Equated Monthly Instalment (EMIs). Actually there is no rule of how much is a perfect EMI, but, there should be some criteria for it, otherwise the income is less and the EMI outgoing increases. And once you start, then you get stuck in that trap and it becomes very difficult to exit.
An EMI Trap i experienced last month. Let’s see how much a family had EMI styled in that trap …
Last month, I was called by one of my investors who were in Pune, and his friend had to make a financial plan. I went to them as I decided. A few chats happened, I was impressed by seeing their lifestyle, flat, house furniture and other things, a beautiful house. Then, i said let’s begin the work of financial planning now. I started to get personal information such as age, job, family, who are in the family, how much package (salary) There was no problem till this, but when I started to wonder about the cost and EMI for creating a cash flow statement, it was a big shock. You see it as well …
Salary: Husband – 85000, Wife 65000 (Together 150000 (Not bad, good salary)
EMI: Home Loan – 80000 (1. 25 CR flat)
Car EMI – 25000 (18 lacs)
Personal Loan EMI-12000 (Personal Loan for Annual Family Trip)
Credit Card EMI – 5000 (Purchase for Trip)
Weekly spend – 5000 (every Saturday / Sunday holiday)
Insurance – 5000 Monthly Premium (ULIP Policy 500000 Life Cover)
Mediclaim – no (company has given)
Now let’s total of the cost,
80000 +25000 +12000 +5000 +20000 (expenditure of 5000) +5000 = 147000, (This month’s grocery + TAX + other costs are not included yet). This is called Perfect EMI Trap,
When I asked what if all money is over? They have authentic answer credit cards. He further said that now they are afraid of the EMIs which have been miscalculated and therefore you are called.
Once you get used to credit cards and EMIs, you cannot create wealth for yourself, because you keep working for credit cards and EMIs only. For the above family, I prepared a further financial planning.
This experience has been shared just to benefit someone:
1) A person whose house is very beautiful and does not mean that the person is very rich (probably because of EMIs and due to the EMI tension and at the cost of night sleep and peace), no not worth.
2) It is more important to save, then splurge on luxury cars lying idle 5 days in week.
3) Never take a trip with a personal loan.
4) Credit card is the amount of money spent today by the credit card today (credit card interest is highest in the world 25% to 44%)
5) Saturday / Sunday is a holiday that does not mean that the you spent every time. Keep it simple sometimes.
6) It is important that the insurance policy covers how much insurance you pay for insurance policies,
If there is no proper arrangement of salary and expenditure, then there is a time for debt market.
So Calculate before Plunging into the ocean of EMIs. Peace is better than Pleasure.