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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 06, 2025

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Aug 06, 2025Hindi

I'm a 28-year-old doctor in Pune, married to a non-working partner. My income is about 1.5 lakh per month. I have a high-interest education loan of 50 lakh and a car loan of 15 lakh. My current savings and investments are about 10 lakh, primarily in fixed deposits and some mutual funds. My financial goals are to become debt-free as quickly as possible and start a robust retirement plan for a secure future, given that my career has just started. How can I strategically use my current savings of 10 lakh to aggressively pay down my high-interest loans of 65 lakh while also continuing to invest for retirement?

Ans: You’ve taken a bold step by starting early on your financial planning journey.
Managing Rs 65 lakh debt with Rs 1.5 lakh income shows courage and commitment.
The fact that you have Rs 10 lakh saved already is truly impressive at age 28.
It’s possible to reduce debt quickly and also begin retirement planning, with proper balance.
Your medical career offers long-term income potential, which strengthens your financial foundation.

» Understand Your Current Financial Picture

– Monthly income is Rs 1.5 lakh.
– Outstanding loans total Rs 65 lakh.
– Savings and investments total Rs 10 lakh.
– Your partner is non-earning, so all financial decisions depend on your income.
– Focus is on debt clearance and retirement building.
– You’re at the right point to optimise cash flow and reduce interest burden.

» Split Your Rs 10 Lakh Into Purpose-Based Buckets

– Use Rs 1.5 lakh as emergency buffer.
– This protects you from unexpected expenses or medical costs.
– Invest this buffer in liquid mutual funds or ultra-short-term funds.
– Avoid FDs for emergency use. They are less flexible.

– Allocate Rs 6 lakh towards high-interest education loan.
– This helps reduce principal and interest cost quickly.
– Pay this directly to the lender as a principal-only payment.

– Allocate Rs 1.5 lakh towards the car loan principal.
– Though smaller in value, car loan interest adds up fast.
– Reducing it early saves EMIs and interest outflow.

– Keep the remaining Rs 1 lakh invested in mutual funds.
– This will support your long-term goals like retirement.

» Understand the Priority Between Loans

– Education loan carries higher interest and no asset backing.
– So it should be the first priority to close.
– Car loan has asset backing, but depreciates in value.
– The faster you reduce both, the better your financial health.
– Don’t delay repayment with minimum EMIs only.

– Use any yearly bonuses or incentives to make lump sum payments.
– Avoid waiting for full loan tenure to end.
– Debt reduction must be your top goal for next 3–5 years.

» Don’t Use All Savings to Repay Debt

– Keeping some liquidity is very important.
– If you use all Rs 10 lakh, you risk running dry in emergencies.
– That forces you to take more loans in the future.
– So keep at least 6–8 months of basic living expenses aside.
– Financial strength lies in both repaying loans and building liquidity.

» Systematic Monthly Strategy for Debt and Wealth Building

– Allocate Rs 75,000 each month towards loans.
– Prioritise Rs 60,000 for education loan and Rs 15,000 for car loan.
– Set automatic payments so you don’t miss EMIs.

– Use Rs 20,000 monthly for SIPs in mutual funds.
– Divide this between equity mutual funds and hybrid funds.
– Since you are young, equity exposure is important.

– Don’t use index funds. They are passive and lack flexibility.
– Actively managed funds give better risk-adjusted returns.
– During market dips, active fund managers protect your money.
– Index funds invest blindly in market cap, even in weak companies.

– Avoid direct funds. They give no guidance or support.
– Investing through regular funds with a Certified Financial Planner helps.
– You get help during market volatility, tax changes, and goal adjustments.

– Keep Rs 5,000 for insurance premiums and protection needs.
– Don’t mix insurance and investment.
– Avoid ULIPs or traditional endowment plans.
– If you already have LIC or ULIP, surrender and reinvest in mutual funds.

– Balance Rs 50,000 monthly for household needs and personal expenses.
– Maintain this balance for at least 12–18 months.

» Focused Retirement Planning Must Begin Now

– You are just 28. Time is your biggest asset.
– Start a separate SIP for retirement corpus.
– Choose diversified equity mutual funds with long-term growth focus.

– A small monthly SIP today will grow big over 30+ years.
– Let the retirement fund remain untouched till your 60s.
– Don’t pause or redeem this SIP unless in extreme need.

– You can increase SIPs whenever your income rises.
– Also consider National Pension Scheme (NPS) for long-term savings and tax benefit.
– NPS is optional, only if your debt reduction is progressing well.

– Don’t delay retirement savings thinking you’re young.
– Each year delayed will cost you crores in future.

» Be Cautious of Debt Traps

– Don’t take any more loans until existing ones are cleared.
– Avoid top-up loans, consumer durable EMIs, or credit card debts.
– These will damage your repayment capacity.
– If needed, delay lifestyle upgrades for a few years.

– Make debt freedom your family goal.
– Discuss openly with your spouse and create shared discipline.

– Every Rs 1 lakh of loan repaid early saves you lakhs in interest.

» Invest Based on Goals, Not Emotions

– Avoid jumping into real estate thinking it’s a good asset.
– It needs big down payments, EMIs, and maintenance.
– With Rs 65 lakh loan already, property will overload your balance.

– Instead, grow wealth slowly through mutual funds.
– Let compounding work quietly over years.
– Don’t chase quick returns or trendy stocks.

– Stay invested during market cycles. Don’t panic sell.
– Long-term wealth builds through patience, not speed.

» Set up a Yearly Review System

– Every 12 months, sit with a Certified Financial Planner.
– Review debt status, investments, and goal progress.
– Increase SIPs if income goes up.
– Rebalance investments if needed.

– Don’t forget tax planning also.
– If you redeem mutual funds, check new tax rules.

– LTCG above Rs 1.25 lakh is taxed at 12.5% on equity funds.
– STCG is taxed at 20% on equity mutual funds.
– For debt mutual funds, gains are taxed as per your income slab.

– So, stagger redemptions and plan exits properly.

» Maintain Adequate Risk Protection

– Get term life insurance based on your income and loan amount.
– It protects your family in case of unexpected events.
– Don’t choose plans with investment features.

– Also take a health insurance plan covering you and spouse.
– Medical costs can derail your financial plan.
– Don’t depend only on employer-provided insurance.

– These two protections – term and health – are non-negotiable.

» Maintain Financial Discipline Every Month

– No impulsive spending. No flashy purchases.
– Avoid lifestyle inflation until loans are gone.
– Live below your means for next 3–5 years.

– Track every rupee. Use budgeting apps if needed.
– Build habits that support wealth creation.

– Don’t try to impress others. Impress your future self.

» Plan For Partner’s Financial Involvement

– Your spouse can be involved in financial planning.
– Encourage skill development or freelancing if possible.
– Even small income adds big value over time.
– It also builds financial confidence in the family.

– If not working, let them handle budgeting or investment tracking.
– Financial awareness must be shared, not one-sided.

» Don’t Lose Momentum Midway

– You may feel tempted to slow down after 1–2 years.
– But stick to your plan consistently.
– Debt freedom takes patience and discipline.
– Reward yourself in small ways but avoid large spends.

– Visualise a debt-free and stress-free future.
– That vision keeps you going during tough phases.

» Finally

– You’ve already done what many in your stage haven’t.
– You have clarity, savings, and strong intent.
– Use Rs 10 lakh wisely to reduce debt without killing liquidity.
– Begin retirement planning now with SIPs in equity mutual funds.
– Don’t delay protection planning – get term and health covers.
– Avoid index funds and direct mutual funds.
– Choose actively managed regular funds with guidance from a Certified Financial Planner.
– Don’t fall for flashy schemes, property traps, or quick profits.
– Review your plan every year and increase contributions.
– You are on the right track. Keep your focus steady and consistent.

Best Regards,
K. Ramalingam, MBA, CFP,
Chief Financial Planner,
www.holisticinvestment.in
https://www.youtube.com/@HolisticInvestment

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