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How can you better plan the payment of your EMIs?

Pritwish and Leena Bose had only one wish at the time they got married about five years back. They wanted to have a home of their own and ever since they have planned this, they put money aside for their dream home. Both being software engineers in one of the leading software firms in the nation, getting a loan was fairly easy and they did indeed buy a two bedroom apartment in Hyderabad in January 2013.

But barely a year has gone by since they had a grand celebration of their home, that the young couple seems far from happy, because their EMI is putting strain on their finances. When they felt their marriage was hanging by a thread, a trusted friend suggested that they go to a financial advisor instead of a marriage counselor and that advice has worked like magic in their life! If you are feeling the strain, because you think you have overleveraged on a home loan, you can follow the path of the couple and will find that managing your EMIs is not that unbearable.

Changing your perspective about your loan- The first thing that the financial advisor told the Bose couple that they should be thankful that they have jobs that are good enough to service their loan. He also said that they should be acclaiming themselves about the fact that they have invested in an asset and have not squandered their money away. That was half the battle won!

Shouldering responsibilities in a better way- Following the advice of their financial planner, Leena and Pritwish have separated their loan and savings accounts. Now the home loan EMI is deducted from Pritwish’s salary account, while all the household expenses are taken care of by Leena’s salary. The couple has also opened a joint account where they are building a contingency fund bit by bit, so that they do no miss even a single EMI. They are aware that a single missed payment may impact their CIBIL score negatively.

Considering pre-payment option- This seemed like a far- fetched suggestion to the couple when their advisor suggested it (since they were barely being able to manage their EMIs), but on careful thought the couple found that it could be a great thing to do. On their recently concluded fifth anniversary, both their families gave them some cash gifts which they have put away. They are both due for a bonus payment in June 2014. Instead of spending this chunk of money on a fancy curved LED TV, the Bose’s have decided to make a partial pre-payment on their loan.

Redoing the math- The advisor sat with the couple and found out what their savings and investments were on the one hand and what were their expenses. It was found that Leena had a recurring deposit of Rs. 3000 and Pritwish had a ULIP that were not giving them very good returns. The advisor asked Leena to direct the recurring deposit towards the EMI and advised Pritwish to go with a term policy with a larger cover to secure their future. It was also discovered that the couple spent at least Rs 5000 each month partying with friends in fancy places. To cut down on these expenses, Leena has started potluck parties each weekend and her friends have followed suit. Not only do they save big bucks, but it is great fun too!

By rejigging some finances and organizing their lives, the Bose couple seems to have sorted out their troubles over EMI. With the blaming and bickering reduced to a minimum, both are finally feeling better about their having their own roof over their heads. The curved LED TV can wait, they say!