The current generation is earning very well – remember most of what people considered as ‘luxuries’ in the 1960s, 1970s, etc. are today considered as a necessity. Also if you consider that in the 1970s when salaries were much lower, and taxation were much, much higher white goods were about 2-3 MONTHS income even for senior management. It is like buying a refrigerator for Rs. 600,000!
Increasing salaries and dramatic drop in the prices of White Goods has ensured easy access to these products, but all of it has not made life easy for the kids of today. Why?
Today it is very easy to live beyond ones’ means, is it not? If you pick a magazine you will find about 15 advertisements – of this about 14 will extol you to live beyond your means. If you can afford a Ford Ikon, they will urge you to buy a Honda City. If you can buy a Honda City, they will push you to an Octavia.
If you tell a real estate broker you are looking for a house for 6 million, be prepared to shell out 9 million!
All of this is easy – because there is a huge push to make you think in EMI language – not full price language! Sir a Merc is available for “only” Rs. 54,000 p.m. as EMI!
What are the indicators that you are living a little beyond your means? They are as follows:
a. Your cheques are bouncing! This is perhaps the worst indicator that you are issuing “rubber” cheques…so this is not a good idea.
b. Your credit score (currently in India you do not have a copy of this) is falling and the people who have lent or wanting to lend to you are hesitant about default and are increasing the interest rate..
c. You are saving less than 15% of your salary!
d. You are charging everything to your credit card and are paying only a part of the amount! I hope you noticed Hdfc bank has raised the interest charges to 3.25% p.m. Try compounding it on a monthly rest basis, and you will be stunned!
e. You have 4 credit cards and you are borrowing from one card to pay the other 3!
f. More than 30% of your earnings are going towards EMI payments
g. You do not have an emergency fund, losing your job is one of the nightmares you go through regularly, one small repair like having to replace your car tyres can create hell for you!
h. you are happy visiting your parents for 10 day vacations because you can save some living expenses
i. if you will touch your parents’ kitty for your purchase of car, bike or your marriage expenses.
j. your marriage expenses was paid for by a bank, and you are paying the EMI on that. This is really bad, every month over the next 5 years your bank will remind you of your blunder!! L O L. Now you are mortally scared of pregnancy!
if you have any of the above mentioned problems, you need to set your financial house in order. TODAY. Procrastination is just refusing to accept that you need help….
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