December 15, 2009
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 (Hindi for 'Debt') 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, 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:
1. Live a balanced life and avoid overspending.
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.
2. 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' (personal loans, car loans).
3. Borrow only if repayment is financially comfortable.
A thumb rule: Keep EMIs within 30 per cent of your monthly income. In that respect, there is one American who I really respect: Warren Buffet.
He has lived in the same ordinary house for over three decades, drives his own medium sized car and leads an extremely regular 'middle class' life. If that's all it takes for the richest person on earth to be happy, why do all of us need to take extra stress just so that we can get things which aren't even essential?
India 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.
December 07, 2009
Terrrific quotes ( One liner )
Love is photogenic it needs darkness to develop.
A good discussion is like a miniskirt, Short enough to pertain interest and long enough to cover the subject!
Children in backseats cause accidents, Accidents in backseats cause children!
"Your future depends on your dreams" So go to sleep!
There should be a better way to start a day than waking up every morning!
"ALCOHOL KILLS SLOWLY", So what? Who's in a hurry?
"Hard work never killed anybody", But why take the risk! (I don't want to be an exception!)
"Work fascinates me", I can sit and watch it for hours!
God made relatives, Thank God we can choose our friends.
My girlfriend ran away with my best friend and I really am sorry for him!
God is Alive! Speak to Him!, (It's cheaper after 9.30 p.m.!)
When two's company, three's the result!
A designer dress is like a barbed fence, It protects the premises without restricting the view!
I thank you for your overwhelmening responses on my site and also the responses in get via emails.
Many have suggested that to start something on educating about banking (as i m a banker) to those who are in banking domain and trying to learn it. I dont know it will be in order to do this or not, coz doing this ...on this site will be out of subject..what it is intended to .
I invite your suggestions on this ... post or email to tell your view on this.
Some have asked my permission to copy the material i post in my website. My reply is : you can freely do that but with only one condition that you will put my website URL (http://www.lifeplan.co.nr/) in your post along with the copied materials.
Voila ....go ahead.
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