I have been married for three years. Our combined annual income is Rs 25 lakh. At present, we are servicing two loans — home and auto. Also, our credit card bills are quite high. Our monthly outgo on loan repayments is 70 per cent of our salaries. I have a couple of systematic investment plans, but I miss their payments often. Can we get into a debt payment schedule that will ensure quick repayment?
While there is no fixed percentage for monthly loan repayments versus monthly income, ideally, it should remain between 35-50 per cent, depending on your income levels and expenses. In your case, the home and auto loans’ equated monthly instalments (EMIs) are largely fixed. First, you need to cut down your expenses, particularly credit card’s immediately. Considering you both are earning and have no other liabilities, it should not be difficult. Second, assuming that you are availing of revolving credit on credit cards, you should know that outstanding amount on credit card is the most expensive debt. You need to convert all credit card dues into EMIs, after which you should stop availing of it. It will ease your financial burden, and with your annual increments in salary, situation should come under control in future.
I started investing in the stock market two years before, with suggestions from friends (working with brokerage firms). I earned decent returns in the first year. My initial investment of Rs 2 lakh rose to Rs 3.5 lakh between 2008 and 2010. I booked profits and invested the entire amount in futures & options and small initial public offerings. I lost money initially and had to borrow Rs 3 lakh (from a moneylender at 15 per cent) as margin money, as I was positive on markets. But today, I am sitting on a loss of Rs 3.5 lakh, along with a loan. My income is Rs 20,000 with household expenses of Rs 10,000, parents’ monthly medical bills of Rs 4,000, mutual fund saving of Rs 2,000 and saving with a local jeweller’s gold scheme Rs 3,000. Please help.
As I see, your concern is to settle the moneylender’s loan, as Rs 3.5 lakh that you lost was your own. You may either ask the lender to convert about Rs 2.25 lakh into EMIs over the next five years, or take a personal loan for the amount from a bank. It will mean an EMI of Rs 5,300-5,500. You can pay these instalments, instead of saving for mutual fund and jeweller’s gold scheme. To repay the balance amount you will either have to sell some asset to the moneylender, or liquidate your mutual fund corpus, or withdraw money from local jeweller.
The writer is senior vice-president and group head-retail strategy and branding at Arcil. Views expressed are his own. Send your queries to yourmoney@bsmail.in