Need Expert Advice?Our Gurus Can Help

Ramalingam Kalirajan |11022 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on May 15, 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 Vaibhav on Apr 04, 2025

I earn 2.25 lakhs per month. But have liabilities like Loans and Credit card bills which costs me around 1.75 lakhs. 25-35K spend is on house hold chores and kids academic activitiesand hence I can invest only 15K in a month. Please suggest a way to get out of this debt trap.

Ans: You have shown great responsibility by still saving Rs. 15,000 per month despite heavy liabilities. That is a very good starting point.

Let us now look at this from a full 360-degree perspective.

?Understanding Your Current Cash Flow

Your income is Rs. 2.25 lakhs monthly.

Loan EMIs and credit card bills take away Rs. 1.75 lakhs.

Household and children’s expenses are around Rs. 25K to Rs. 35K.

That leaves a very tight margin. You are managing Rs. 15K for savings, which is good.

However, this situation is not sustainable in long term. Debt burden is very high.

You are already in a high EMI trap. There is no space for emergencies or freedom.

So, reducing debt must be your first and most urgent financial priority.

?Steps to Regain Control from Debt

Write down all your loans and credit cards separately.

Note the outstanding amount, monthly EMI, and interest rate for each one.

Identify which loans or cards have highest interest rates.

Usually credit card dues and personal loans have very high interest.

Target these high-cost loans first.

Try to stop using your credit cards for next 12 months.

Don’t make minimum due payments. They increase debt sharply.

Use the Rs. 15K savings as a focused prepayment tool.

Use it to reduce high-interest loans or card dues. Focus one by one.

Don’t split this Rs. 15K across many debts. That weakens the impact.

You can also take help of a trusted MFD and Certified Financial Planner to build a debt snowball plan.

?Build a Small Emergency Fund

Before you invest anywhere else, keep aside Rs. 30K to 50K as emergency fund.

Keep it in a savings account or short-term liquid mutual fund.

This will protect you from future debt in case of sudden expenses.

Don’t touch this unless for medical or emergency reasons.

Build this slowly from your Rs. 15K savings.

?Avoid Fresh Loans for 2 Years

Don’t take any new loan unless it is unavoidable.

This includes car loans, gadgets EMI, or personal loans.

Say no to buy-now-pay-later schemes. They reduce cash discipline.

For kids' education or family functions, try to plan in cash only.

?Discuss Loan Restructuring or Balance Transfer

Check if you can consolidate multiple loans into one low interest personal loan.

If any personal loan is at high rate (above 15%), consider balance transfer.

Check eligibility and processing charges before making this switch.

Avoid doing this frequently. Do only if cost benefit is clear.

?Review Spending Habits Closely

You are spending Rs. 25K to Rs. 35K on household and kids.

Sit down and list where the money is going in detail.

Can you reduce non-essential spends by 10% without affecting quality?

Use UPI and app tracking to monitor monthly expenses.

Cut any subscription or auto deductions not used regularly.

Check for cheaper options for school transport, food delivery, or online purchases.

Even Rs. 2K saved monthly will help reduce debt faster.

?Once Debt Reduces, Shift to Long-Term Investments

Once your high-interest loans are under control, shift your Rs. 15K to investment.

Select one good actively managed mutual fund through a trusted MFD.

Don’t go for direct funds. They seem cheap but need constant tracking and expertise.

A regular plan via MFD with CFP support helps in guided growth.

Start SIPs from your Rs. 15K only after emergency fund and basic loan reduction.

Don’t try to invest in index funds or ETFs. They follow the market and don’t aim for alpha.

Actively managed funds handled by good fund managers give better long-term results.

?Avoid Mixing Insurance and Investment

Don’t buy insurance plans that say investment + protection.

Term life insurance is enough for now. You already have it.

Don’t invest in ULIP, LIC traditional plans, or endowment products.

Their returns are very low and lock your money for long time.

?Talk with Family and Involve Spouse

Debt reduction needs household support.

Share your plan with your spouse or close family member.

Explain that next 24 months are for financial reset.

Ask their help to reduce non-essential expenses.

Together decisions are more disciplined and lasting.

?Review After 6 Months

Track your EMI progress every month.

Once in 6 months, check how much debt is reduced.

Adjust your plan if needed. Add Rs. 1000–2000 more if possible.

Once high-interest debts are gone, build long term SIP goals.

This shift from debt-reduction to wealth-creation is a powerful phase.

?Take Professional Help Without Hesitation

If things feel confusing or overwhelming, don’t delay.

Sit with a Certified Financial Planner for complete financial health check.

They will guide step-by-step with plan and discipline.

It helps avoid costly errors and speeds up your debt recovery.

?Final Insights

Your income is strong. That is a big advantage.

The issue is debt and expenses being out of balance.

You are already saving Rs. 15K monthly. That shows commitment.

Now, use it strategically for debt control.

Avoid new loans and credit usage for next 24 months.

Build an emergency fund to avoid future surprises.

After debt control, invest in actively managed mutual funds.

Always use regular plan through MFD with CFP. Avoid direct route.

Focus on disciplined money behaviour. That will bring peace and freedom.

Joyful and stress-free money life is possible. But needs sharp focus now.

Stay consistent, track progress, and involve your family.

Small steps today will create huge difference in 3 years.

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.