In debt but want to save? Read this!

ot a question about your money? What you should or should not do with it?
Our expert Uma Shashikant has the answers.

Age: 26
Earnings: Rs 15,000 / month
Expenses: Rs 12,000/month

I am servicing my credit card debt of around Rs 60,000. How can I get rid of it in a year?

- Anjan Bora

Since you spend most of what you earn, you need to ensure that you can repay at least Rs 5,000 of the credit card loan every month.

Converting the outstanding into a loan with Equated Monthly Installments can come with a very high rate of interest. 

It would be at least 18 months before you can pay off the loan.

• No savings and in debt? Here's help!

I am 23 and will start earning from August Rs 14,000 per month.

My father earns a monthly income of Rs 23,000 and I will begin to earn Rs 14,000 from August.

My father is repaying a loan of Rs 8,00,000 for which he pays Rs 16,000 every month.

My sister will be getting married in about three years and I have to save Rs 2,00,000 to 4,00,000 towards the expenses.

- Kamalesh

If the earnings of the family are what you have stated, how did the household run on Rs 7,000 per month before you started earning? Find out how much is needed and target a saving of at least Rs 5,000/month. 

Perhaps your sister could also chip in with some earnings for the three years before she is married.

Invest in a balanced fund, which has short-term debt and diversified equity.

A balanced fund will invest in shares of companies just like a diversified equity fund and also invest in debt (fixed-return investments) to balance the risk.

• There's no time like NOW to save!

Age: 29 years
Income: Rs 60,000 per month
Home loan: Rs 20 lakh, EMI: Rs 17,000 per month

I invest in tax-saving instruments like the Public Provident Fund and would like to have a portfolio of investments of Rs 1 crore (Rs 10 million) in the next 15-20 years.

I plan to buy a new car in the next year or two and also have a child by then.

- Rahul Menon

Taking your home loan and expenses for your child into account, target a saving ratio of at least 25% of your earnings. 

If you invest Rs 15,000 in three to four well performing equity mutual funds, even at a 10% return, you will achieve your goal in 20 years.

What is needed is the patience and discipline to invest a fixed amount every month in a Systematic Investment Plan. To understand how an SIP works read, How to invest in a mutual fund.

Illustration: Dominic Xavier

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