Hi I am 38 Years, Two kids Boy 9 year old and daughter 5 year old. Net salary Gross salary 1,20,000. I borrowed personal loan 25 lakh to purchase agricultural land 2 acre. I planted Areca nut plant 3 years ago and expected income in another 2 year. My expenses are household Rs.10,000 rent 8000 children education Rs.10,000 mutual fund investment monthly 5000 elss. Health insurance 3380. KGID 10,000. Term Insurance 3000. Income tax 10,000 please tell me how to plan my finances
Ans: You are 38 years old and managing a lot. You have two kids aged 9 and 5. You are already making some smart moves. You invested in land and are growing Areca nut. You are also investing in mutual funds and ELSS. This shows you are thinking ahead. That is a great habit.
Let’s now look at your complete financial picture. I will give you a 360-degree analysis. We will see where you are, what you need to change, and how to move forward. I will explain in simple words and with short sentences.
Income and Expense Analysis
Your gross monthly salary is Rs. 1,20,000.
Let us understand how this income is used:
Household expenses: Rs. 10,000
House rent: Rs. 8,000
Children education: Rs. 10,000
Mutual fund (ELSS): Rs. 5,000
Health insurance: Rs. 3,380
KGID (Life insurance saving): Rs. 10,000
Term insurance: Rs. 3,000
Income Tax: Rs. 10,000
Personal loan EMI (for Rs. 25 lakh): likely Rs. 45,000–50,000
You are spending about Rs. 1,09,000 monthly. That leaves very little surplus. This is a tight budget. But it can be improved. Let us look at your plan deeply.
Understanding Your Debt Burden
You took Rs. 25 lakh personal loan for buying land.
Personal loan has high interest. It is not meant for assets like land.
Also, this land will give income only after two years.
This means for the next two years, EMI is pure outflow.
There is no income to match it yet. This creates cash flow pressure.
That is why savings are getting reduced.
What you can do:
Try to prepay part of the loan if possible
Use any bonus or extra income to reduce this loan
Once Areca nut income starts, use it only for this loan
Do not take another loan for the land or plants
Try to close this loan early. That will free up your cash. Then you can save more.
Household and Lifestyle Expenses
Your household expenses are moderate. That is good.
House rent is also low. Education cost is manageable.
You are living within your means. That is a big plus.
What can improve?
Track every expense every month
Keep a budget for groceries and utilities
Avoid any new EMIs for next 3 years
Try to keep Rs. 3,000–5,000 monthly as buffer savings
Small discipline here gives you better control.
Existing Investments
You are investing Rs. 5,000 monthly in ELSS.
That is a good habit. ELSS gives tax benefit.
But this should not be the only investment.
You also have KGID at Rs. 10,000 per month.
Let us assess this properly.
Problems with KGID:
It is not pure insurance
It gives very low return (around 4–5%)
It locks your money for many years
You are paying Rs. 1.2 lakh per year into it
This amount can grow better in mutual funds
KGID is like LIC endowment. It mixes insurance and savings.
This does not help your goals. It blocks cash flow.
You already have term insurance. That is enough.
Action point:
Check if you can surrender KGID
Stop future premiums if possible
Shift this amount into mutual funds every month
You will get better returns and better control
This one change can free up Rs. 10,000 every month.
That is very helpful.
Mutual Fund Investment Review
Your monthly mutual fund investment is Rs. 5,000 in ELSS.
That is a good start. But not enough for long-term goals.
Once you reduce loan burden and stop KGID, increase MF amount.
Why choose mutual funds?
They beat inflation
They build long-term wealth
They are managed by professionals
They give liquidity when needed
But please invest only through Certified Financial Planner (CFP).
They guide you with a goal-based plan.
They help you choose the right funds.
Avoid direct mutual funds.
They look cheaper, but have no advice.
They lack portfolio strategy and monitoring.
Without guidance, mistakes will happen.
Regular plans through CFP are better.
You get reviews, rebalancing, goal setting.
Also, avoid index funds.
They follow the market.
They don’t protect in falling markets.
They don’t adjust to opportunities.
Actively managed funds do better over time.
That’s why stay with active mutual funds.
Insurance Planning
You are paying Rs. 3,000 for term insurance.
That is a good choice. Continue that.
You are paying Rs. 3,380 for health insurance.
That is also good.
Make sure your health cover is at least Rs. 10 lakh.
Include your wife and kids in the same plan.
If your current cover is low, consider increasing.
Medical cost is rising every year.
Do not depend only on employer’s insurance.
Have a personal family floater plan.
Emergency Fund Planning
You don’t have a clear emergency fund.
This is very risky. Life is uncertain.
Health issues, job change or crop failure can hurt.
Create an emergency fund of Rs. 1.5 lakh at least.
Keep this in liquid fund or savings account.
Build this over 6–8 months.
Put Rs. 2,000–3,000 every month into this fund.
Do not use this for daily use.
Child Education Planning
Your son is 9 and daughter is 5.
You need money in next 7–10 years.
School fees now is Rs. 10,000 monthly.
College education can cost Rs. 20–25 lakh per child.
You have to plan early.
Start separate SIPs for both children.
Put Rs. 5,000 monthly in each child’s goal.
Use child-oriented mutual funds or balanced funds.
Keep the SIP running for 10–12 years.
This will create a large fund for education.
Do not depend on loans for education.
Education loans add burden later.
Use investments to create funds peacefully.
Areca Nut Land Planning
You planted Areca nut 3 years ago.
You expect income in 2 more years.
That is a good initiative.
This will become passive income later.
Till that income starts, do not count on it.
Once income starts, use that income to:
Close your personal loan
Increase mutual fund investments
Add to emergency fund
Save for kids and retirement
Do not reinvest into land again.
Keep focus on financial assets like mutual funds.
They give better liquidity and less risk.
Retirement Planning
You are 38 now. You have 22 years to retire.
You need to plan from now.
Right now, no money is going for retirement.
After loan is cleared, start a separate SIP for retirement.
Put Rs. 10,000 monthly in a balanced or flexi-cap fund.
Increase it every year.
Use this fund only after 60.
This will create Rs. 1–1.5 crore easily.
Do not delay this plan.
Your Areca nut land income can also help later.
But don’t depend only on that.
Keep investing monthly for steady retirement wealth.
Tax Planning
You are paying Rs. 10,000 as tax.
ELSS gives you Rs. 1.5 lakh deduction.
Term insurance premium also helps.
KGID gives some tax benefit, but low returns.
Do not invest just to save tax.
Always see return and goal first.
After removing KGID, use ELSS, PPF or NPS for tax saving.
These are better options for long term.
What to Do Every Year
Review budget every 6 months
Review mutual funds with a CFP yearly
Increase SIPs as income increases
Track loan repayment and close early
Avoid new debt or credit card spending
Add Rs. 1 lakh every year in kids’ plans
Do yearly health checkup and insurance check
Keep all documents in one file
Write a WILL once assets are stable
Finally
You are doing well by being disciplined.
You have planted seeds for future income.
You are investing in ELSS and insurance properly.
But your cash flow is tight now.
Loan and KGID are blocking your savings.
Fix these two things first.
After two years, when Areca income starts, your situation will improve.
Till then, manage cash carefully.
Avoid any new loans.
Focus on increasing savings slowly.
Once loan is closed, shift that EMI into mutual funds.
That alone can create wealth.
Also build emergency fund.
And increase investment for kids and retirement.
Use mutual funds through a CFP.
They give better guidance.
Do not use direct funds or index funds.
They don’t suit personal goals.
Stay with active funds and regular advice.
Your financial future can be strong.
Just keep discipline, patience, and clarity.
Small steps every month give big results over time.
Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment
Question by Kapil on May 19, 2025
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