Thursday, October 16, 2008

An interesting article by Yogesh Chhabria

This is an interesting article by Yogesh Chhabria. I got it by email from a good friend of mine. There is nothing mine in this, its just a copy-paste of the email.


Dear all.

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 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, the 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, even 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.

2.Don't buy things we don't need.

3.Don't buy Branded goods.

4.Don't buy excess Food, Cloths, Cosmetics, Footwear, electronics and
Fashion accuracies
just think before you buy.
Tip: World 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.

5.Try to balance life with work (No one is happy to work in their
professions).

6. Don't stress out your self, after work try to do some extra activities
like swimming,
yoga, walking, running where you can divert your mind from stress.
A thumb rule: Health is more important than money.

7.Try to understand each other (Wife and Husband) in financial matters and
help each
other.

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.

8. 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' (Credit cards, personal loans, car loans).

9. Borrow only if repayment is financially comfortable.
A thumb rule: Keep EMIs within 35 to 45 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

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