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Ramalingam Kalirajan |10874 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Jul 23, 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 US on Jul 23, 2025Hindi

Hi! This is Surya! I'm salaried with 18lac CTC, taje home around 1.1lac, monthly PF 26K including employer contribution. I have monthly 8k sip, 5k in TATA Ulip, 10lac family medical insurance personally and 5lac corporate family insurance from my company. Monthly expenses is 35k, plus school fees 15k, home loan emi 22k (16.5L loan), jewel loan outstanding 8lac. Let me know best option to diversify funds to close jewel loan + home loan in 40 yrs. Also some higher education funds for my 2 kids aged 5yrs and 2 yrs at 18yrs

Ans: You've done a good job in setting a structure already with SIPs, insurance, and disciplined expense habits. You are taking solid steps and deserve appreciation.

Let us assess your situation from all angles and provide a comprehensive plan that works for your goals, which are:

– Closing the jewel and home loan
– Planning higher education for two kids
– Managing your expenses wisely and investing for long-term wealth creation

Let’s look at this in detail from a Certified Financial Planner’s perspective.

? Income and Expense Summary

– Your monthly take-home is Rs.1.1 lakh
– PF contribution of Rs.26,000 monthly (includes employer share)
– SIP of Rs.8,000 and TATA ULIP Rs.5,000
– Family and corporate medical covers are in place
– Monthly expenses Rs.35,000
– School fees Rs.15,000
– Home loan EMI Rs.22,000
– Outstanding jewel loan of Rs.8 lakh

Your total monthly outgo is close to Rs.85,000 excluding investments. So surplus available is approx. Rs.25,000 per month. This is a decent start.

? Immediate Concerns – Jewel Loan

– The jewel loan outstanding of Rs.8 lakh is a burden
– Interest rates are usually high on such loans
– Aim to clear this before you plan anything else
– Treat this as a financial emergency

Instead of continuing the ULIP of Rs.5,000 per month, consider surrendering it if it’s older than 5 years and value is higher than premiums paid. TATA ULIP charges are usually high. Return is often less than equity mutual funds.

Redirect that Rs.5,000 to increase the EMI or build a reserve to prepay the jewel loan.

Also, pause SIP of Rs.8,000 for 1 year and use the Rs.13,000 (SIP + ULIP) to repay the jewel loan faster.

If this continues for 12 months, you will save approx. Rs.1.5 lakh in a year. Use this for partial repayment.

Next, use bonus, incentives or PF loan (if allowed) to reduce this further.

Once this is closed, resume SIPs and long-term plans.

? Home Loan – Long-Term but Needs Attention

– Home loan of Rs.16.5 lakh is not urgent to close
– Interest is usually lower and offers tax benefit
– Don't rush to prepay this aggressively now
– Once jewel loan is cleared, you can plan part prepayments every year

Use yearly bonus or tax refund to part-prepay 10% of home loan every year. This will cut interest burden and reduce the term too. Avoid topping up this loan for consumption.

? Emergency Fund and Insurance Cover

– You already have Rs.15 lakh of medical insurance (corporate + personal)
– This is good coverage for your family size
– Ensure the personal policy is a family floater with no claim bonus benefit

Keep an emergency fund equal to at least 6 months of expenses + EMIs. Around Rs.3 lakh minimum.

Start building this gradually in a liquid mutual fund or sweep-in FD. This will help in emergencies without breaking investments.

Also, consider a term insurance of Rs.1 crore or more. This is missing in your profile. If anything happens to you, this will secure your family’s future.

Avoid insurance policies which combine investment. They give poor returns and high charges.

? Higher Education Planning for Children

– Your kids are aged 5 and 2 years
– You have 13 and 16 years before their college needs
– Goal should be to build minimum Rs.35-40 lakh for each child at age 18

Start SIPs of Rs.5,000 each for both kids. Once jewel loan is cleared, this will be possible.

Choose actively managed diversified mutual funds with a mix of large and mid cap styles. These perform better over long term vs index funds.

Many people fall for index funds due to low cost. But in India, active funds usually beat index returns. They manage risks better during market corrections. Fund managers adapt to market cycles. Index funds don’t.

Also avoid ETFs and passive investing for kids’ goals. You need capital protection with decent growth.

Start with equity mutual funds now since the goal is 13+ years away. Closer to the goal, shift gradually to debt mutual funds to avoid market risk near college age.

Regularly monitor the funds with the help of an MFD who is a CFP. He can suggest switches if the fund underperforms.

Use regular funds over direct plans. Direct funds lack hand-holding, advice and portfolio reviews. Mistakes in fund selection and timing may cost you more than the 0.5%-0.7% commission in regular plans.

? Investment Plan Post Jewel Loan Repayment

After the jewel loan is cleared, here’s a suggested monthly flow:

– Rs.8,000 SIP for kids’ higher education
– Rs.10,000 towards emergency fund till Rs.3 lakh built
– Rs.5,000 part prepay home loan yearly (lump sum mode)
– Rs.5,000 continue SIP for long-term wealth building
– Rs.5,000 invest for your retirement corpus

This way, every rupee has a purpose. No leakage or confusion.

Also, review your SIPs every year. Increase them by 10% annually if salary increases. This keeps pace with inflation.

? Retirement Planning and Wealth Building

Right now, you haven’t mentioned specific retirement corpus. But this is a vital goal.

Use your existing EPF, but don’t depend only on that.

Once jewel loan is over and kids' SIPs are going, start a Rs.5,000 monthly SIP in diversified equity funds for retirement. Increase to Rs.10,000 in future.

Do not touch this corpus for any other goal.

Use ELSS for tax savings under 80C if needed. It also gives wealth creation.

Avoid buying endowment or traditional life policies. These give low return and lock-in your money.

Mutual funds are more flexible and transparent.

? Tax Planning

Maximise 80C with EPF, term insurance premium, ELSS and school tuition.

Also consider 80D benefit for health insurance.

Avoid investing just for tax savings. It must align with goals.

Mutual fund taxation must be kept in mind. For equity mutual funds:

– Short term capital gain taxed at 20%
– Long term capital gain above Rs.1.25 lakh taxed at 12.5%

Debt mutual funds are taxed as per your slab.

So plan redemptions smartly with help of MFD or CFP.

? Review Plan Regularly

Create a financial calendar. Review SIPs, fund performance, loans every 6 months.

Track how much of each goal is funded and how much pending.

Avoid frequent changes. Be consistent. Compounding rewards discipline.

? Mistakes to Avoid

– Continuing ULIP for long if not suitable. Consider exit if charges are high.
– Mixing insurance and investment
– Using direct mutual funds without support
– Using index funds or passive products for long term goals
– Ignoring term insurance or emergency fund
– Delaying kids' higher education planning
– Not part-prepaying high-interest loans like jewel loans

? Final Insights

Your financial habits are on the right track. You are saving and planning early.

Repaying the jewel loan must be your top priority. This will ease cash flow.

Once that’s over, you can balance between home loan, kids' education and retirement.

Use mutual funds with guidance. Choose active, diversified funds and review performance.

Avoid mixing insurance and investment. Use pure term insurance and mutual funds separately.

Build financial safety net with emergency fund and regular reviews.

This holistic plan ensures your family’s needs, your peace of mind and long-term wealth.

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.