Leading a decent life complemented by basic necessities, few luxuries and savings at hand is what most of us aim at. While the definition of decent may vary for different people, more or less it broadly means having a home, a car, kids studying at a good school etc. But all of these look for a hefty amount of money to eat in order to be accomplished and most of them come on EMIs. Since these are major accomplishments of life, doing them just on savings would not be possible. This leaves you to only options of EMIs, but is your whole life about EMIs and repaying them? Home loan, Car Loan, Personal loan, Education loan etc? The worst part is that they jeopardize your savings even without you knowing.
There is no last with EMIs
EMIs generally start with the first car or first home. As and when the time passes, the EMIs also seems coming to an end. However, by this time people plan for their second property investment or a secondary car or an upgrade, all on a loan.
The car gets upgraded, the house gets upgraded and so does the amount and number of EMIs. Most of us change our cars in a span of 5 to 7 years, the newer one comes loaded with features, technology advancement and higher EMIs. Same goes with the house, the newer one is better located, bigger, well furnished and comes on higher EMIs. With a bigger home, newer car, you have higher EMIs to pay. Plus, by the time you have reached this stage of upgrading your assets, it is time that your kids are ready to go to high school or college or further studies. Now is the time you get introduced to the new trap called ‘Personal Loan’. As warm and custom-made it sounds, it is very poisonous. Yes, personal loans were introduced to assist you and help you realize some of your dream which would not be possible otherwise, they come under the category of undefined loans which are deadly as far as your personal finance is concerned.
As the amount of EMIs climbs up, you will find yourself in despair and insufficient funds to deal with your needs and emergencies. However handsomely you may be earning, loans are snakes. Be very careful and calculative before you take one. Not to forget, with time as you grow professionally, lifestyle demands also climb up a fast ladder. Hence, in all directions, there is a vent for your money to flow out. If you are someone who aims at planning an early retirement, these loans will never let you do that. So, what can be done?
- Buy ‘ONLY’ what is affordable to you
Nobody knows your finances better than you do. If you know you can only buy a one plus but wish for an apple, then you are a fool. Buying an apple would give you momentary happiness (and pride) but will subdue with time and most phones are well advanced to carry out all operations as others do. There is no need to buy the latest smartphone when you can work very fine with one generation older. Trust this, if you are not into some deep technical stuff, you will never realize what is the big difference. But one huge difference that you will see is your EMIs going down.
- Start investing NOW!
Almost all personal finance articles and blogs suggest this, starting saving, start investing, Now is the right time, late would be too late etc. why is that so? Does it really have some grounds?
To fully understand this, you must understand the concept of compounding. Compounding is the formula that works at the back end in helping you create wealth. Once your goals are set, save and invest according to them and then see your money grow with time. The sooner you begin, the greater the returns are.
- Do not compare
This is very important for you to be at peace both mentally and financially. We are social animals and more than good traits, we have a larger set of social bad traits. To top the lost is comparison and looking down upon ourselves. We are in constant competition to outrun our friends, neighbors, people in a social circle etc. If she has a MAC, I have to have a Bobbi Brown or if he has a Rado, I have to have a Longines. This is not the way life is lead. If this is how you are going to build up your empire of materials, you are nearing a mental breakdown. It is absolutely insane to try and match up to things and people which are beyond your means. Learn to be happy in your own skin and it will simplify a lot of things for you.
Even if you earn well, make sure you do not overload yourself with loans and EMIs on things that you do not want. Be a planner from the very beginning, plan for your working life and retirement. You may not have exact goals but have an idea of your life track.