Noob at Financial Planning

POSTED BY rahul chatterjee ON April 29, 2013 12:54 pm COMMENTS (9)

Hello Guys! My details are:

Age=29 years, Occupation=Railway Employee, Monthly take home salary=20340/-, PF=960/month, Total PF balance=76243/-, dependants=Mother (family pension holder @ 13450/month) & Spouse.

Assets=House(5-BHK paid in full worth 45L), Gold worth 2L & RD worth 70K.

Loans/Liabilities=1) Car loan from Magma Fincorp to be paid @ 6450/month till Apr 14. 2) Co-operative society loan to be paid @ 1912/month till Jan 17. 3) Money borrowed from relative to be paid via RD @ 4000/- till Jan 15 & @4500/- till Oct 15. 

Insurance=1) 30 year Term plan from Birla SunLife @ 560/month worth 40L, 2) LIC Jeeval Saral @ 510/month salary saving (worth 20K as of now), 3) Reliance Life Insurance Classic (50K lumpsum in equity option).

My questions are as follows:

1) My monthly expenses are @ 10000/month. I have been serving in Railways for past 10 yrs. As you can see that, I am in a tight spot right now and have to rely on my mother’s pension to make ends meet. However I have managed to own a big house and a car despite my low age + meager salary. Should I start investing in MFs through SIP right now (long term 22 years) or wait till all the loans are paid. 

2) Should I surrender the LIC Jeeval Saral & Reliance Life Insurance Classic to prepay my loans as i have opted for BSLI term plan. The Jeevan Saral will complete 5 yrs in Aug 13.

3) I started a RD aacount as an emergency fund for my mother last year which is worth 35K as of now. Will it be a good idea to use the money I get from surrendering the above policies towards this fund.

9 replies on this article “Noob at Financial Planning”

  1. Dear Rahul, we are rubbing the positives on you. Now it’s your turn to keep the momentum going. Either you rub positive on someone else or if not possible to you, at least share the forum address to your friends, relatives who may need it more than you. 🙂



  2. Dear Rahul, please wait for closure of car loan. Only after this is over, divert full EMI amount towards saving.



    1. rahul chatterjee says:

      Thanks Dear Ashal.

      It was very nice to receive such prompt and unbiased replies from you to my queries. It is quite remarkable when gentlemen such as yourself offer such helpful & honest advise without any financial incentive. It is a nice change after being duped by so called friends (insurance agents) & relatives (loan sharks) alike.

      Thanks a lot again.

      Warm Regards,


  3. Dear Rahul, from your query I assume you are living in same house. if my assumption is correct, the value of your house is zero not 45L. The reason is it’s for self consumption & in case of need, if your family opts to sell it, where ‘ll they go to live?

    I understood the situation. Actually from your original query, I was in the impression, that you recently purchased this house for 45L Rs.

    My take – Please consolidate all your loans into one single loan & pay off all the smaller loans from that one single loan. This way you ‘ll be able to save on money outgo & can divert the saved amount for investment.



    1. rahul chatterjee says:

      Dear Ashal, What i forgot to mention is that we also have another house in old town (inherited from grand parents) where we used to live until 2003. My cousin with his family and my aunt still live there. In case of an emergency, we can still move back there since it is a huge place (07 bedrooms). The thing is that I don’t want to rely on that inheritance alone so i opted for my own house instead.

      Anyways, I had bought my house for 18L (3BHK HIG) back in 2003. I further built up 2BHK construction on the first floor in 2012 which i plan to either rent out in future when i’m retired. But problem is that i did not plan on how i should consolidate my loans before jumping in head first into investments.



  4. Dear Rahul, Instead of answering you, I’m interested to know, how did you manage to purchase that 45L Rs. house with out any loan when your salary can not afford even a 20L house?



    1. rahul chatterjee says:

      Dear Ashal, I was 18 yr old when my father died during active service (he was also in the railways). My mother received about 13 lacs from railways & LIC & I was offered job under compassionate grounds in Railways (death of employee during active service).

      I had two options back then: 1) Continue my studies and use the money for the same. 2) Leave studies, get the job, buy a house and settle down.

      I chose the second option and used the money to buy house in 2003 for about 18 lacs (I had to borrow from relatives as i was ineligible for housing loan at that time). At that time everybody told me that i was foolishly wasting money on a house so far away from the main city. In the last 10 years, a lot of development happened in my residential area including direct connectivity to national highway, relocation of chattisgarh high court, sanction for 4 lane expressway etc. Property prices climbed astronomically and value of my house appreciated alarmingly. Many people came to me offering upto 60L for my house as it was on such a prime location. I still think it was the best decision i ever made in my life.

  5. “5. Stop the emergency fund RD use to pay the relative loan.”

    I meant use the future RD payments to pay the relative loan. The remaining amt can be the emergency fund. Scrounge some additional money and keep adding to it each month 1-2K.
    In case of huge emergencies you could use the gold.

  6. 1. What is the 70K RD for? Why not use it to clear out the loans along with selling some gold?
    2. Make Jeevan Saral Paid up. The reliance policy is a ULIP I guess. I think you should leave it be.
    3. RD for emergency fund is not a good idea. It has no liquidity. Best to put it in a SB acc. that is good enough
    4. Sell the car, pay off the loan, save some money and buy a second hand car. Use every DA arrears toward loans
    5. Stop the emergency fund RD use to pay the relative loan. Let the co-op society loan run. It is not much. You can close it later

    You are not really in such a bad state. Few adustments is all you need to get back in shape.
    Think about investing after you close out the relative- and car loans

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