How should I pay off my debt and save for retirement?

Capitalstars Investment Advisor

You can invest monies in liquid funds or a fixed deposit. Once the loan is paid off and an emergency fund created, invest the Rs 1 lakh per month towards your retirement in a mix of equity and debt mutual funds.

I am 47 and earn Rs 2.72 lakh a month. I pay Rs 49,000 as rent and an EMI of Rs 40,000 for a loan. I have dependents for whom I spend Rs 40,000 a month and Rs 24,000 on expenses. I invest Rs 1.5 lakh in PPF and Rs 33,000 as insurance premium. I want to create an emergency fund, buy a house, save for retirement and pay off my debt. Please advise.

Ankur Choudhary Co-Founder and CIO, Goalwise replies: You have about Rs 1 lakh left in hand every month which you can invest. Use half the amount to increase your EMI towards your personal loan to pay it off sooner. The remaining Rs 50,000 can be used to build an emergency corpus of about Rs 5-6 lakh. You can invest this money in liquid funds or a fixed deposit. Once the loan is paid off and an emergency fund created, invest the Rs 1 lakh per month towards your retirement in a mix of equity and debt mutual funds.

I am 38 and the sole earning member in a family of three. I took a home loan of Rs 54 lakh in April 2018 for which I am paying an EMI of Rs 50,000. Now I want to buy a car by selling my existing stocks and mutual fund investments worth Rs 9 lakh. Is this a good idea? Adhil Shetty CEO, BankBazaar replies:It would not be prudent to use up your entire savings to buy a car. Instead, invest an additional amount from your salary towards purchasing a car for a year or two. For instance, if you invest Rs 20,000 every month in liquid funds or short-duration funds, you can accumulate close to Rs 5 lakh in two years. This will give you enough for a down-payment and more. You can finance the rest via a car loan. Alternatively, you could use a portion of your bonus or income from any other source as a downpayment and opt for a larger loan for financing the rest of the amount. Ideally, not more than 40% of your salary should go into servicing debts. So keep your EMIs within that limit.