A GOOD ARTICLE TO READ IN TIME OF FINANCIAL CRISIS
One MUST READ AND IMPLEMENT IN LIFE TO SAVE OUR FUTURE It's an interesting article by Yogesh Chhabria.
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 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, 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:
>Live a balanced life and avoid overspending.
>Don't buy things we don't need.
>Don't insist to buy only Branded good's.
>Don't buy excess Food, Cloths, Cosmetics, Footwear, electronics and Fashion accuracies.... (Just think before you buy... there are peoples in the world who don’t afford to even think about basic necessities)
Tip: It's not like that you should not enjoy your life with these luxuries, but the spendings should not be only because you have excess money after all your needs have fulfilled. Unnecessary spendings will ultimately going to create current situation. 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. (Something Lehman's do)
>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.
>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.
- 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).
- Borrow only if repayment is financially comfortable.
A thumb rule: Keep EMIs within 35 to 45 per cent of your monthly income
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 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, 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:
>Live a balanced life and avoid overspending.
>Don't buy things we don't need.
>Don't insist to buy only Branded good's.
>Don't buy excess Food, Cloths, Cosmetics, Footwear, electronics and Fashion accuracies.... (Just think before you buy... there are peoples in the world who don’t afford to even think about basic necessities)
Tip: It's not like that you should not enjoy your life with these luxuries, but the spendings should not be only because you have excess money after all your needs have fulfilled. Unnecessary spendings will ultimately going to create current situation. 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. (Something Lehman's do)
>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.
>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.
- 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).
- 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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