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Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 29, 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 - May 19, 2025

I'm 34 years years old, my fixed income is 3 lacs 20 thousand per month. Also receive 6500 monthly rent from one of the parents house, currently we use this fund in household expenses. Current EMIs of around Rs. 45,000 per month with home loan pending for 200 months. Investment: Emergency fund is 7 lacs in FD, in process to increase it minimum 15 lacs. Lic for Mom and Dad total investment done is 4 lacs in 2 years which includes 1 lacs per year investment for 10 years. Gold I purchase 20gm every year, current Gold amount saved about 15 lacs. For family health insurance is 50 lacs with 2 policies including 2 persons each. How much savings per month should be there to secure my future and become debt free and financially stable? Also, suggest where should I invest the money ? Also, I am also thinking to take a good term insurance for myself, please suggest shall I go for one or two term insurance from different companies ?

Ans: You already have a good income and discipline. Let’s look at how to move ahead wisely.

Here is a full plan that is practical and complete from all sides.

Cash Flow and Current Liabilities

Your income is Rs. 3.2 lakhs per month. That is very strong.

EMI outflow is Rs. 45,000. That’s about 14% of your salary.

You also receive Rs. 6,500 rent, used for household expenses. That is fine.

Current emergency fund is Rs. 7 lakhs. Your target is Rs. 15 lakhs.

This goal is important. You must prioritise this fully before new investments.

Your home loan is long, 200 months remaining. That’s about 16.5 years.

Emergency Fund Planning

Your goal of Rs. 15 lakhs is suitable based on your lifestyle.

Continue building it with part of your monthly surplus.

Keep this fund in safe, liquid FDs or liquid mutual funds.

Don’t invest this fund into risky or long-term assets.

Emergency fund must be ready for any medical or job loss event.

Review of Existing Commitments

You’re paying Rs. 1 lakh per year in LIC for your parents. That’s a total of Rs. 10 lakhs in 10 years.

These traditional policies give poor returns. Usually below 5% annual returns.

You may consider stopping these if possible. Check surrender value from LIC.

If you surrender, reinvest in mutual funds through Certified Financial Planner.

That can give you much better long-term wealth creation.

Term Insurance Planning

You are thinking of term insurance. That is a wise step.

Just one term plan is enough. Multiple term policies are not required.

Term plan is pure protection. There is no maturity value. Only death benefit.

Buy only from a trusted insurer. Use online or offline method. Either is fine.

Choose coverage 15 to 20 times of your annual income. That will protect your family.

Ensure the term insurance covers till age 60 or 65.

Gold Investment Review

Buying 20 grams gold every year is a habit you follow.

You have already saved around Rs. 15 lakhs in gold.

Please do not increase gold allocation further. Already enough is done.

Gold does not grow like equity. It does not give interest or dividends.

Keep it only as 5% to 10% of your total wealth. Not more.

Home Loan Repayment vs. Investing

You are repaying a long-term home loan.

Loan interest gives tax benefit on interest and principal.

Don’t rush to repay the home loan early.

Instead, use monthly savings to build assets.

Good investments will grow more than the loan interest rate.

So wealth creation is better than early loan closure.

Once your emergency fund is done, focus on investments.

Investment Strategy to Build Wealth

Start monthly SIPs in actively managed mutual funds.

Don’t go for direct plans. They don’t give guidance or tracking.

Invest through regular plans with a Certified Financial Planner.

That gives personal help, portfolio review, goal mapping and tax planning.

Direct funds don’t provide this support.

SIP should be spread across large cap, flexi cap and midcap categories.

You can add hybrid funds too. Based on your risk level.

Actively managed funds do better than index funds.

Index funds don’t beat inflation. They only copy the index.

In active funds, skilled fund managers try to beat the market.

Start with Rs. 50,000 SIP monthly if you can.

After full emergency fund, you may increase further.

Debt Reduction Strategy

Continue EMI payments for now without lump sum repayment.

Your surplus should go to wealth creation, not loan prepayment.

But after 8-10 years, you can consider partial prepayment.

That will save interest and reduce loan term.

Keep this flexible. Don’t make it a fixed goal now.

Retirement and PF

Your PF corpus is around Rs. 2.5 lakhs now.

This is a long-term saving. Continue it as per company policy.

PF should be part of your retirement plan.

But don’t rely only on PF. Inflation will reduce its real value.

Mutual funds can help create more retirement wealth.

Review retirement plan with your Certified Financial Planner every 3 years.

Health Insurance Check

You have Rs. 50 lakh coverage across two policies.

That is a strong and wise decision.

Review if your parents are covered. If not, consider separate policy for them.

Health costs are rising. Good coverage is a must.

Ideal Monthly Saving Target

Your monthly income is Rs. 3.2 lakhs.

Your fixed outflow (EMI and essential expenses) is around Rs. 1.2 lakhs.

You can comfortably save Rs. 1.5 lakh per month.

Split it into emergency fund, SIPs and short-term goals.

Prioritise goal-based investing, not random saving.

Track your net worth every year to monitor progress.

Suggested Investment Buckets

Emergency Fund: Top up from 7 lakhs to 15 lakhs first.

SIP in Mutual Funds: Start with Rs. 50,000 monthly.

Gold: Stop buying more. Keep current holding only.

Short Term Goals: Use recurring deposit or ultra-short debt fund.

Tax Saving: Use ELSS mutual funds, not insurance or ULIPs.

Retirement: Long-term equity mutual funds for high growth.

Important Financial Habits to Maintain

Always save before you spend. Make saving automatic.

Don’t mix insurance and investment. Keep both separate.

Review your plan every 12 months.

Avoid personal loans and credit card EMIs.

Take help from Certified Financial Planner when required.

Finally

You have good income and financial discipline already.

Emergency fund, term cover and SIP should be top focus now.

Do not increase gold allocation anymore.

Don’t buy another term plan from second insurer. One is enough.

No need to rush with loan prepayment. Focus on wealth creation.

Mutual funds through MFD and CFP guidance is better than DIY plans.

Avoid traditional LIC policies. Use that money for mutual funds instead.

If you follow this path, you can become debt-free and wealthy in 12-15 years.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.