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Standard of Living takes a deep dive…

Mr.Homie would have initially showcased his brand new shiny apartment to everyone in his family/friends, but soon had to cut down on all expenses just to clear his loan. Some “smart” people will take personal loans to compensate for the cash crunch they are facing.

Loan is somehow lately the new answer to all financial problems. Not far ago, taking out a loan was a taboo and was considered a fool with little idea on managing his/her finances. Not anymore… Flaunt a brand new car, bike , vacation and what not, all on loan , post them on Facebook, Twitter, Instagram . Wait for the likes , Life is beautiful !! 

Imagine a job loss due to black swan events like Covid19. If you are in a rented house , you can always relocate to a newer house to match your financial crunch. On an EMI ? Good save you!!

I have never understood the logic behind people congratulating someone for buying a shiny new car on loan.

Once had the opportunity of meeting this gentleman with whom I would occasionally hitchhike a ride back home. He had signed up through a famous carpooling service in Bangalore that involved mostly IT professionals using their personal car. He owned a higher end BMW and I always felt INR 80/- for a  ride back home on a BMW was a steal deal :). During a casual chat he then spoke of the loan that it was acquired with and that broke my heart. A luxury car on loan is like owning an Elephant as a pet. It feels all good sitting on top of the elephant and going around for a ride. But then cost alone to maintain it will kill you.

Next time you see someone buying a car on loan, don’t congratulate them. Look at them with pity on what a horrible decision they have made. 

A car loses 25% of its MRP as soon as it comes out of the showroom :(. 

Credit Card Outstanding

It’s shocking to see Credit Card Outstanding has tripled since 2005!! I have seen some of my friends transfer credit from one card to another to avoid payment 😦 .

It’s shocking to see Credit Card Outstanding has tripled since 2005!! I have seen some of my friends transfer credit from one card to another to avoid payment 😦 .

Avoid using Credit Card and carry cash when you go in for shopping. The pain one feels when money leaves the hand is real , which one does not experience while swiping a card.

Stay Clear of Debt

I am not saying never buy an apartment. Just think twice before committing to one and definitely not on a loan. Debts are a downward spiral hard to come out of. By the time Mr.Homie has cleared his debt and “settled” in life, there is hardly any fund left for retirement. He can’t even sell the apartment, as moving into a home, on rent, hurts his ego ( not to forget the added loss that will be incurred ).

“When you combine ignorance and borrowed money, the consequences can get interesting”

Warren Buffett

Instead build your Freedom Fund and stay in a rented house unless you can afford to buy one. Wait for the market to crash, the current prices are exorbitant and the Housing bubble is waiting to burst just round the corner. With just half the amount invested smartly ,you can retire with a lot more money and happiness. Having money to spend on things you need is more important than an old worn down apartment and nothing to spend on for a decent living.

“It’s only when the tide goes out that you discover who’s been swimming naked.” 

Warren Buffett

At just 20K per month you can build a cash chest of 2 Crore ! – We will read about this in detail in later articles.

Here are some things to remember

• Purchase of New expensive smartwatch can wait
• Stop upgrading phones as a symbol of status
• A new car can survive at least 10 years before it needs an upgrade
• Nobody cares about your Gucci belt or shoe
• Avoid buying things you don’t need even if its as a bargain
• That extravaganza birthday party can be a small family affair with loved ones.
• Never compare yourself with others , especially through Social Media. Most of the things purchased are on loan. anyone can buy on loan. What’s the big deal ?

Save your money wisely.Housing bubble or not, Debt needs to be avoided like the plague !

Read Next: Compound Interest 

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