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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

Question by Vijay on Jun 27, 2025Hindi

Hi Sir, I am 39 year old having taken home salary 1.7 lakh PM. I have 2 homeloan combined debt around 93 lakh and paying EMI 82200 for duration 135 months and 17854 for 164 months. I have auto loan for 11.5 lakh and emi 18552 with 80 months. I have approx 6 lakh in MF investment, 6 lakh as FD for emergency fund and approx 10 tola physical gold. I have 2 daughters age viz 8 and 5. I have no major short term outstanding as of now. Please guide me for retirement corpus + kids education readiness. Also is my decision to payout debt by increasing EMI yearly and prepayment advisable? Thanks.

Ans: Income and Expense Overview
– Your monthly take-home is Rs. 1.7 lakh
– Combined home loan EMI is Rs. 1,00,054
– Auto loan EMI is Rs. 18,552
– Total EMI outflow is Rs. 1,18,606 per month
– This leaves you with about Rs. 51,000 for all other expenses
– You are under high fixed obligation due to loans
– This limits your savings and investment capacity

– However, your discipline in EMI payments is strong
– You have kept Rs. 6 lakh as emergency fund in FD
– That is a good buffer
– You also have Rs. 6 lakh in mutual funds
– And around 10 tola gold (approx Rs. 6–7 lakh)

– Your debt level is high, but you are managing it without default
– That shows resilience and commitment

Assessment of Current Loans
– You have two home loans, total Rs. 93 lakh
– Combined EMIs are Rs. 1,00,054
– One loan is for 135 months (over 11 years)
– Other loan is for 164 months (about 13.5 years)
– Auto loan of Rs. 11.5 lakh adds pressure with Rs. 18,552 EMI

– Loans are eating 70% of your income
– This restricts wealth-building and puts stress on monthly budget

– If income doesn’t grow, savings may suffer
– You must plan carefully to balance debt and future goals

Should You Increase EMI and Prepay Loans?
– Yes, increasing EMI annually is a good strategy
– This brings down the interest burden and shortens loan duration
– Prepaying home loan is also beneficial if done smartly
– Focus more on prepaying auto loan first

– Auto loan has shorter life and higher interest cost
– Clear it off within 3–4 years if possible

– After that, shift focus to prepay home loans step-by-step
– Avoid using emergency fund or MF corpus to prepay
– Use only surplus from salary hikes and bonuses

– You may increase EMI by 5–10% every year
– That will bring strong interest savings
– But don’t reduce emergency fund below Rs. 6 lakh

– Prioritise long-term wealth creation along with loan reduction
– Don’t stop mutual fund SIPs to prepay loans
– Balance both smartly

Mutual Fund Investment Review
– You have Rs. 6 lakh in mutual funds
– You didn’t mention the type, but assuming it’s equity
– It is a good start for long-term goals

– Mutual funds should be your main investment tool going forward
– You must build SIP discipline even with EMI pressure
– Even Rs. 10,000 monthly SIP can create huge wealth in 15 years

– Use actively managed equity mutual funds
– They are more flexible and perform better than index funds
– Index funds do not adjust during market fall or rise
– Active funds are handled by experienced fund managers

– Avoid direct mutual funds as well
– Direct plans may look cheap but give no guidance
– Investing through Certified Financial Planner helps manage risk
– Regular plans offer service, reviews and help in tough markets

Emergency Fund and Safety Net
– You have Rs. 6 lakh in FD
– This is sufficient for now
– It covers at least 4–5 months of your expenses and EMIs

– Do not use this FD for investment or prepayment
– It is your safety cushion against job loss or medical emergencies

– Also, ensure you have term life insurance
– You are the only earning member with high debt
– Take a term plan of at least Rs. 1 crore or more
– It will protect your family from loan burden in your absence

– Health insurance is also crucial
– Take Rs. 10 lakh family floater for your family
– Don’t rely only on employer cover

Children’s Education Planning
– Your daughters are 8 and 5 years old
– Their higher education will begin in 10–13 years

– You must start SIPs now for their goals
– Begin with separate SIP for each child
– Use child-labeled mutual fund schemes or long-term equity funds
– Avoid ULIPs or child insurance plans
– These mix insurance with investment and give low returns

– Mutual fund SIPs offer higher growth and flexibility
– Start with minimum Rs. 5,000–7,000 per child per month
– Increase this every year as EMI burden reduces

– Your gold can also be used for children’s expenses later
– It will work as buffer support

– Don’t depend only on gold or loans for their education
– Planned SIPs will give you full control

Retirement Corpus Planning
– You are 39 now
– Retirement at 60 gives you 21 years
– You need to build wealth during this time

– Your current focus is debt reduction
– But you must slowly shift to wealth creation
– Start SIP for retirement, even if small now
– Rs. 5,000 per month is enough to begin

– Increase the SIP amount as EMI reduces
– Goal should be Rs. 25,000–30,000 monthly SIP after 5–6 years
– This can create sufficient retirement corpus in time

– Don’t stop SIPs when market falls
– Stay invested for full term
– Review portfolio yearly with Certified Financial Planner

– Avoid index funds and direct funds for retirement
– You need professional management and timely advice

Physical Gold Holding
– You hold 10 tola gold, approx Rs. 6–7 lakh
– Gold is good for diversification
– But don’t increase gold further

– Gold does not give regular income or compounding
– Use it only during daughter’s marriage or big expenses

– For long-term goals, equity mutual funds are better
– They offer higher returns and tax advantages

Taxation on Investments
– Equity mutual funds are taxed only when sold
– LTCG above Rs. 1.25 lakh is taxed at 12.5%
– STCG is taxed at 20%

– Debt mutual fund gains are taxed as per your slab
– FD interest is also fully taxable

– So mutual funds are tax-efficient for long-term goals
– FDs are not tax-efficient but useful for safety

Future Action Plan – Step by Step
– Keep Rs. 6 lakh FD for emergencies
– Don’t use this for prepayment or investing
– Increase EMI yearly by 5–10% if income rises
– Prepay auto loan first, then target one home loan
– Don’t stop SIPs during loan repayment
– Build minimum SIP of Rs. 15,000 total per month now
– Divide between retirement and child education
– Take term insurance of at least Rs. 1 crore
– Take health cover of Rs. 10 lakh for family
– Slowly reduce gold exposure if needed

Finally
Your debt pressure is high, but your financial behaviour is very responsible. You have created buffers. You are planning ahead.

Yes, increasing EMIs and prepaying debt is wise. But do it gradually. Do not stop mutual fund investments. Wealth creation and debt reduction must go together.

You are at a turning point in your financial journey. Right steps from now will secure your future. Stay consistent. Review yearly with a Certified Financial Planner.

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

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