Advertisements

Life @ 13.99%

Many people take loans for various reasons. Some take it  for unavoidable reasons and others for avoidable ones…or for ones which can be easily delayed, like vacations, purchase of electronics, luxury watches, etc.

But before you read further, I would request you to understand that I am not against those who take loans. Everyone’s needs and situations are different. Even I have taken loans in past.

Since last few days, the following image is popping up on the website of a large private bank whose services I use to conduct my financial transactions.
Personal Loan - Vacation
As you can see, the bank is telling you few important things…

First is that ‘Life is waiting’. And that is a fact. Nobody can be wrong by making such a statement. There are so many things to do in life that sometimes I feel one life isn’t enough to fully experience life. 🙂

Now second thing to observe is that the image above shows a couple enjoying vacation in Europe (probably). Now a decent European vacation for two costs around Rs 4 Lacs. This picture pops up just before one logs into bank’s website. Therefore, my assumption is that bank is showing this image to everyone irrespective of whether person logging into bank’s website is or isn’t a suitable candidate to pitch such visual advertising to sell loans for luxurious expenditures. 

It means that bank does not take into account customer’s past average balance, repayment histories before making the (very first) pitch for the personal loan.

Once again, I am not saying that one should not take loans. But vacation is something which can be delayed. Or should be planned well for. Vacations are generally not spur-of-the-moment decisions.

So it is better to plan for them from the very day the final decision is taken. Isn’t it? And some people actually don’t want to take loans for such discretionary spendings. They plan well and well before the day funds are actually required. Just sometime back, I received a mail from a reader to help him plan his funding of a trip to Dubai he wanted to gift to his wife.

For the time being, lets not judge whether what bank is doing is correct or not. Bank can anyways justify its marketing actions by saying that there are proper processes in place for approving loans to check suitability of candidate.

And they are right in saying this. They can also give an example that there are no checks on who sees the hoardings on sides of highways offering home loans for budget(!) homes costing 1+Crore. Once again they are not wrong.

This brings us to a possible conclusion that onus and responsibility of applying for loans of any kind lies with customer and not with bank. 

Bank only evaluates suitability of the applicant and then decides to lend or not to lend to him / her. Bank is there to lend you money for all your expenses. But it is for you to decide whether you need to take a loan for something which is as discretionary as a vacation, or something which has the potential to generate future wealth like property or commercial vehicles. 

Always have limits to how much you will borrow and for what reasons you are willing to borrow. Because eventually, this will be a major determinant of whether you will be rich or not.

By the way, I feel that banks are generally ready to give loans to those who don’t need it. What do you think? Also, if you have any stories about your loan related experiences which you think will be beneficial for others, please feel free to share the same in comments or drop me a mail at stableinvestor@gmail.com

Advertisements

Answer to the BIG question – “Why Am I Not Getting Richer?”

Didn’t you always have this question? 

That even after earning so much, why are you are not getting any richer?

I guess you must have felt like this before. In a post I did some time back, a person earning more than Rs 1 lac every month was barely able to make his ends meet; but that is before he took matters in his own hands and retired at a young age of 37.

What does it mean?

This simply means that there is something fundamentally wrong about the way we manage our incomes and more importantly, expenditures. But all is not lost. If you are ready to take care of some really simple but critical factors while managing your finances, then chances of you getting richer are bound to rise.

So here are the 5 less-discussed but really important ways to help you become rich.

Reinvest your profits
I have seen people making the mistake of not reinvesting their profits many times (to be precise, 19 times out of 20). Don’t be tempted to spend your profits. If you reinvest profits from your investments, then you would be helping yourself in the long run as you would be contributing to the magic of compounding. And don’t worry if the profit is small. In the long run, compounding takes care of converting small amounts into very large ones.

Control small expenses
Be obsessive over controlling small but wasteful expenditures. For example, just because one of your colleagues has got himself a new phone, you decide to buy a newer one to satisfy your ego. Agreed that such expenditures can give you pleasure & satisfaction. But these would be short lived. And such useless expenditures also dent the process of long term wealth creation. Exercising vigilance over small expenses can help you divert funds from going towards unnecessary expenditures towards better investment (profit) opportunities.

Limit What You Borrow
It is simple common sense. Living on credit card and loans won’t make you rich. Period. It is only when you are debt-free that you can think of saving and investing to become rich. If you are not debt free, then most of your time would be devoted in servicing the EMIs and Credit Card Bills. Think about it.

Assess The Risk
Just because a family member or a good friend introduced you to something which looks-too-profitable-to-be-true does not mean that you should blindly do what you are being told. Asking ‘and then what’ can help you see all possible consequences and risks involved when making the final decision.

Be Willing To Be Different
Just because it did not work for somebody else does not mean it won’t work for you. But more importantly and similarly…just because it worked for somebody else does not mean that it would also work for you. Remember this and assess the risk provided by every opportunity. It’s always possible that life is offering you something unique to benefit from; and which was never offered to anybody else. So be ready and be capable of recognising such opportunities.
Warren Buffett Richest Man
To be rich (& not poor) is glorious and glamorous | 🙂
Note – Most of these 5 points/ways are based on Warren Buffett’s philosophy. Hence the picture above.

______