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Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jul 06, 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 - Jun 24, 2024Hindi
Money

Hello sir I m 48 years old and me & my wife got earing of 1+ lakhs per month and home loan of rs 40 lakhs.. Which i took 4 years back..with EMIof ?39615/ month Which i have planned to increase by 5% every year I too have daughter of 5 years .. Who has started going to school From this year As per saving is concerned.. I have ppf... ?2000/ month Bajaj allience? 6000/year Sukanya s yojana ? 1000/ month Met life pnb ? for last 10 years. ? 3000/ month Epf.. Both me & my wife Since last year 19& 18 years respectively How shd i manege my finance So that i could.. Finish the loan before me & my wife retirement.. Thank you

Ans: Managing your finances effectively can ensure a secure and comfortable future for you and your family. At 48, with a combined monthly earning of over Rs 1 lakh and a daughter starting school, it's essential to have a robust financial plan. Let's dive into how you can manage your finances to finish your home loan before retirement and secure your family's future.

Understanding Your Financial Position
Firstly, let's assess your current financial status:

Age: 48 years
Combined Monthly Earnings: Over Rs 1 lakh
Home Loan: Rs 40 lakhs, taken 4 years back
EMI: Rs 39,615/month, planned to increase by 5% annually
Daughter's Age: 5 years, recently started school
Existing Investments and Savings
You have several ongoing investments and savings plans:

PPF: Rs 2000/month
Bajaj Allianz: Rs 6000/year
Sukanya Samriddhi Yojana: Rs 1000/month
Met Life PNB: Rs 3000/month (for last 10 years)
EPF: Both you and your wife have been contributing (19 years and 18 years respectively)
Goal: Finishing the Home Loan Before Retirement
Your primary goal is to finish the home loan before you and your wife retire. Let's break down the steps to achieve this.

Step 1: Evaluating and Adjusting the EMI
You're currently paying an EMI of Rs 39,615/month. Increasing this by 5% annually is a good strategy. This will help you pay off the loan faster and reduce the total interest paid. Here’s how you can implement it effectively:

Yearly Increase: Make sure to adjust your budget to accommodate this increase each year.
Prepayments: Use any bonuses or extra income for prepayments. This reduces the principal amount and the interest burden.
Step 2: Reviewing Your Investments
Now, let's review and optimize your existing investments for better returns and liquidity.

PPF (Public Provident Fund):

Pros: Safe, tax-free returns.
Cons: Lock-in period of 15 years, partial withdrawals allowed after 7 years.
Recommendation: Continue with PPF for its safety and tax benefits.
Bajaj Allianz:

Pros: Provides insurance cover along with investment.
Cons: Returns are generally lower compared to mutual funds.
Recommendation: Consider surrendering this policy and investing the proceeds in mutual funds for better returns.
Sukanya Samriddhi Yojana:

Pros: High-interest rate, tax benefits, specifically for girl child.
Cons: Lock-in period until the girl turns 21.
Recommendation: Continue with this as it's specifically for your daughter’s future.
Met Life PNB:

Pros: Provides insurance cover.
Cons: Lower returns compared to mutual funds.
Recommendation: Evaluate the surrender value and consider moving the funds to mutual funds.
Step 3: Building a Balanced Portfolio
Creating a balanced portfolio with a mix of equity and debt investments will help you achieve your financial goals.

Equity Mutual Funds:

Pros: Higher potential returns, suitable for long-term goals.
Cons: Market risk, requires patience and a long-term horizon.
Recommendation: Allocate a portion of your savings to equity mutual funds for wealth creation.
Debt Mutual Funds:

Pros: Lower risk, stable returns.
Cons: Lower returns compared to equity.
Recommendation: Use debt mutual funds for medium-term goals and to balance the risk in your portfolio.
Step 4: Increasing EPF Contributions
Both you and your wife have been contributing to EPF for many years. Consider increasing your voluntary provident fund (VPF) contributions. EPF offers safe and tax-free returns, making it an excellent tool for retirement planning.

Step 5: Education Fund for Your Daughter
With your daughter starting school, it's essential to plan for her future education expenses.

Sukanya Samriddhi Yojana:

Continue contributing as it offers good returns and tax benefits.
Education Fund:

Recommendation: Start a dedicated education fund with equity mutual funds. This will help you meet her higher education expenses.
Step 6: Emergency Fund
Ensure you have an emergency fund that covers at least 6-12 months of your monthly expenses. This fund should be easily accessible and kept in liquid assets like a savings account or liquid mutual funds.

Step 7: Insurance Coverage
Having adequate insurance coverage is crucial to protect your family’s financial future.

Term Insurance:

Ensure both you and your wife have term insurance coverage that is 10-15 times your annual income. This provides financial security in case of an unfortunate event.
Health Insurance:

Have comprehensive health insurance for your entire family to cover medical expenses.
Analyzing and Rebalancing Your Portfolio
Regularly review your portfolio to ensure it remains aligned with your financial goals and risk tolerance. Rebalance your portfolio annually to maintain the desired asset allocation between equity and debt.


It’s commendable that you are focused on managing your finances and securing your family’s future. Your commitment to increasing your EMI and planning for your daughter's education is impressive. Balancing multiple financial goals at this stage of life is challenging, and your proactive approach is truly inspiring.

Final Insights
To achieve your goal of finishing the home loan before retirement, focus on increasing your EMI, making prepayments, and optimizing your investments. Building a balanced portfolio with equity and debt mutual funds will help in wealth creation and risk management. Regularly review and rebalance your portfolio to stay on track.

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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Asked by Anonymous - May 02, 2024Hindi
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Hi Sir, I am 36, in hand salary is 2.4 lakhs per month(including rental) I have 2 properties 1st current market value 2.2cr outstanding loan 40 lakhs 2nd. 60 lakh outstanding loan of 28 lakhs(taking tax benefit on this). Apart from this I personally have 0 savings in cash. My wife is housewife. At current market value we will have roughly 60 lakhs of gold. Recently bought a car on loan with emi of 35k. My monthly emi outflow is 1.1 lakh with roughly 1 lakh as additional monthly expense. Whatever I am able to save currently I am using it to pay of my Housing loan no.1. Need your suggestion on financial planning & decision that I should take in future
Ans: Given your financial situation, it's important to prioritize debt management, savings, and investment planning to achieve your long-term financial goals. Here are some tailored suggestions:

Debt Management:
Continue prioritizing the repayment of your housing loans. Focus on clearing high-interest debt first, such as the outstanding loan on Property 1.
Explore options to accelerate debt repayment, such as allocating any surplus income towards loan prepayments.
Review the terms of your car loan and consider refinancing if possible to reduce the monthly EMI burden.

Emergency Fund:
Establish an emergency fund equivalent to at least 6-12 months of your household expenses. This fund will provide a financial buffer in case of unexpected events like job loss or medical emergencies.
Set aside a portion of your monthly income towards building this fund gradually, even while repaying loans.

Savings and Investments:
Once you have built an emergency fund, allocate a portion of your income towards systematic savings and investments.
Consider investing in tax-efficient instruments like Equity Linked Savings Schemes (ELSS) to optimize tax benefits while generating potential long-term returns.

Diversify your investment portfolio across asset classes such as equity, debt, and gold to mitigate risk and enhance overall returns.

Insurance Coverage:
Review your existing insurance coverage, including life, health, and property insurance, to ensure adequate protection for your family and assets.
Consider purchasing term insurance policies to provide financial security to your dependents in the event of any unforeseen circumstances.

Financial Planning:
Engage the services of a Certified Financial Planner (CFP) to develop a comprehensive financial plan tailored to your specific goals, risk tolerance, and time horizon.
Work with your financial planner to set clear objectives, such as retirement planning, children's education, and wealth accumulation, and devise a strategy to achieve them systematically.

Budgeting and Expense Management:
Track your monthly expenses diligently to identify areas where you can optimize spending and redirect savings towards debt repayment and investments.
Create a realistic budget that accounts for all essential expenses, loan repayments, savings, and discretionary spending.

Future Financial Goals:
Define your long-term financial goals, such as retirement planning, children's education, and wealth creation, and allocate resources accordingly.
Regularly review your financial plan with your spouse and adjust strategies as needed based on changing circumstances and priorities.

By adopting a disciplined approach to debt management, savings, and investment planning, you can gradually improve your financial health and work towards achieving your long-term financial objectives. Consulting with a qualified financial advisor or planner can provide valuable guidance and support in navigating complex financial decisions and optimizing your overall financial well-being.

..Read more

Ramalingam

Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 04, 2024

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Hello Sir, I am 37 year old and earning 2lac/month. I save 33k per month, 13k in SIP(small call, blue chip and flexi) and 20k in post office RD. I have a home loan of 1.50 cr whose monthly installment is 1.29 lakh. I do have 3 childrens ( 2 teenage kids and 1 small kid). I need your guidance to pay the loan amount ASAP and also want to save the corpus amount for my kids higher studies. Note. For my monthly needs i do have another passive income which fullfil our basic needs.
Ans: Securing Your Family's Future: A Financial Roadmap
It's great that you're thinking about paying off your home loan early and saving for your children's education! You're taking charge of your family's financial well-being. Let's explore some strategies to help you achieve your goals:

1. Analyzing Your Cash Flow:

Track Your Expenses: For a month, track all your income sources and expenses (including your passive income). This will help you identify areas where you can potentially cut back and free up more cash for debt repayment and savings.

Debt-to-Income Ratio: Calculate your debt-to-income ratio (total monthly debt payments divided by gross monthly income). A lower ratio indicates better debt management. A CFP can help you analyze this ratio and suggest strategies for improvement.

2. Prioritizing Debt Repayment:

Additional Lump Sums: Do you have any upcoming bonuses or windfalls? Consider using them for additional home loan payments to reduce the principal faster.

Part Pre-Payment: Explore the option of a part pre-payment on your home loan. This can significantly bring down your overall interest outgo.

3. Exploring Refinancing Options:

Compare Interest Rates: Research current home loan interest rates offered by different lenders. If you find a significantly lower rate than your existing one, refinancing your loan can save you money in the long run.

Processing Fees: Consider any processing fees associated with refinancing and weigh them against the potential interest savings.

4. Saving for Children's Education:

Investment Time Horizon: For your older children (likely closer to needing funds for education), a 5-8 year investment horizon might be suitable. This allows for some aggressive investment options.

Younger Child: For your younger child (with a longer horizon, say 10-15 years), a balanced actively managed SIP can offer growth with some stability.

5. Choosing Actively Managed SIPs:

Actively Managed vs. Index Funds: Actively managed funds have fund managers who try to outperform the market by selecting promising stocks. This has the potential for higher returns than passively managed options like index funds, but also involves more risk. A CFP can help you choose the right option based on your risk tolerance.

Diversification: Consider investing in a diversified mix of actively managed SIPs across different market segments (large-cap, mid-cap) to spread your risk and maximize growth potential.

Remember, a CFP can't recommend specific schemes. However, they can help you understand the features and risks of different actively managed fund categories based on your goals.

Additional Considerations:

Emergency Fund: Ensure you have an emergency fund with 3-6 months of living expenses to handle unexpected situations.

Life Insurance: Review your life insurance coverage to ensure your family is financially protected in case of an unfortunate event.

Taking Action:

Schedule a CFP Consultation: A CFP can create a personalized roadmap considering your specific situation, risk tolerance, and financial goals.

Review and Monitor: Your financial situation and goals might change over time. Regularly review your progress with your CFP and make adjustments to your plan as needed.

By following these steps and seeking professional guidance, you can effectively manage your debt, save for your children's education, and achieve your long-term financial goals. Remember, actively managed funds can be a powerful tool for growth, but they also carry risk. Consulting a CFP can help you make informed investment decisions for a secure future.

Don't wait! Take charge of your financial well-being today.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

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Ramalingam Kalirajan  |6501 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 18, 2024

Asked by Anonymous - Jun 14, 2024Hindi
Money
Me nd my wife are working couple having monthly income of 1.5 lacs combined. Age 30s, Liabilities of around 85 k per month. Investment 12.5k ppf, emergency fund created, please guide financial management for child education target doctor course fees after 20 years Buy own house in 4 to 5 years approx60 to 70 lacs with loan. Current liabilites include 15k car emi (6 lakh loan plannjng to end in 2 years) and 15k rent
Ans: Financial planning is crucial for achieving long-term goals, especially when you aim to fund your child's education and purchase a home. With a combined monthly income of Rs. 1.5 lakhs and liabilities of Rs. 85,000, it’s essential to strategically manage your finances. In this comprehensive guide, I will help you plan for your child's future education expenses, buying your own house, and managing current liabilities.

Assessing Your Current Financial Situation
Income and Expenses
Your combined monthly income is Rs. 1.5 lakhs. Current liabilities are Rs. 85,000, including Rs. 15,000 for car EMI and Rs. 15,000 for rent. This leaves you with Rs. 65,000 for savings and other expenses.

Investments and Savings
You are already investing Rs. 12,500 in PPF and have an emergency fund created. These are excellent financial habits that provide a strong foundation for future planning.

Prioritizing Financial Goals
Child's Education Fund
You aim to fund your child's education, particularly a doctor’s course, in 20 years. Medical education costs can be substantial, so starting early is beneficial.

Purchasing a Home
You plan to buy a house worth Rs. 60-70 lakhs in the next 4-5 years, with the help of a loan. This goal requires a significant amount of savings and careful financial planning.

Budgeting and Expense Management
Creating a Detailed Budget
Develop a comprehensive budget that includes all income sources, fixed expenses (like EMIs and rent), and variable expenses (like groceries and utilities). This helps in tracking your spending and identifying areas where you can cut costs.

Prioritizing Expenses
Prioritize essential expenses and identify discretionary spending that can be reduced. This might include dining out, entertainment, and other non-essential expenditures.

Tracking Expenses
Use expense-tracking tools or apps to monitor your spending. Regular tracking ensures that you stay within your budget and can make adjustments as necessary.

Managing Current Liabilities
Car Loan
You have a Rs. 6 lakh car loan with a monthly EMI of Rs. 15,000, planning to repay it in 2 years. Focus on repaying this loan quickly to free up funds for other financial goals.

Rent
Your monthly rent is Rs. 15,000. As you plan to buy a house in 4-5 years, continue to manage this expense while you save for a down payment.

Savings and Investments
Systematic Investment Plans (SIPs)
Consider starting SIPs in mutual funds. SIPs allow regular, disciplined investments that can grow over time. Choose funds that align with your risk tolerance and financial goals.

Diversified Investment Portfolio
Create a diversified investment portfolio, including mutual funds, fixed deposits, and other safe instruments. Diversification helps in managing risks and optimizing returns.

Benefits of Actively Managed Funds
Actively managed funds have professional fund managers who make investment decisions to outperform the market. These funds can provide higher returns compared to index funds, despite higher fees.

Avoiding Direct Funds
Direct funds require investors to manage their investments, which can be challenging without expertise. Investing through a Certified Financial Planner ensures professional management and better financial planning.

Planning for Child’s Education
Education Fund
Start a dedicated education fund for your child. Regular contributions to this fund will ensure you are financially prepared for their higher education.

Education Savings Plans
Consider education savings plans that offer tax benefits and long-term growth. Consult with a Certified Financial Planner to choose the right plan for your needs.

Systematic Investment Plans (SIPs) for Education
Utilize SIPs to build the education fund over time. SIPs offer the advantage of rupee cost averaging and the power of compounding, making them ideal for long-term goals.

Planning for Home Purchase
Saving for Down Payment
To buy a house worth Rs. 60-70 lakhs, save for the down payment, typically 20% of the property value. This requires disciplined saving over the next 4-5 years.

Home Loan Planning
Research home loan options and choose one with favorable terms. Look for low-interest rates, flexible repayment options, and minimal processing fees.

Loan Eligibility and Repayment
Ensure your credit score is good to qualify for a home loan. Plan your EMI payments so that they are manageable and do not strain your finances.

Long-term Financial Planning
Retirement Planning
Start planning for retirement early. The earlier you start, the more time your investments have to grow, ensuring a comfortable retirement.

Retirement Funds
Invest in retirement-specific funds like the Public Provident Fund (PPF) or Employees’ Provident Fund (EPF). These funds offer long-term growth with tax benefits.

Health and Life Insurance
Ensure adequate health and life insurance coverage. These protections are crucial for safeguarding your family’s financial future in case of unforeseen events.



Your commitment to saving and planning for your family’s future is admirable. Balancing current liabilities while planning for significant future expenses shows great financial discipline.


Managing finances while supporting a family and planning for the future can be challenging. Your proactive approach to financial planning is commendable and will benefit you in the long run.

Practical Steps for Implementation
Regular Financial Reviews
Conduct regular reviews of your financial plan. Adjust your budget and investments based on changes in income, expenses, and financial goals.

Professional Guidance
Engage a Certified Financial Planner to help you create and manage your financial plan. A CFP provides expert advice, ensuring your financial decisions align with your goals.

Family Involvement
Involve your spouse in financial planning. A collaborative approach ensures that both partners are on the same page and can work together towards common goals.

Final Insights
Balancing current liabilities with long-term financial goals requires careful planning and disciplined execution. By creating a detailed budget, prioritizing expenses, and making strategic investments, you can manage your finances effectively. Start early with your child’s education fund and retirement planning to ensure you meet these goals comfortably.

Engaging a Certified Financial Planner ensures you receive professional guidance tailored to your unique situation. Your dedication to your family’s future and financial well-being is commendable. With the right strategies and support, you can achieve your financial goals and secure a prosperous future for your family.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

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