Hi,
I have a monthly salary of 1.32 lakhs. Pay a monthly EMI of 35 K towards home loan and a 25 K EMI of 25 K towards a personal loan (it's a 5 year personal loan of 10 lakhs, paid almost 2.5 years of EMIs). Have a year old baby.
Questions
1. At the end of the month I am usually left with no savings, how to plan better.
2. What all investment should I make for my family my baby's education.
3. I wanted to also understand how can I claim rebate in taxes on home loan (I have opted for new regime)
Ans: Thanks for sharing your detailed background. You have a young family and steady income.
But no savings is a big warning sign. EMIs are eating most of your salary. Your baby’s future needs attention.
Let’s create a 360-degree plan to improve your finances. We'll address savings, investments, and tax clarity.
Income and Expense Breakdown
Monthly salary: Rs 1.32 Lakhs
Home loan EMI: Rs 35,000
Personal loan EMI: Rs 25,000
Baby’s expenses: Likely Rs 10,000–12,000
Monthly balance: Near zero
You are paying Rs 60,000 in EMIs. That’s almost half of your income.
This is choking your monthly cash flow. You are unable to save. That must be fixed.
First Step – Fix Monthly Cash Flow
No plan works without free cash in hand. You need Rs 10,000–15,000 savings monthly.
Try below steps:
Reduce unnecessary expenses
Track every rupee for 3 months
Stop subscriptions or memberships not used
Reduce eating out, shopping, online orders
Use fuel cards and cashback apps
Cancel OTT platforms if unused
Even small savings of Rs 3,000–4,000 help a lot.
Cut discretionary spending
Vacations can wait
Festival expenses must be cut
High-end gadgets are not needed now
Don’t impress others. Impress your future self.
Restructure personal loan if possible
You already paid 2.5 years of 5-year loan. That is 50%.
Check if your bank allows restructuring:
Can you reduce EMI by extending tenure?
Can you get top-up home loan to close personal loan?
Can you get balance transfer with lower EMI?
If your credit score is good, restructuring is possible. That will ease cash flow.
Talk to your Certified Financial Planner before any decision.
Emergency Fund is Non-Negotiable
Without emergency fund, you may fall into more debt.
Your goal:
Save Rs 2–3 Lakhs in liquid funds or sweep FDs
Use this only for job loss, medical crisis, etc.
Build this in 6–8 months gradually
Even Rs 4,000 monthly saving will help
This fund gives mental peace. Start this first before any investment.
Baby’s Education Plan
You must act early. Baby is 1 year old now.
You have 16–17 years before college. That is good time for compounding.
Start SIP of Rs 5,000 now. Use regular mutual funds. Use actively managed funds only.
Don’t use direct funds. They lack advice, rebalancing, and planning support.
Don’t use index funds. They cannot adjust during market fall. No active management.
Use:
Large cap fund for stability
Flexi cap fund for balanced growth
Midcap fund for long-term growth
Keep all under regular plan with help of a Certified Financial Planner.
Start with SIP. Later, shift bonus or arrears into lump sum.
Even small SIP now becomes big in 15–18 years.
Insurance for Family Protection
If something happens to you, your family must be safe.
Buy term insurance of Rs 50–75 Lakhs minimum.
Cost is low when bought early. Don’t mix insurance with investment.
Avoid ULIPs or moneyback LIC policies. They eat returns. If already bought, consider exiting and shifting to mutual funds.
Buy health insurance separately:
Rs 5–10 Lakhs family floater
Don’t depend on company cover alone
Add Rs 25 Lakhs super top-up later
Also, consider personal accident and disability cover. That is cheap and useful.
Monthly Investment Priority List
Once you restructure and save Rs 10,000–15,000 monthly, follow this order:
Build emergency fund (Rs 4,000–5,000/month till 3 Lakhs saved)
Buy term and health insurance (premium may be Rs 1,000–2,000/month)
Start SIP for baby’s future (Rs 5,000/month)
Start small SIP for your own retirement (Rs 2,000/month)
Don’t try to do all at once. Start slowly and increase as income rises.
Retirement Planning
You didn’t mention any retirement corpus. This must be addressed.
You still have 15–18 years before retirement.
Even a small SIP today becomes huge by age 55–60.
Start with Rs 2,000–3,000 SIP now.
Use:
Large cap
Balanced advantage fund
Hybrid equity fund
Later, shift more savings to this goal. Don’t delay.
Tax Rebate on Home Loan – New Regime
You have opted for new tax regime. So, no major deductions allowed.
No rebate under section 80C, 80D or 24(b).
That means:
You don’t get Rs 2 Lakhs interest deduction
You don’t get Rs 1.5 Lakhs principal deduction
Health insurance premium is not deductible
If your income is low, new regime may still work.
But with home loan, old regime is usually better. Because of:
Interest deduction (Sec 24)
Principal deduction (Sec 80C)
Insurance and PPF benefits
Speak to your CA or tax expert before choosing regime next year.
You can opt in and out every year (as salaried person). Review annually.
Avoid These Common Mistakes
Investing in ULIPs or LIC endowment policies
Waiting too long to start child education fund
Having no emergency corpus
Keeping savings in savings account only
Ignoring insurance
Overestimating rental income from real estate
Not reviewing tax regime yearly
Avoid these traps. Stick to a plan. Review it every 6 months.
Structured Action Plan – Month by Month
Month 1–3:
Track expenses daily
Identify wasteful spending
Talk to bank for personal loan restructure
Start saving Rs 5,000 minimum
Month 4–6:
Create Rs 1 Lakh emergency fund
Buy term insurance and health cover
Start Rs 3,000–5,000 SIP for baby’s future
Month 7–12:
Add retirement SIP
Increase emergency fund to Rs 2 Lakhs
Review loan structure again
Plan to repay personal loan faster if possible
Year 2:
Start SIP for your retirement goals
Plan for school admission expenses
Start estate planning
Finally
You are earning well. Your family is young. You have time.
But monthly pressure is eating all savings.
Fix your cash flow first. Then protect your family with insurance. Then invest.
Start mutual fund SIPs in regular plans. Avoid index and direct funds.
Every rupee counts. Small steps bring big peace later.
Your baby deserves a safe and strong financial future. You can create it.
Stay focused. Stay disciplined. Plan every rupee.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment