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How can I turn around my financial situation at 40 with no savings, mounting debt, and a low income?

Milind

Milind Vadjikar  | Answer  |Ask -

Insurance, Stocks, MF, PF Expert - Answered on Nov 16, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more
Asked by Anonymous - Nov 10, 2024Hindi
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Hi Nitin, I am 40, no saving, no investments. Was out of job in '22 restarted contractual work in '24. During this period of 2 years. I borrowed money from people (friends/ family) & credit card. Missed multiple EMI's. Cibil score has gone for a toss. Out of monthly income of 40,000 i have monthly due of 30,000 to clear each month. Please guide how i can turn around the situation.

Ans: Hello;

Only way you can turnaround the situation is by diligently repaying overdue loans.

Once loans are over start a monthly sip of 20 K. This can grow into a corpus of around 50 L in 10 years and around 1 Cr in 15 years. (12% return from equity funds assumed).

Best wishes;
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  |9924 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  |9924 Answers  |Ask -

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

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I am a Civil engineer working in esteemed Construction Company of the country having 11 years of experience. My current take home salary is 91,000 and due to some experiences of my life all my decision went bad and I have to pay almost 80 percent of my salary into Personal loan EMIs. I have exhausted the amount which is got from my last organization which was around 2 lakhs and I am running into huge trouble with almost no savings. I am living with my wife and 9 month old baby boy. I am Trapped in debt. How should I come of from this? Anyone please guide.
Ans: You're a Civil Engineer with significant experience, facing a tough financial situation. Here's a holistic approach to tackle your debt:

Assessing the Debt Situation
Understand the total debt burden and prioritize repayments.
Evaluate personal loan terms and conditions for possible restructuring.
Managing Current Expenses
Budget meticulously to cover essential expenses for your family.
Minimize discretionary spending to allocate more towards debt repayment.
Maximizing Income Opportunities
Explore opportunities for additional income leveraging your engineering skills.
Consider freelance projects or consulting work to boost earnings.
Debt Repayment Strategy
Focus on paying off high-interest loans first to reduce overall interest burden.
Negotiate with lenders for feasible repayment schedules or interest rate reductions.
Emergency Fund Creation
Start building an emergency fund gradually, even with small amounts.
Ensure it covers at least 3-6 months' worth of living expenses.
Family Financial Security
Review insurance coverage for health and life to protect against unforeseen events.
Plan for your child's future needs, such as education and upbringing costs.
Long-Term Financial Planning
Once debt is under control, prioritize systematic savings and investments.
Avoid high-risk investments; opt for diversified options suited to your risk tolerance.
Final Insights
By strategically managing your debts, expenses, and income, you can gradually regain financial stability. Seek professional advice if needed to tailor a plan that fits your specific circumstances.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

..Read more

Ramalingam

Ramalingam Kalirajan  |9924 Answers  |Ask -

Mutual Funds, Financial Planning Expert - Answered on Jun 02, 2025

Asked by Anonymous - May 14, 2025Hindi
Money
I made very huge mistake, first I started trading in share market without knowledge and lost 1.5Cr last yr all on loan and now again 70L gone in Forex and crypto this year. I hv a salary of 2.27 monthly all goes in EMI and intrest. I am trapped in the loans and finding it very stressful. I should hv taken calculated risk instead of risking everything including my family future. Total 2.25Cr outstanding loan with average intrest of 13% Please suggest how to get out of this trap.
Ans: You have total outstanding loans of Rs. 2.25 crore.

The average interest rate is high at 13%.

Your monthly salary of Rs. 2.27 lakh is going towards EMIs and interest.

Losses from trading in share market, forex, and crypto are significant.

It’s natural to feel stressed and regretful.

Appreciate your honesty and willingness to correct this.

Let’s plan a path to reduce stress and regain financial stability.

Immediate Steps for Debt Management
First, list down all loans with outstanding amounts and EMIs.

Include interest rates and remaining tenure for each loan.

Focus on paying off high-interest loans first.

Avoid further loans or borrowing for investments.

Do not enter forex, crypto, or high-risk trading again.

A Certified Financial Planner can help restructure your debt.

Explore Loan Restructuring Options
Speak to lenders to restructure your loans.

Request for extended tenures to reduce EMI burden.

Try to negotiate lower interest rates if possible.

Banks may allow temporary moratoriums in genuine hardship cases.

Always explain your situation honestly to lenders.

Create a Practical Monthly Budget
List all essential monthly expenses: rent, food, utilities, children’s needs.

Allocate minimum for discretionary expenses like entertainment.

Whatever is left should go towards loan EMIs and savings.

Track expenses closely to avoid leaks.

Increase Income Wherever Possible
Explore part-time work or freelance projects for extra income.

Any additional money should go to paying down high-interest loans.

Avoid using extra income for new risky investments.

Avoid High-Risk Trading and Speculative Investments
You lost large amounts due to unplanned trades and speculation.

Trading without knowledge is dangerous and not reliable for wealth building.

Stop forex and crypto trading entirely.

Stocks can be risky if not managed well.

Prefer regulated instruments like mutual funds managed by professionals.

Certified Financial Planners recommend actively managed mutual funds for steady growth.

Systematic Investment in Mutual Funds
Avoid direct equity investments without proper knowledge.

Mutual funds managed by professionals can help build wealth steadily.

Regular mutual fund investments through a CFP ensure a disciplined approach.

Actively managed funds try to beat the market, unlike index funds.

Index funds only copy the market; they don’t adapt to changes.

Regular mutual fund investments via CFP are better than direct funds.

Direct funds lack ongoing guidance and emotional support during volatility.

Protecting Your Family’s Financial Future
Ensure your family’s basic needs and future goals are safeguarded.

Health insurance for your family is a must to avoid medical shocks.

If you have dependents, get term insurance for life protection.

Avoid mixing insurance and investment in one policy.

Work with a Certified Financial Planner
A CFP can create a detailed debt repayment plan.

They will help with loan restructuring and prioritising payments.

They can plan your investments for safety and long-term growth.

They give unbiased advice and guide you through financial decisions.

Psychological and Emotional Support
Financial stress can be heavy on your mind.

Speak to family or trusted friends to ease the emotional burden.

Seek professional help if stress feels unmanageable.

Remember, mistakes happen but taking corrective steps is key.

Steps to Control Spending and Improve Cash Flow
Limit lifestyle expenses to bare essentials.

Cut out luxury or non-essential spending completely.

Use budgeting tools to monitor every rupee spent.

Keep a record of income and outflows for better visibility.

Loan Consolidation as an Option
Consider consolidating high-interest loans into one lower-interest loan.

This may help reduce EMI burden and simplify repayments.

Discuss with a CFP or bank for consolidation feasibility.

Always read terms carefully before consolidating.

Long-Term Approach to Rebuild Wealth
Wealth rebuilding will take time, but discipline and patience are vital.

Set realistic long-term goals for retirement, children’s education, and other needs.

Use disciplined, systematic investments to meet these goals.

Avoid short-term get-rich schemes.

Avoid Future Pitfalls
Do not chase risky investments or get-rich-quick schemes again.

Avoid unsolicited tips or social media financial influencers.

Stick to safe, professionally managed investments.

Don’t invest borrowed money in stock markets or crypto.

Building a Financial Safety Net
Slowly build an emergency fund in savings or liquid mutual funds.

Emergency fund should cover 6-12 months of expenses.

This buffer helps avoid future debt traps.

Final Insights
You have faced tough financial setbacks.

Appreciate your courage in seeking solutions now.

Work with a Certified Financial Planner to prioritise loan repayment.

Avoid risky trades and focus on building a secure, steady future.

Discipline, realistic goals, and professional advice are your tools to recover.

Financial stability will take time but it is possible with these steps.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

https://www.youtube.com/@HolisticInvestment

..Read more

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