Never Pay Off Your Loans; CA Tells 35-Year-Old Man: Truth or Story?

A man in his late 30s recently decided to pay off both his home loan and car loan in one go. At first glance, this seemed like an ideal achievement — no more EMIs (equated monthly instalments) and the peace of being debt-free. He proudly shared the news with his chartered accountant (CA), expecting praise. But instead, his CA called it a huge financial mistake.

To clear these loans, the man did more than just use his monthly savings. He sold his mutual fund investments, drained his emergency fund, and even postponed retirement planning for several years. In the process of eliminating his debt, he also eliminated his financial safety net — the very buffer that protects individuals during crises.

The CA, Abhishek Walia, explained that while being debt-free feels good, it shouldn’t come at the cost of financial security. Without investments or emergency savings, the man would now be highly vulnerable to any unexpected event — such as a medical emergency, job loss, or urgent family need — which could force him back into debt, only this time without any savings to fall back on.

This story underscores an important point: “debt-free” doesn’t automatically mean “financially free.” A balanced financial strategy doesn’t just focus on paying off loans aggressively; it also ensures there is enough liquidity, savings, and investment growth to protect against future uncertainties.

The article contrasts this approach with how wealthier individuals manage their finances. According to CA Nitin Kaushik, wealthy people do not simply aim to eliminate debt. Instead, they structure their financial lives so that their assets and liabilities are balanced and protected. For example:

• Homes may be held in trusts or companies, rather than in personal names, to protect family wealth.
• Businesses may be divided into holding companies and subsidiaries so that the failure of one unit doesn’t destroy total wealth.
• Loans may be taken through companies rather than personally, separating personal lifestyle from liability.
• Insurance is used widely to cushion against major risks.
• Assets are diversified across different entities, sometimes even including spouses or trusts, creating multiple layers of protection.

According to this perspective, the real key to financial freedom isn’t just being free of EMIs — it’s ensuring you have enough protection, liquidity, and structure to withstand unexpected life events. Rushing to eliminate debt at the cost of one’s emergency fund or future plans can leave someone more exposed, not more secure.

In short, the article argues that financial decisions should be holistic: consider life goals, risk protection, savings, and growth — not just the emotional satisfaction of being debt-free.