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Ramalingam Kalirajan |8940 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 18, 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 18, 2025

I'm 34 years years old, me and my wife have joint income of around 2 lacs per month. Current EMIs of around Rs. 45,000 per month and House Rent Rs. 22,000 per month. How much should we be savings per month to secure our future and become debt free and financially stable? Also, suggest where should I invest the money?

Ans: At 34, with a steady income and manageable EMIs, you’re in a good position to build strong financial stability. Let’s now assess your situation from all angles and give you a full financial roadmap.

Income and Expense Analysis

Your combined monthly income is Rs. 2 lakhs.

Your current EMI is Rs. 45,000.

Your house rent is Rs. 22,000.

Total fixed outgo is Rs. 67,000 monthly.

After these, you are left with Rs. 1.33 lakh per month.

This leftover amount is your starting point to build savings and investments.

Emergency Fund Planning

Emergency fund is your first priority before any investments.

Keep 6 months of expenses in this fund.

For your household, target Rs. 4 lakhs to Rs. 5 lakhs.

Park it in liquid mutual funds or bank savings-linked FDs.

This will protect you from sudden job loss or medical expenses.

Insurance Protection Plan

Get health insurance for both of you separately from employer cover.

A Rs. 10 lakh floater family policy is ideal.

Life insurance should be term insurance only.

Coverage should be 15-20 times your annual income.

Avoid ULIPs, endowments, and money-back policies.

These mix insurance and investment and deliver low returns.

Debt Strategy for Freedom

Aim to close EMIs before investing heavily.

Start with highest interest debt first.

If you can add Rs. 10,000 extra per month towards EMIs, it will help.

This shortens tenure and reduces total interest.

Avoid taking new consumer loans.

Ideal Monthly Savings Target

From Rs. 1.33 lakh available, aim to save Rs. 80,000 monthly.

Use rest for lifestyle, vacations, family gifts and goals.

As income grows, increase savings by 10% every year.

Goal-Based Investment Approach

Let us now divide your investments into key life goals. This gives focus and clarity.

Short-Term Goals (0–3 years)

These can include vacation, car, or house deposit.

Avoid equity here. Too risky for short term.

Use ultra short-term mutual funds or arbitrage funds.

These give better returns than FDs with similar risk.

Medium-Term Goals (3–7 years)

Child birth, early school needs, small home improvement.

Use a mix of hybrid mutual funds.

Choose a balanced advantage fund and multi-asset funds.

They manage equity and debt dynamically. Suitable for this time frame.

Long-Term Goals (7+ years)

Children’s higher education, retirement, wealth building.

Focus more on equity mutual funds here.

Diversify across large-cap, flexi-cap, and mid-cap funds.

SIP of Rs. 50,000 monthly across 4–5 equity mutual funds is ideal.

Equity gives inflation-beating growth over long term.

Important Note on Index Funds

Many suggest index funds as low-cost option.

But they blindly follow the market without research.

In falling markets, they fall without cushion.

Actively managed mutual funds give better downside protection.

They have research-driven stock selection and flexibility.

Investment Mode – Direct vs Regular

Direct mutual fund option looks cheaper on paper.

But lacks advisor support and guidance.

Wrong fund or wrong asset mix can lower your long-term wealth.

Regular funds via a Certified Financial Planner ensure right strategy.

CFP monitors, rebalances and aligns portfolio to your goals.

Child Future Planning

If planning a child or already have one, start early.

SIP in child-focused mutual funds is a good start.

Use long-term funds for higher education corpus.

Avoid child ULIPs or endowment policies.

These are expensive and give low returns.

Retirement Planning from Now

You are 34. Retirement at 58 gives you 24 years.

Compounding works best in this time frame.

SIPs in equity mutual funds can build strong retirement wealth.

Add NPS only if you are sure of its structure and lock-in.

Better to use mutual funds with liquidity and flexibility.

Avoid Investment-Linked Insurance Plans

LIC, ULIPs, money-back plans offer low IRR.

If you have any, consider surrendering.

Redirect those funds to mutual funds with long-term vision.

How to Start Your Investments

Begin with a financial plan prepared by a CFP.

List all your goals with time and value.

Divide your Rs. 80,000 monthly savings across goals.

Allocate in the right mix of funds.

Monitor it every 6 months with the planner.

How to Become Financially Stable

Financial stability is more than just saving money.

It is about managing risk, growing money, and planning future needs.

Keep track of net worth yearly.

Avoid credit card debts. Use loans only for assets.

Increase savings rate as income grows.

Stay invested even during market falls. That’s where wealth is created.

Avoid Common Investment Traps

Don’t follow friends or social media for fund tips.

Avoid churning of funds frequently.

Don’t mix insurance with investments.

Avoid investing everything in one asset class.

Tax-Saving Investments

ELSS funds are good for 80C tax saving.

They also help create wealth in the long run.

Don’t overdo insurance to save tax.

Use PPF for some safe tax-free returns.

Use Bucket Strategy in Future

Create three buckets for money post-retirement.

Short-term bucket for regular needs in liquid or arbitrage funds.

Mid-term bucket in hybrid funds for 5–7 years needs.

Long-term bucket in equity mutual funds for growth.

This helps manage income and reduce tax stress.

Taxation on Mutual Funds (Updated Rules)

Equity mutual fund gains above Rs. 1.25 lakh are taxed at 12.5%.

Gains below this are tax-free in a year.

Short-term gains taxed at 20%.

Debt mutual funds taxed as per your income slab.

Keep Your Investments Simple

Choose 4–5 strong mutual funds only.

Don’t chase past returns.

Focus on consistency and fund manager experience.

Use SIPs for regular investing and lumpsum during market dips.

Final Insights

You are in a good place financially.

Just need structured saving and smart investing.

Rs. 80,000 monthly saving is a strong start.

Focus on risk protection, goal clarity and fund discipline.

Take guidance from a Certified Financial Planner for long-term support.

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.