Some tips to help you manage your home loan repayment better and plan finances for other needs too

A home loan is a longterm commitment for a borrower. You need to make regular repayments month after month for some 15 to 20 years. When a major chunk of the salary goes towards the loan repayment, other important expenses get overlooked. Planning finances becomes a major challenge. Striking a proper balance between debt repayment, investing for the future and meeting home expenses is critical.

Financial planning aims at meeting your long-term financial objectives. It includes asset allocation, exploring investments, tax planning, retirement planning and risk management. Financial planning first involves computation of your earnings, estimating your future needs to maintain your desired lifestyle and arriving at an investment plan to reach your objectives.

If you thought that your home loan was the only longterm commitment, it is not so. Children's education, marriage expenses, retirement savings, medical bills, unforeseen expenses and emergencies are all major expenses. You may also have other debts like personal loans, credit card bills and vehicle loans. Spending too much of your income and improper management of money, can lead you to a debt trap.

The tenure of any typical home loan is usually long. And owing to inflation and other pressures, a floating rate of interest is bound to go up as years pass by. So, your EMI due to the lender may shoot up, but your salary may not move up by the same fraction. Hence, when planning for repayments keep a considerable cushion for these increases in rates. Uncertainties abound. The health of the economy, inflation numbers, interest rates, your job stability and financial conditions are indeterminate elements. Repayments can become an arduous challenge for many borrowers if no cushion is provided.

The interest rates are showing signs of taming down. If the trend continues you can expect further reductions in rates. Borrowers must make as much down payment as they can, so that the burden of their EMIs will be minimal. Then, opt for floating rates, rather than fixing at the current relatively high levels.

If you were contemplating a vehicle loan or another personal loan, simply postpone to a later date. More debt means more financial obligations. For those already reeling under the burden of rate hikes, acquiring new debts can be an unwise move.

The key to successful retirement planning is to start off quite early and benefit from the power of compounding. Retirement planning acquires even more prominence because the inflation monster is waiting to eat into the money in your savings account. Increased life expectancy and escalating medical costs increase the need for a decent retirement savings.

If you are in a serious unmanageable debt, work out plans to sail out of debt first. This may include paying off high interest loans, paying credit card bills on time and cutting down on a lavish lifestyle. Investments in debt instruments, equity vehicles, balanced funds, real estate, and insurance must be made with due diligence. Adopt a disciplined approach and refrain from the temptation to splurge till your debts are paid off.