This goes against the post of the morning. Why am I contradicting myself?
Why did I say…do not buy a house in the earlier post..and why am I saying ‘you MUST buy a house’?
Well, the assumptions when you rent are:
- you are earning well, can afford to buy a house, but you are not buying
- you are using the money saved in good investment options – equity mutual fund or direct equities
- you are disciplined enough not to miss any SIP
- you have enough emergency funds and you will not dip into equity corpus for an emergency
Sadly for many people I know – including millennials – this is not true.
I know couples who spend far too much. This itself means they have less amount of money to spare. Even if they do spare, it is in a RD/Fixed deposits and is extremely inefficient way of handling money. Many of them are completely unfocused and will not put money away in a systematic manner. I know many parents/ In laws who think that their children spend too much. In a few such cases, the parent makes the down payment and force their kids to pay the installments. This is their way of instilling discipline in their kids.
Many of them will not have the discipline to review, do asset allocation, etc. NOR will they hire a planner to manage the stuff for them
Many of them on, the other hand, will be able to pay the EMI – because it is compulsory. Women with homing instincts will do anything to reduce their expenses if an EMI has to be paid. The same amount of respect or commitment is not seen for a SIP.
I also know of a 50 year old who has been living in rented houses, and most of the money has been lost in equity ‘trading’. So at 50 he has neither a house nor a big enough portfolio to be able to buy a house. I know a 33 year old couple who will keep their money only in bank fixed deposits. I know many of these young Indians who will not (never) have the discipline to put away money in an SIP.
So if you do not buy a house, show me the SIP / direct equity portfolio. The portfolio should be good enough for you to buy a house without any borrowing.
There are just too many people who cannot do this – in fact they are the majority. Sad, but true.
If you are going to keep your money in Recurring deposits, fixed deposits and pay 30% tax on that…..hey joker you are surely MUCH BETTER OFF BUYING A HOUSE NOW…
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