Investor, Entrepreneur, Educator and Happionaire!
LATELY, I have been thinking a lot about the Lehman crisis. Spending
money that they didn't have and going beyond their means is one of the
main reasons for their situation today. In fact that is the cause for
the current economic crisis in the US.
When I see all this happening, I can only remember the good old days.
Then, karz (loan) was bad. People looked down upon those who took loans.
Parents would not give their daughter's hand in marriage to a man with
loans.
But of course, the times have changed now. Everyone I know has a loan.
The buzz word is EMI (equated monthly installment). Today, you can buy
everything on EMI - a house, a television, even an i-Pod. In fact I know
of someone who just bought a fancy BMW 3 series on EMI, instead of
buying a cheaper car outright with cash. I mostly prefer to take public
transport, but then I am an old man with old thoughts!
Anyway, coming back to what caused the crisis.
Imagine having Rs 2 lakh in your bank account, no regular income, yet
buying a house worth Rs 65 lakh, in the hope of selling it for a higher
price. Even if the price of the house fell by just 5 per cent (that is
Rs 3 lakh), you will go bankrupt.
This is what Lehman Brothers did; with around USD 20 billion they went
and bought assets worth over USD 600 billion. Isn't it suicidal and
simply foolish?
I am sure things would have been different, had I been the head of
Lehman brothers. But who wants an old conservative man like me to head a
complex financial institution.
But there are a few lessons that we can learn:
1.Live a balanced life and avoid overspending.
2. Don't buy things we don't need.
3. Don't buy Branded goods.
4. Don't buy excess Food, Clothes, Cosmetics, Footwear, electronics and
Fashion accuracies. Just think before you buy.
Tip: World still has a lot of growth ahead and the future holds
immense opportunities for us. Let us make the most of it and save and
invest it wisely instead of wasting our precious little on things we
don't need.
5. Try to balance life with work (No one is happy to work in their
professions).
6. Don't stress out your self, after work try to do some extra
activities like swimming, yoga, walking, running where you can divert
your mind from stress.
A thumb rule: Health is more important than money.
7. Try to understand each other (Wife and Husband) in financial matters
and help each other.
Tip: As soon as you get your monthly salary, set aside a fixed
amount, usually 35 per cent, for insurance, savings and investments. You
can then spend the rest.
8. Not all loans are bad. Loans that are 'need based' (home loans,
education loans) can always find a place in your finances against those
that are largely 'want based' (Credit cards, personal loans, car loans).
9. Borrow only if repayment is financially comfortable.
A thumb rule: Keep EMIs within 35 to 45 per cent of your monthly
income.
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