Lessons in Investing
Managing Loans, Building Security: Yogesh’s Financial Journey
This week on Money Matters, we met Yogesh, an IT professional with over 12 years of experience. Yogesh prefers not to show his face on camera, and we fully respect that. He joined us to share his financial story—one that many middle-class families in India can relate to.
Introducing Yogesh
Yogesh is 32 years old, married, and currently living in government quarters with his wife. He recently bought a house worth ₹26 lakhs and is preparing to move in soon. Like most first-time homeowners, he has taken on a substantial home loan, along with a couple of other loans, which has led to some financial stress.
His monthly take-home salary is ₹46,000. His wife has just finished her degree and is not yet working. On top of that, she is pregnant, and they are expecting a baby in about six months. Naturally, the family’s financial responsibilities are about to grow.
Yogesh’s Loans at a Glance
Here’s a breakdown of Yogesh’s current loans and EMIs:
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Home Loan: ₹26 lakhs @ 7.9% interest, EMI of ₹19,000 (30 years).
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Personal Loan: ₹2 lakhs @ 16% interest, EMI of ₹5,838 (4 years).
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Mobile Loan: EMI of ₹2,346 (10 months remaining).
Add household expenses of roughly ₹9,000, and his monthly budget looks very tight. That totals to ₹36,000+ in fixed monthly obligations, against his ₹46,000 income.
Currently, Yogesh has about ₹1.75 lakhs in the bank, of which ₹1.4 lakhs will go toward the house possession payment soon. He also has an RD (recurring deposit) of ₹35,000. Beyond this, his savings and investments have been depleted—he liquidated everything to make the down payment.
The Real Problem
On paper, Yogesh’s numbers balance out. He earns enough to cover his EMIs and household expenses. But the issue lies deeper:
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No savings buffer left – All savings and investments have been drained.
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Dependence on loans – Any unexpected need (like medical expenses during his wife’s pregnancy) could push him into taking another personal loan.
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Long-term risks – A 30-year home loan could mean paying nearly ₹70 lakhs back to the bank for a ₹26 lakh loan.
This is a financial trap many fall into—focusing only on EMI affordability without accounting for related costs (registration, brokerage, furnishing, appliances, etc.) that come with home ownership.
The Guidance
Here’s the step-by-step roadmap that was discussed for Yogesh:
1. Build an Emergency Fund
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Goal: ₹1.5 lakhs over time, to cover 4–5 months of expenses.
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Start with his existing ₹35,000 RD and the ~₹34,000 that will remain in his account after possession.
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Save ₹10,000 per month via a liquid or debt mutual fund (easily redeemable within 24–48 hours).
Within a year, he will have ~₹1.8 lakhs as a safety net. This becomes critical with a baby on the way.
2. Prioritize Debt Management
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The personal loan @16% is very expensive. Instead of putting the full ₹10,000 into investments, split it:
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₹5,000 towards SIP (systematic investment plan).
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₹5,000 towards extra payments on the personal loan.
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This strategy can help close the personal loan in ~2 years instead of 4.
3. Tackle the Home Loan Smartly
A 30-year loan at 7.9% can nearly triple the repayment amount. But with discipline, Yogesh can cut this drastically:
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Pay one extra EMI every year.
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Increase EMI by 10% every year as his salary grows.
Doing just these two things can reduce the loan term from 30 years to just 11 years—saving ~₹27 lakhs in interest.
4. Protect the Family
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Get a life insurance cover of at least ₹1 crore (will cost around ₹20,000 annually at his age).
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Rely on his corporate health insurance for now, but consider a top-up after the baby arrives.
5. Grow Investments Over Time
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Once the personal loan is closed and the emergency fund is secure, shift investments to equity mutual funds.
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A simple ₹10,000 monthly SIP, increased by 5% annually, compounded at ~15%, could give Yogesh nearly ₹6 crores by retirement at 60.
Key Lessons from Yogesh’s Story
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Home buying needs real math, not just EMI math. Down payment, registration, furnishing, and hidden costs can wipe out savings.
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Emergency funds are non-negotiable. Without them, even a small crisis pushes families into expensive personal loans.
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Debt strategy matters. Costly loans must be paid off early; long loans like home loans should be shortened with smart repayment hacks.
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Insurance is protection, not expense. With a family, life and health insurance are must-haves.
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Start investing early. Even ₹10,000 monthly, with discipline, grows into crores over decades.
Final Words
Yogesh’s story is one of ambition, responsibility, and lessons learned. Buying a home is a dream for every family, but it must be done with careful planning. The key is discipline—saving consistently, paying off high-interest loans early, and building an emergency cushion.
With these steps, Yogesh can not only manage his present obligations but also secure his family’s future, become debt-free much earlier, and still build a substantial retirement corpus.
Congratulations, Yogesh, on your new home. With patience and planning, you’re on the path to true financial freedom.
👉 If you found Yogesh’s story insightful, share it with someone who is planning to buy a house. It might save them from financial stress down the line.
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