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38-Year-Old IT Professional Seeks Financial Advice on Managing Debt

Ramalingam

Ramalingam Kalirajan  |7097 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 16, 2024

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 - Jul 16, 2024Hindi
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Dear Sir, I am 38 years old, happily married and working in as IT professional. My monthly take home is around 92K. My current personal loans are having an balance around 9 Lakhs and an hand loans around 4 Lakhs. My current EMI cut off is around 85K due to bad financial planning in last few years due to personal emergencies, i have been incurring losses and unable to save salary. Personal loans will finish by February 2025, but unable to cope with the monthly EMIs and due to this it is having negative impact in cibel score. Could you please suggest me on how to plan things for short term and also on long term.

Ans: You are 38 years old, happily married, and working in IT. Your monthly take-home salary is Rs. 92,000. You have personal loans with an outstanding balance of Rs. 9 lakhs and hand loans of Rs. 4 lakhs. Your current EMI cut-off is Rs. 85,000. Personal loans will be cleared by February 2025.

Immediate Steps for Debt Management
Prioritize High-Interest Loans
Focus on clearing high-interest loans first. These are costly and impact your finances. Prioritizing them will ease financial pressure.

Negotiate with Lenders
Talk to your lenders. Request for lower interest rates or extended payment terms. This can reduce your monthly EMI burden.

Consolidate Loans
Consider consolidating multiple loans into a single loan. This can lower your overall interest rate. It simplifies payments and reduces stress.

Cut Unnecessary Expenses
Identify and cut unnecessary expenses. This will free up funds to pay off debts. Focus on essential expenses only.

Mid-Term Planning
Emergency Fund
Start building an emergency fund. Aim for 3-6 months of expenses. This provides a safety net for future emergencies.

Financial Discipline
Stick to a strict budget. Avoid unnecessary expenses. Ensure timely payment of EMIs to improve your CIBIL score.

Long-Term Financial Planning
Investing in Mutual Funds
Once debts are cleared, start SIPs in mutual funds. Diversify your investments across equity, debt, and hybrid funds. This will help in wealth creation.

Retirement Planning
Start saving for retirement. Consider PPF and NPS for long-term benefits. Regular contributions will ensure a comfortable retirement.

Children’s Education
Plan for your children’s education. Start investing in child-specific mutual funds. Ensure their future is financially secure.

Final Insights
Focus on clearing high-interest loans first. Negotiate with lenders for better terms. Build an emergency fund. Plan for long-term goals with disciplined investing.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in
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.
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Ramalingam

Ramalingam Kalirajan  |7097 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on May 20, 2024

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Hi! I am having financial crisis, my take home salary is 55k, I have a personal loan EMI of 19.7k(upto sep.26), monthly expenses around 20k. Also took an overdraft of 1.25 lakhs for medical emergency. Still every month I spent 6-7 k on my wife's treatment. How can I plan for future saving. Should I anyhow lower my emi
Ans: Understanding Your Financial Crisis
Financial crises can be overwhelming, but with a strategic approach, you can regain control. Your situation includes a personal loan EMI of ?19.7k, monthly expenses of ?20k, and ongoing medical costs for your wife amounting to ?6-7k per month. Additionally, you have an overdraft of ?1.25 lakhs.

Analyzing Your Current Situation
Income and Expenses:

Your take-home salary is ?55k.
Total monthly commitments are around ?45-46k, leaving little room for savings.
Debt Obligations:

Personal loan EMI until September 2026.
Medical overdraft increasing financial strain.
Steps to Financial Stability
1. Evaluate and Lower Your EMI
Lowering your EMI could provide immediate relief. Consider the following strategies:

Loan Restructuring:

Contact your bank to negotiate a longer repayment term or a lower interest rate.
This will reduce your monthly EMI and ease your cash flow.
Refinancing Options:

Explore refinancing the loan with a different lender offering lower interest rates.
This can significantly reduce your monthly payment burden.
2. Create a Detailed Budget
Effective budgeting is crucial. Here's how to start:

Track Your Expenses:

Monitor every expense, no matter how small.
Identify non-essential expenditures that can be minimized or eliminated.
Prioritize Spending:

Focus on essential expenses like medical costs and loan EMIs.
Allocate any surplus towards savings or debt repayment.
3. Increase Your Income
Boosting your income can provide additional financial stability:

Freelance or Part-Time Work:

Look for opportunities to utilize your skills in freelance or part-time jobs.
Even a small additional income can make a significant difference.
Upskilling:

Invest time in learning new skills that can lead to a higher-paying job.
Online courses and certifications can enhance your qualifications.
4. Emergency Fund
Building an emergency fund is essential for financial security:

Small, Regular Contributions:

Start with small, manageable amounts each month.
Aim to save at least ?1,000-?2,000 initially, then gradually increase.
Automate Savings:

Set up an automatic transfer to a separate savings account.
This ensures consistent contributions without relying on manual efforts.
5. Address Medical Expenses
Managing ongoing medical costs is critical:

Insurance:

Ensure you have adequate health insurance coverage.
Explore family floater plans or additional riders for comprehensive coverage.
Government Schemes:

Investigate government healthcare schemes that might offer support for your wife's treatment.
Schemes like Ayushman Bharat can provide significant relief.
Adopting a Napoleon Hill Mindset
Napoleon Hill, in his seminal work "Think and Grow Rich," emphasized the power of desire, faith, and persistence. Apply these principles to your financial journey:

Desire:

Clearly define your financial goals, such as becoming debt-free and building savings.
Write them down and visualize achieving them daily.
Faith:

Believe in your ability to overcome financial challenges.
Cultivate a positive mindset and remain confident in your financial recovery plan.
Persistence:

Stay committed to your budget and savings plan.
Overcome setbacks with determination and adapt your strategy as needed.
Conclusion
Your financial situation requires careful planning and strategic action. By lowering your EMI, creating a detailed budget, increasing your income, building an emergency fund, and managing medical expenses, you can achieve financial stability. Embrace the principles of desire, faith, and persistence to navigate this challenging period and secure a brighter financial future.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7097 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 16, 2024

Money
hi, i am 46 year old central government employee in Pune, I had several bad financial decision in my life. i have two daughters aged 11 and 17 i have no saving left, i have a flat in pune with liability of 38lac on home loan and 10 lac on personal society loan at 9% interest i have a ancestral property of 50 lac in Tamil nadu where my mom lives per month iam paying 550000 as home loan and personal loan EMI, My income is around 86000 how can I come out of this EMI burden and improve financial stability
Ans: Understanding Your Financial Situation
First, let me commend you for reaching out for guidance. It's never too late to improve your financial situation. You have two daughters to support and considerable loan burdens, which makes it essential to adopt a well-structured plan to regain financial stability.

Current Income and Expenses
Your current income is Rs. 86,000 per month. However, a significant portion of this income goes towards EMI payments. You are paying Rs. 5,50,000 annually towards home loan and personal loan EMIs, which is a heavy burden. This leaves limited room for savings and other expenses.

Loan Burden Analysis
The home loan liability is Rs. 38 lakh, and the personal society loan stands at Rs. 10 lakh. The home loan EMI is likely a major part of your monthly expense. Given the 9% interest rate on the personal loan, it is essential to address this first due to its higher interest rate compared to many other debt forms.

Asset Overview
You have an ancestral property worth Rs. 50 lakh in Tamil Nadu, where your mother lives. While this property holds significant value, it is tied to emotional and familial considerations.

Steps to Improve Financial Stability
Reassess and Prioritise Debts
Prioritise High-Interest Debts: Focus on reducing high-interest debts first. The personal loan at 9% interest is more expensive than typical home loans. Prioritising its repayment can save you significant interest over time.

Consider Debt Consolidation: Look into consolidating your personal and home loans. Consolidating at a lower interest rate can reduce the overall EMI burden. Discuss with your bank for possible consolidation or refinancing options.

Utilising Assets
Evaluate Ancestral Property: While the ancestral property is valuable, it might be worth considering its role in your financial recovery. You might explore options like renting out a portion of the property for additional income.

Downsize or Rent: If possible, you might consider downsizing your living space in Pune or renting out a portion of your flat to generate extra income. These steps can help manage EMIs more comfortably.

Budgeting and Expense Management
Create a Detailed Budget: Track all your income and expenses meticulously. Identify areas where you can cut down unnecessary costs. Budgeting helps in allocating resources more efficiently and finding ways to save money.

Emergency Fund: Establish a small emergency fund to cover unexpected expenses. Even a modest fund can prevent you from taking on more debt during emergencies.

Increasing Income Streams
Leveraging Skills and Opportunities
Freelancing or Part-Time Work: Explore opportunities to leverage your skills through freelancing or part-time work. Additional income from side gigs can significantly help in managing loan repayments.

Utilise Government Benefits: As a central government employee, explore any available benefits, allowances, or grants that might assist in your financial situation.

Investments and Savings
Start Small Investments: Begin with small, regular investments in safe, growth-oriented funds. Consult a Certified Financial Planner to select funds that align with your risk tolerance and financial goals.

Employer-Provided Benefits: Maximise contributions to government-provided savings schemes and benefits. These can provide tax advantages and enhance your financial security.

Reviewing and Adjusting Insurance
Insurance Policies
Evaluate Existing Policies: If you have LIC, ULIP, or investment-cum-insurance policies, consider their current value and benefits. These policies might not be the most efficient use of your funds.

Surrendering Underperforming Policies: If your policies are underperforming, you might consider surrendering them and redirecting those funds into more effective investments, such as mutual funds managed by certified professionals.

Adequate Coverage
Health Insurance: Ensure you have adequate health insurance coverage. Medical emergencies can drain savings and push you further into debt.

Life Insurance: Maintain sufficient life insurance to protect your family’s financial future in case of unforeseen events.

Planning for Children's Education
Education Fund
Separate Fund for Education: Create a separate education fund for your daughters. Even small, regular contributions can grow significantly over time.

Scholarships and Grants: Research scholarships, grants, and educational loans that can help fund your daughters' education without straining your finances.

Long-Term Education Planning
Invest in Education Plans: Consider education-specific investment plans. These can offer returns aligned with the timeframes of your daughters' educational needs.

Consult a CFP: A Certified Financial Planner can help tailor an education savings plan that suits your financial situation and goals.

Building a Sustainable Financial Plan
Setting Financial Goals
Short-Term Goals: Focus on immediate goals like reducing debt and creating an emergency fund. These are crucial for stabilising your financial situation.

Long-Term Goals: Set long-term goals for retirement, children's education, and eventual financial independence. A CFP can help you set realistic and achievable goals.

Monitoring and Reviewing
Regular Financial Check-Ups: Conduct regular reviews of your financial situation. Adjust your plans as needed to stay on track towards your goals.

Professional Guidance: Regular consultations with a Certified Financial Planner can provide ongoing support and adjustments to your financial strategy.

Final Insights
Improving your financial situation requires a multi-faceted approach. Prioritise paying off high-interest debts and consider refinancing options to reduce your EMI burden. Utilise your assets effectively, and explore additional income opportunities. Establish a disciplined budgeting and savings strategy to build financial stability.

Consider the future needs of your family, particularly your daughters' education, by creating dedicated funds and exploring scholarships. Regularly review your financial plan and adjust as necessary to stay on track. Engaging a Certified Financial Planner can provide personalised advice and support throughout your financial journey.

Your determination and willingness to improve your financial situation are commendable. By taking these steps, you can work towards a more stable and secure financial future for yourself and your family.
Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |7097 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 10, 2024

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Hi. I am 30y old male earning 25000 monthly. I have a family with 4y old son. I have loan of around 50000+20000+30000? total of 1 lakh. I have managed my EMI regularly but sometimes it missed. How do I clear at earliest & plan for my child future studies? I can't even save any money currently. Please guide
Ans: I understand your situation and appreciate your effort to manage your finances. It's commendable that you are looking to clear your loans and plan for your child's future despite your current challenges. Let's break down your financial situation and create a plan to help you achieve your goals.

Current Financial Snapshot
Age: 30 years old
Monthly Income: Rs 25,000
Family: Wife and 4-year-old son
Loans:
Rs 50,000
Rs 20,000
Rs 30,000
Total Debt: Rs 1 lakh
Savings: Currently unable to save
Assessing Your Financial Priorities
Your main priorities should be:

Clearing your existing loans
Managing your monthly expenses
Starting a savings plan for your child's future education
Building an emergency fund
Loan Repayment Strategy
Clearing your loans is the first step towards financial stability. Let's create a plan to tackle this.

List Your Loans
Loan 1: Rs 50,000
Loan 2: Rs 20,000
Loan 3: Rs 30,000
Prioritize Your Loans
Start by paying off the smallest loan first. This is known as the debt snowball method. It gives you a sense of accomplishment and motivates you to continue.

Loan 2: Rs 20,000
Loan 3: Rs 30,000
Loan 1: Rs 50,000
Creating a Repayment Plan
Allocate a specific amount each month towards loan repayment. Since your income is Rs 25,000, let's see how much you can afford to allocate towards your debts.

Monthly Income: Rs 25,000
Monthly Expenses: Rs 20,000 (assuming essential expenses)
Amount Available for Loan Repayment: Rs 5,000
Focus on paying off Loan 2 first. Once Loan 2 is cleared, move to Loan 3, and finally Loan 1.

Managing Monthly Expenses
Managing your monthly expenses is crucial to ensure you have enough to pay off your loans and save for the future.

Budgeting
Create a monthly budget to track your income and expenses. Identify areas where you can cut back on unnecessary spending.

Income:

Salary: Rs 25,000
Expenses:

Rent: Rs 8,000
Groceries: Rs 4,000
Utilities: Rs 2,000
Transportation: Rs 2,000
Other Essentials: Rs 4,000
Loan Repayment: Rs 5,000
Reducing Expenses
Look for ways to reduce your expenses. Consider the following tips:

Cook at home to save on food costs.
Use public transport or carpool to save on transportation.
Limit discretionary spending such as dining out, entertainment, and shopping.
Starting a Savings Plan for Your Child’s Education
Once you have cleared your loans, start saving for your child's future education.

Opening a Separate Savings Account
Open a separate savings account dedicated to your child's education. This helps in keeping the funds separate and avoiding unnecessary spending.

Systematic Investment Plan (SIP)
Consider starting a SIP in a mutual fund. This allows you to invest small amounts regularly and benefit from the power of compounding. Even a small monthly contribution can grow significantly over time.

Building an Emergency Fund
An emergency fund is crucial to handle unexpected expenses without derailing your financial plan.

Setting a Goal
Aim to save at least 3-6 months’ worth of living expenses in your emergency fund.

Starting Small
Start by saving a small amount each month. As your financial situation improves, increase your contributions to the emergency fund.

Evaluating Financial Habits
Your financial habits play a crucial role in managing your finances effectively.

Tracking Expenses
Track your expenses to identify areas where you can save. Use budgeting apps or maintain a simple spreadsheet.

Setting Financial Goals
Set short-term and long-term financial goals. This helps in staying focused and motivated.

Regular Review
Regularly review your financial plan and make adjustments as needed. This ensures you stay on track to achieve your goals.

Power of Compounding in Mutual Funds
Mutual funds are an excellent way to grow your savings over time. Let's understand their benefits.

Categories of Mutual Funds
Equity Funds: Invest in stocks, offering high returns but with higher risk.
Debt Funds: Invest in fixed income securities, offering lower returns but with lower risk.
Hybrid Funds: Invest in both equity and debt, balancing risk and return.
Advantages of Mutual Funds
Diversification: Spread your investment across various securities, reducing risk.
Professional Management: Managed by experts who make informed decisions.
Liquidity: Easily buy or sell units, providing flexibility.
Compounding: Reinvesting earnings generates earnings on earnings, growing your investment exponentially.
Importance of a Certified Financial Planner (CFP)
A CFP can provide personalized advice, helping you create a comprehensive financial plan.

Benefits of a CFP
Expertise: In-depth knowledge and expertise in financial planning.
Personalized Advice: Tailored advice based on your financial situation and goals.
Ongoing Support: Regular reviews and adjustments to your financial plan.
Final Insights
Clearing your loans and managing expenses is the first step towards financial stability. Start by prioritizing and paying off your smallest loans. Create a monthly budget to manage expenses and identify areas to cut costs. Once your loans are cleared, start saving for your child's education through a dedicated savings account and SIP in mutual funds. Build an emergency fund to handle unexpected expenses. Regularly review your financial plan with a Certified Financial Planner to stay on track and achieve your goals.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

..Read more

Latest Questions
Radheshyam

Radheshyam Zanwar  |1054 Answers  |Ask -

MHT-CET, IIT-JEE, NEET-UG Expert - Answered on Nov 21, 2024

Asked by Anonymous - Nov 21, 2024Hindi
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Hello, I am 3 yr neet dropper.in 2025 it will be my third attempt... I'm trying my best to crack neet ...i don't know what will happen will i score good marks or not ... please help me in suggesting good career options if not crack neet .....there are many options through neet marks also like bhms , veterinary...etc. i will also give entrance exam also like cuet ,gbpuat ,....but i want that what to choose which course will be best for me ...i want to make my life good and happy... having a good degree, good job ,...
Ans: Hello.
Have you analyzed your failure in 2 successive attempts in the NEET examination? If yes, then the question is what you have done for improvement and not then again the question arises why not? Here, I would like to suggest you focus now only on the NEET examination which is your 3rd attempt. Don't think about any other options right now till May 2025. After the NEET exam is over, you have ample time to explore the options available. Depending on your score in NEET 2025, we will guide you at that time. But yet, if you are confused, then looking towards your question and anxiety, you need personal counseling where you can express yourself face-to-face. Only after the NEET exam is over, you contact a counsellor for one-to-one counseling. Till then, keep mum and focus only on NEET. Take this exam as your mission and project. Work on this project, apply forces from all sides, success is there which is waiting for you eagerly.
Best of luck for your bright future.

Some tips: (1) Analyse separately Phy, Che, Bio (2) Prepare a list of hard topics (3) First focus more on the topics which are easy for you and then try to excel in hard topics (4) Appear more and more online/offline examinations (4) Prepare your short-cut file for all subjects (5) Prepare a file for each subject having only synopsis of all chapters (6) Try to solve the problems at the lightening speed and observe the period on regular basis (7) Create your time table to revise the topics on regular basis (8) Do not hesitate to ask your difficulties to your teachers, if you have joined to offline classes (9) Keep the habit of marking the answers which you know 100%. Don't guess the answers and mark them, as there is -ve marking scheme. (10) Be calm, quite, and smiling all the time to release the tension and always have a healthy chat with your friends.

If satisfied, please like and follow me.
If dissatisfied with the reply, please ask again without hesitation.
Thanks.

Radheshyam

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DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Investment in securities market are subject to market risks. Read all the related document carefully before investing. The securities quoted are for illustration only and are not recommendatory. Users are advised to pursue the information provided by the rediffGURU only as a source of information and as a point of reference and to rely on their own judgement when making a decision. RediffGURUS is an intermediary as per India's Information Technology Act.

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