It’s so strange the way people in
general are dealing with money. In my
interactions when I ask people I meet what they like, paying interest or
earning interest? Almost all of them want to earn interest, and yet they end up
paying one. Why is it happening?
As students while we were in
school we have all learned in economics that wants are unlimited. It is practically impossible to have
everything we want. Yet we are overtaken by the innate desire to satisfy our wants.
The other big factor is, instant
gratification and pride of ownership. New car is launched and we want to buy
it, or a new phone is come into the market and we want to have it, the list is
endless. And also practically everything today is available on EMI, be it mobile
phone, or travel and tourism, electronics, automobiles, house, even insurance
is now available on EMI the list is long. Some even come with zero down payment
schemes. So then how do we decide if
buying things on EMI is good or bad?
I guess the following case study
will help you understand this better.
Aman and Ajay decides to purchase a car. They both pay a certain down
payment and balance amount is raised through loan. Let us say they are both
paying an EMI of Rs.8600/ month for a 5 years loan tenure.
Now, Aman needed car because he
uses his car every day for commuting to and fro for work and on week end’s he
takes his family for outings too. Ajay on the other hand travels by
train for his work place and never takes his car to office. Once a month he goes
to shopping mall for grocery purchase, and in a fortnight he goes for outings
with his family.
In Aman’s case since he is using
his car to optimum his paying EMI is justified. But in Ajay’s case he is hardly
using the car for 5 days, and almost 25 days of month his car is not used. On these 5 days when Ajay goes
for outings or grocery purchase, even if he takes an air conditioned cab on all
these days his total expense will be much lower than what he is paying as EMI.
This my friends is a bad EMI. There is no visible need for him to own a car.
The difference money could be used for something more useful.
This is just one example, there
are so many things where money is spend unnecessarily. What is needed is the sensibility
to ask your own self every time you want to buy something especially on EMI are
these questions…… Do I really need this? How important this purchase is? And
lastly whether it can be postponed? If the answer to these are all positive
then by all means buy things on EMI, but if even one of the answers is negative
please avoid the purchase.
Temptations are always there but
how to take charge of them and not get carried away by them is something you
need to learn and bring in to practice. It is not easy but if you are
determined and want to live stress free life in the long run, this is precisely
what you really need.
Best explained.
ReplyDeleteThank you so much Srikanth, for reading and I am glad it made a connect with you. Please Continue the connection.
ReplyDeleteExplained in Short and simple way to analyze the importance of spending money.
ReplyDeleteThank you so much Vinod for your kind words. Stay connected for more.....
ReplyDelete