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Pay back credit card debt first

business Updated: Oct 04, 2010 00:21 IST

Hindustan Times
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Mint, Hindustan Times and NDTV, bring you a personal finance show, Let’s Talk Money. The weekly call-in show, anchored by Monika Halan, editor, Mint Money, and Manisha Natarajan, senior anchor, NDTV, aims to answer viewers’ questions about money-related issues. Here are edited excerpts from the show that aired over the weekend on NDTV Profit and NDTV.

Poorva Gokhale, 28, from Mumbai:
I am in a big financial crisis. My husband lost his job two years back and at the same time we had a baby. So our expenditure increased but income decreased. We both are working now. After two years, he didn’t get a good job. We are worried about clearing the loans we have.

Halan: Poorva, you have a surplus of R40,000 and from the numbers that you have sent, it seems that there is a lot of backlog of bad loans which were taken and not paid back.

Listening to you and from the kind of information that you have sent, I think there is a little bit of holding onto what you were doing before that high-paying job went... So let’s do a money solution first and then we will come to how you can emotionally handle this change-over.

First, you need to get out of all this debt, this credit-card debt. You do have surplus — R10,000 or R20,000, whatever it is, aggressively pay back your credit-card debt; from R50,000 credit-card debt, you are up to R80,000 simply because you are only doing minimum payments.

That’s a recipe for disaster. Pay back your credit-card debt, very aggressively pay back the other loans. There is also this car loan which is pending. The bank has repossessed the car but the loan is still pending. There are arbitration methods possible. I think that by February you should look at zero debt — you take it as a goal and, believe me, money will come. In 2011, build an asset base of R4-6 lakh to get back on your financial feet.

Finally, just drop the past and get on with rebuilding your life.

Natarajan: Absolutely everything has to be cut out. I am looking at your finances and see there is not much surplus left. You have to create that surplus and pay back your personal loan and your credit-card loan.

From not running ACs to switching to travelling by bus and not watching movies in a mall, do whatever it takes.

Talk to Disha — it’s a counselling agency which will help you in refixing your credit. SMS DISHA at 53030 or call at Mumbai 65971815/16/17 to get them to help you.
Prajesh Patel, MNC employee from Mumbai:

I want to start investing in mutual funds. I have an income of R3.25 lakh per annum; I save R6,000 per month. I am already paying my LIC and Max New York life insurance premium.
Natarajan: What are the basics of a good portfolio of mutual funds and how do you start it? The basics of a good mutual fund portfolio — have a diversified portfolio but not too scattered. When you begin, 3-4 funds are good enough, and as you grow your portfolio about eight funds is all that you should have, not more.

Within the first three, you need at least two funds which will form the core portfolio of steady long-term funds – from the universe of large cap funds. Then add some growth kickers for increasing overall portfolio return — these could be midcap and small cap funds. If you want to moderate the risk, don’t go for midcap or sector funds. Rather, go for a balanced fund. These invest up to 60 per cent in equities and the rest in debt.