will be under Rs. 1,000 monthly.
?? Fifth: Restart SIP + PPF
Don’t stop mutual fund and PPF completely.
Just do Rs. 2,000 SIP in 3 funds via CFP.
Also continue PPF with Rs. 1,000 monthly minimum.
Compounding works only with regular and long-term investment.
?? Sixth: Land Plan Needs Revision
Avoid land now. It adds risk. Returns are uncertain.
Focus first on clearing current loans.
Then, increase investment portfolio and savings.
Later you may revisit land after 5–6 years if income rises.
?? Seventh: Keep Goal-Based Vision
No kids now. But keep education goal in mind.
Start one goal-based SIP after 12 months.
For example: SIP for child education Rs. 5,000.
SIP for retirement Rs. 3,000.
Split these in diversified mutual funds via MFD with CFP.
???? Why Real Estate May Not Be Ideal Now
Land or property needs huge investment.
Liquidity is low. You can't sell in emergency.
No monthly return till house is built and rented.
Capital gain takes time. No guarantee of doubling.
Maintenance, taxes, legal issues can reduce net gain.
???? Why You Should Resume Mutual Fund Investing
Equity funds give 12–14% potential return long-term.
Better than land or endowment policies.
Liquidity is high. You can redeem in part.
Taxation is simple under new rules.
Invest through MFD with CFP support. They plan better.
???? Important Note on Mutual Fund Taxation
Equity MF gains under Rs. 1.25 lakhs are tax free.
Beyond that, taxed at 12.5%.
Short-term gains are taxed at 20%.
For debt MF, taxation is as per your income slab.
???? Goal Suggestions for Next 5 Years
Emergency fund: Rs. 2 lakhs. Finish in 12 months.
Car loan: Prepay small extra EMI per year.
Gold loan: Clear in 10 months.
Term insurance: Buy Rs. 1 crore cover.
Mutual fund: Start 3 SIPs. Rs. 2,000 each.
PPF: Continue Rs. 1,000 monthly.
Land/home: Plan after 5–7 years.
???? What Needs to Be Avoided Now
Don’t rush into land purchase now.
Don’t stop all investments.
Don’t carry all loans together.
Don’t keep multiple endowment policies.
Don’t depend on land appreciation.
???? Key Behavioural Suggestions
Lifestyle pressure will increase after home loan.
Stay with current rent setup for 3–5 years more.
Focus on liquidity, not just property.
Delay real estate, but not mutual fund SIPs.
Focus on financial peace, not emotional pride.
???? Things to Track Every Month
Track EMI-to-income ratio. Keep under 40% ideally.
Track net savings rate. It should be at least 20%.
Monitor emergency fund status.
Watch SIP performance once a year.
Talk to your CFP every 6 months.
???? What to Do If Bonus or Hike Comes
Use 30% to prepay loan.
Use 30% to add to emergency fund.
Use 30% to increase mutual fund SIP.
Keep 10% for enjoyment. Balance is key.
???? Plan For Child and Spouse
Plan a SIP for future child’s education.
Review health insurance coverage for family.
Add term insurance early for lower premium.
Spouse may consider part-time work later for support.
???? Final Insights
Your friend's intention is strong.
But timing of the land plan is not good now.
Focus on clearing loans and rebuilding investments.
Avoid stopping SIPs for property dreams.
Step-by-step approach will keep life peaceful and steady.
Land will not go anywhere. But lost savings won’t return.
Build strong foundation now. Property can come later.
Best Regards,
?
K. Ramalingam, MBA, CFP,
?
Chief Financial Planner,
?
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by chittanand on Feb 02, 2023English
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