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Ramalingam Kalirajan |10872 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 01, 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 Rs on Jul 11, 2025Hindi

Hi, I am 41 years old with a salary of 1.2 lacs per month. Currently I have 30 lacs of home , 2.5 lacs in PPF, 2.6 lacs in mf and 11.5 lacs in fd. I have 2 kids 11 and 7 years old. I want to buy 1 crore above flat.How should i plan for flat kids education, retirement and future investments.Please suggest.....in present i have no loan history.......

Ans: You have taken responsible steps in your financial life.
Owning a home and having zero loans is a great achievement.
Your income and savings give you strong potential for growth.
Your family goals now need structure and discipline.

Let’s guide you in building a clear and sustainable financial roadmap.

»Income and Expense Planning

– Your monthly income is Rs. 1.2 lakh.
– Try to keep expenses under Rs. 60,000 monthly.
– This allows you to save at least Rs. 40,000 to Rs. 50,000 monthly.

– Track expenses under household, children, EMIs, and lifestyle heads.
– Use surplus for goal-based investments.

– After buying new house, EMI will increase.
– So first optimise expenses before adding new liability.

»Emergency Fund and Liquidity

– Every family must keep 6 months of expenses aside.
– Keep this in savings or sweep-in fixed deposits.

– If monthly expenses are Rs. 60,000, then save Rs. 3.6 lakh for emergency.
– Do not include mutual funds or PPF in this fund.

– This fund helps during job loss or health issue.
– It avoids breaking long-term investments during crisis.

»Assessment of Existing Assets

– You already own a home worth Rs. 30 lakh.
– You have Rs. 2.5 lakh in PPF.
– Rs. 2.6 lakh in mutual funds.
– Rs. 11.5 lakh in fixed deposits.

– Total financial assets = Rs. 16.6 lakh (excluding current house).

– Good start but needs better structure.
– Current FD holding is too high.
– FD returns are low and taxable.

– Slowly shift excess FD amount to mutual funds.
– Use debt funds for short-term and equity funds for long-term.

– PPF is safe but has lock-in.
– Continue with PPF yearly contribution for stability.

»Buying New Flat Worth Rs. 1 Crore

– This is a big financial decision.
– Do not commit unless it fits your overall goals.

– You can sell existing house to fund part of the new one.
– But avoid selling if it's emotionally or practically important.

– Even if you take a loan of Rs. 70-80 lakh, EMI will be high.
– EMI of Rs. 60,000 to Rs. 65,000 per month will strain your budget.

– After loan, monthly savings will drop.
– This can affect retirement and children’s education planning.

– First ask: Why are you buying a flat worth Rs. 1 crore?
– If it is for comfort or upgrade, check alternatives.
– Can a Rs. 70-80 lakh house solve your purpose?
– Don’t stretch beyond affordability.

– Also consider stamp duty, registration, GST, interiors.
– Total cost may go above Rs. 1.1 crore.

– Do not use mutual fund or PPF for this goal.
– These are for other long-term goals.

– If possible, delay house upgrade till income grows.
– Or pay larger down payment and reduce EMI stress.

»Children’s Education Planning

– Your kids are 11 and 7 years old.
– You have about 6-10 years before college.

– Start two separate SIPs in child-focused mutual funds.
– One for each child’s higher education.

– Begin with Rs. 10,000 each per month.
– Increase it by 10% yearly as income grows.

– Use actively managed mutual funds only.
– Avoid index funds – they do not offer downside protection.
– Index funds include both good and bad stocks.

– Actively managed funds are better handled by fund managers.
– They adjust portfolio based on market cycles.

– Use regular plan via Certified Financial Planner.
– Do not invest in direct plans.

– Direct plans lack monitoring and personal advice.
– Regular plan offers rebalancing, review, and right scheme selection.

– Long-term education goals need active hand-holding.
– A CFP ensures proper fund mix and switching later.

»Retirement Planning

– You are 41 now.
– You have about 17-19 working years left.

– You must build a retirement corpus from now.

– Current PPF is Rs. 2.5 lakh.
– Continue investing in PPF every year.
– But PPF alone is not enough.

– Start a SIP of Rs. 15,000 to Rs. 20,000 per month in mutual funds.
– Use a mix of largecap and flexicap equity funds.
– These give better long-term returns than FDs.

– Use regular plan through CFP.
– Avoid direct plan mutual funds.
– Without guidance, you may miss opportunities or hold wrong funds.

– Review your retirement target every 3 years.
– Add bonus or surplus into retirement corpus whenever possible.

– Also consider setting up an SWP after retirement.
– This gives monthly income from your mutual fund corpus.

– Keep 2 years of retirement income in short-term debt funds for safety.
– Rest can stay in growth funds.

»Asset Allocation Restructuring

– Current asset allocation is not balanced.
– Too much is in FD and less in equity.

– Approx current structure:

FD = 11.5 lakh

MF = 2.6 lakh

PPF = 2.5 lakh

Total = 16.6 lakh

– Target structure should be:

60% in mutual funds

20% in PPF and safe instruments

20% in short-term debt funds

– Shift Rs. 5 lakh from FD to mutual funds in phases.
– Use 3-4 good diversified mutual funds only.
– Avoid having more than 4 funds.

– Do not go for NFOs or fancy schemes.
– Stick to funds with 10-year history and stable team.

»Loan Readiness and Caution

– If you go for home loan, restrict EMI to 35% of monthly income.
– With Rs. 1.2 lakh salary, this is Rs. 40,000 EMI max.
– Higher EMI will kill your ability to invest.

– Take loan only if you are confident about future job stability.

– After taking loan, pause any new long-term investments.
– Restart once EMI becomes comfortable.

– Don’t touch child’s education or retirement SIPs for house EMI.

»Other Financial Habits and Recommendations

– Keep all insurance policies in one file.
– Update nominees in all assets regularly.

– Take term insurance if not already taken.
– Term cover should be 15-20 times your yearly salary.

– Health cover of Rs. 5 lakh minimum for entire family is must.
– Top-up plans can help reduce premium burden.

– Make a will to ensure smooth asset transfer.
– Also keep list of bank accounts, MF folios and FD details ready.

– Avoid gold and real estate as investment.
– These are illiquid and give poor returns.

– Review your financial goals every year.
– Use help from Certified Financial Planner for timely advice.

»Finally

– You are already debt-free and saving well.
– That is your biggest strength today.

– Take house loan only after understanding long-term impact.
– Don’t let EMI stop your kids’ education or retirement planning.

– Build equity mutual fund portfolio with clear goal mapping.
– Keep FD only for short-term needs or safety cushion.

– Avoid direct and index mutual funds.
– Use regular plan with CFP’s help for smarter investment.

– Structure your assets based on goals and timelines.
– Focus on growth and liquidity both.

– If done right, you can manage flat purchase, kids’ education and retirement smoothly.

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.