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Ramalingam Kalirajan |10881 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 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 - Jun 27, 2025Hindi

Hi Sir , I am now at 35. My monthly income is 70K. I have PL of 12L and Credit Card Dues of 6 lakh. I have LIC 12k per year and an market link investment and life insurance policy of 10k per month. I have liability of school fee of my child that is 30K / Y. Please suggest.

Ans: Understanding Your Current Financial Situation
– You are 35 years old with Rs 70,000 monthly income.
– You have a personal loan of Rs 12 lakh.
– Your credit card dues are Rs 6 lakh.
– You pay Rs 12,000 yearly towards a LIC policy.
– You have a market-linked insurance plan costing Rs 10,000 monthly.
– Your child’s annual school fees are Rs 30,000.

Your financial situation shows some urgent areas to fix. You have high debt. Your savings are locked in non-useful products. Immediate steps are needed.

Assessing the Impact of Debt on Your Finances
– Personal loans and credit card dues are costly.
– Personal loans carry interest rates of 12% to 18%.
– Credit cards have interest rates of 30% to 42% yearly.
– These loans are wealth-destroying, not wealth-building.

– With Rs 70,000 salary, your EMI capacity is limited.
– High debt EMIs will strain your daily living expenses.
– This can affect your peace of mind and family life.

Reducing debt must be your first priority.

Analysing the LIC and Market Linked Insurance Plan
– LIC policy premium is Rs 12,000 yearly.
– You also pay Rs 10,000 monthly for a market-linked plan.
– This totals Rs 1.32 lakh per year for insurance.

– These policies are investment-cum-insurance.
– Such products give poor returns and inadequate protection.
– They lock your money for long periods.

A Certified Financial Planner always advises pure term insurance for protection.
Investments should be in mutual funds separately for better growth.

Suggested Immediate Actions on Insurance Policies
– Surrender your market-linked insurance plan immediately.
– Also surrender LIC if it is a money-back, endowment, or ULIP.
– Stop paying further premiums on both.

– Use the surrender values to repay your debts partly.
– Buy a pure term insurance plan separately for life cover.

– The term insurance premium will be low.
– Around Rs 8,000 to Rs 12,000 yearly for Rs 50 lakh to Rs 75 lakh cover.

Your first step is to protect your family without wasting money in poor plans.

Creating a Practical Debt Repayment Strategy
– List all your loans with outstanding amounts and interest rates.
– Start with clearing the highest interest loan first.

Step 1: Pay Off Credit Card Dues First
– Credit cards charge the highest interest.
– Take a personal loan top-up at lower interest to clear the cards.
– If top-up is not possible, convert your credit card dues into EMIs.

– Avoid making only minimum payments.
– Pay the full amount or convert to lower EMIs.

Step 2: Repay Personal Loan Next
– Once credit card dues are cleared, focus on personal loan EMIs.
– Use every bonus, incentive, or side income for loan prepayment.
– Don’t delay prepayment. Interest eats your wealth silently.

Planning a Monthly Cash Flow Budget
– Your monthly income is Rs 70,000.
– Set aside Rs 8,000 yearly for term insurance premium.
– Child’s school fee is Rs 2,500 monthly (Rs 30,000 yearly).

– Your household expenses should not exceed Rs 25,000 to Rs 30,000.
– Allocate Rs 5,000 to Rs 7,000 monthly for essential savings.
– Use the rest fully to clear debt EMIs.

Keep your lifestyle simple till your debts are cleared.

Setting Up an Emergency Fund Slowly
– After clearing your loans, start building an emergency fund.
– This should cover 3 to 6 months of expenses.
– Keep it in a liquid mutual fund or sweep-in FD.

This will protect your family during job loss or medical emergencies.

Starting Proper Investments After Debt Clearance
– Don’t invest aggressively until your debts are cleared.
– Debt interest is higher than investment returns.

After debt clearance, start SIP in actively managed mutual funds.
Don’t choose index funds.

Why Avoid Index Funds?
– Index funds only copy the market without expert guidance.
– In falling markets, they fall with the index.
– Actively managed funds aim to protect your downside.
– Expert fund managers spot opportunities and risks.

Mutual funds through a Certified Financial Planner give you personalised advice.
Don’t go for direct funds.

Why Avoid Direct Mutual Funds?
– Direct funds give no personalised advice.
– In tough markets, you will have no guidance.
– A Mutual Fund Distributor (MFD) holding CFP credentials helps you stay disciplined.

Regular funds through an MFD have monitoring and handholding. This protects your long-term goals.

Keeping Your Child’s Education in Focus
– School fees are currently manageable.
– But higher education will need a bigger corpus.

After your debts are cleared, start a dedicated SIP for your child.
Prefer an actively managed equity mutual fund for growth.

Increase the SIP yearly as your income grows.

Protecting Your Retirement in the Long-Term
– At 35 years, retirement is around 25 years away.
– Start small investments in equity mutual funds after debt clearance.

PF and PPF can be part of your retirement safety net.
But they alone are not enough.

Mutual funds give higher growth potential for long-term retirement goals.

Smart Cost-Cutting Suggestions to Improve Cash Flow
– Cut down unnecessary lifestyle expenses temporarily.
– Postpone big-ticket purchases like phones or vacations.
– Stop premium OTT subscriptions if not used.
– Limit eating out and reduce online shopping.
– Use public transport or carpool to save fuel.

Every Rs 1 saved can help clear your debt faster.

Exploring Additional Income Opportunities
– Look for freelance or weekend work in your skill area.
– Even Rs 5,000 to Rs 10,000 extra per month helps your debt reduction.
– Explore online part-time teaching, content writing, or digital freelancing.

This extra income can be used fully for loan repayment.

Reassessing Your Loans Every 6 Months
– Review your debt status every 6 months.
– If your income increases, increase EMI or make prepayments.

This reduces your interest and loan tenure quickly.

Important Money Habits to Follow
– Always pay your full credit card dues on time.
– Never take fresh personal loans unless it is an emergency.
– Don’t borrow to invest.
– Avoid EMI shopping for gadgets and appliances.

Your focus now should be on clearing your past dues first.

Your Step-by-Step Action Plan
Stop all poor insurance plans and surrender them.

Buy a pure term insurance plan for family protection.

Pay off credit card dues first using personal loan top-up or EMI conversion.

Stick to a tight household budget.

Allocate all savings towards debt clearance.

Start building an emergency fund only after debt is cleared.

Begin SIPs in mutual funds for child’s education and retirement later.

Get ongoing guidance from a Certified Financial Planner.

Final Insights
Your debt levels are high but can be cleared with discipline.
Don’t panic or lose hope. Start taking small steps today.

Clear your debts first to achieve financial peace.
Then start your wealth-building journey through proper mutual fund investments.

Avoid confusing insurance with investment.
Don’t touch real estate for investment purposes. It is illiquid and costly.

Work with a Certified Financial Planner to review your progress yearly.

In the future, your family’s financial stability will thank you for these steps.

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.