Get financially set for the future

I am 25, single, working as a hardware engineer and living with my grandparents in Bangalore. My take home monthly salary is around Rs 38,000.

I plan to buy an apartment for Rs 40 lakh (Rs 4 million) and expect to pay an Equated Monthly Installment of around Rs 25,000 for 20 years.

 After marriage in around 18 months time, I shall shift to this house. Till then, I plan to earn a rent of around Rs 15,000 per month on it.

 I have already zeroed in on a beautiful apartment.

Taking into account additional expenses after marriage, salary hikes and the assumption that my wife may not work (just to be pessimistic), am I making the right decision?

- Raja K

I like your romantic view to life, but I am afraid I have to ground you. 

Your EMI should not be more than 20% of your income. If you think your income is going to move up, so will your expenses.

More so, you are young, plan to marry and start a family. You will soon join the tribe of youngsters living in a posh home, driving a fancy car, but having credit card dues that are many times their incomes. 

If much of your income is locked into the EMI, you may have little choice when your day-to-day expenses mount. 

Buy a house, but at half the cost you now envisage. In 10 years, when you are better off and well-settled, sell it and move into your dream house as a man who is financially more stable and secure.

• Can I take a home loan from my dad?

I'm 27 with a monthly earning of Rs 23,000. I have a loan of Rs 1,75,000 which I am paying right now (Rs 5,500 for 36 months). I have a brother who is studying in Class XII and will be pursuing an engineering degree later. I will have to fund his education -- Rs 60,000 per annum.

I'm planning to buy a house for Rs 12 lakh (Rs 1.2 million). The EMI will be Rs 9,480 for 20 years.

I also have to pay the house rent and groceries bill that amounts to Rs 6,000 every month.

Now, my parents want me to get married. Is it wise? All I have is expenditure, no savings.

- Rajkumar Mohanraj

I do hope the loan you mention is a vehicle loan, and not a personal loan. 

If it is a personal loan, you have to ask what made you take that loan, how your expenses amounted to that and whether or not you are in control of your spending.

It is important to be able to get a handle on this before you marry.  

A house loan EMI of Rs 9,480 will take away about 40% of your salary, and adding your brother's fees, you will be left with less than 50% of what you earn. That could create situations of less money to go around, to meet regular expenses, given the size of your family.

Do your parents have an income, and some assets? If yes, you have some buffer. Perhaps your father can guarantee an educational loan that your brother can take. 

You can then consider marriage.

If not, build some assets by beginning to save every month and review your situation after a year. If you are able to save, and if you are also able to manage the household expenses, perhaps you can consider getting married. 

Postpone the decision to buy the house until you are sure your spend is under control. Perhaps your wife will also earn, and you will be able to keep the house EMI at 25% of your combined salaries. 

Your tax benefits will also be better if the house is in your joint names. Avoid taking on a big liability, especially since you have many claims on your current income.

• Get out of debt, NOW!

I am 24 with a take home salary of Rs 24,000.

I have to pay an education loan (Rs 5,000 every month for five years).

Since I also pay for my brother's education, at the end of the month I am left with only Rs 10,000.

I owe my friends around Rs 35,000. How do I manage this since I am planning to get married next year?

- Hemant Rathore

Your friends will need the reassurance that you intend to pay. Convince them that you will do so on a monthly basis. Even if you manage a Recurring Deposit account of Rs 3,000 per month in their name (or begin to pay into a Systematic Investment Plan for them), you can repay them in about a year.

This will entail fixed amounts going every month into a deposit (like a bank or post office) or into a mutual fund (via an SIP).

Start small, but start. If you begin even with a simple Public Provident Fund (so you don't withdraw the money in haste) and deposit Rs 1,000 for yourself, you will have begun some long term saving. 

If you manage to save more than that, begin to invest in a mix of equity (try diversified equity funds) and short-term instruments like Fixed Maturity Plans.

Consider an educational loan for your brother, so he can chip in to pay for his education.

I hope you marry a working woman and are not planning to spend a bomb on your wedding. 

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