Comments on: A thought on finance management.

By: Amit Sharma

Amit Sharma — Tue, 29 Dec 2009 06:34:02 +0000

PPFs make more sense, because they are tax saving instruments. That in itself is giving you a 30% “return” (remember Sholay? Gabbar ke taap se tumhe ek hi aadmi bacha sakta hai, khud gabbar)

By: Amit Sharma

Amit Sharma — Tue, 29 Dec 2009 06:32:05 +0000

@Mayur

So you agree it’s an emotional thing to want to own a flat.

With a life that is not anchored in one city for more than 5 years (most of the educated lot in our generation is like that), how much sense does it make to want to own a flat for living in it?

Our parents’ generation had different priorities and, for lack of a better word, values. They had a job for life or were into business. It was the age of the PSUs and Tatas, or jobs in the small entrepreneurships where the proprietor knew each employee by name, went to their house during festivals, brought gifts for the employees’ kids when they went to travel etc. Then a car was a luxury that you wanted much much later in life, and a house was a bare necessity.

Today things are different. The first big thing many people buy after getting jobs is a car – for status, convenience, plain interest or whatever. Maybe a bike after that if you’re into biking. Cameras, gadgets, laptops, fancy mobiles, suits. Houses come much much later, when 1. we are thinking of settling down (getting married, or starting your own company), or 2. we have so much of cash with us (mutual funds maturing, or cash in other assets, or plain cash in the bank) which is a better investment in real estate.

Even the guy who’s rented me the flat is smart – atleast I’m sharing his EMI, and I don’t have qualms in doing that – because I have to pay 1/3 of what I would have to pay if I bought “my own flat”.

I still don’t get why people take loans and buy flats to live in.

By: MayurK

MayurK — Fri, 04 Dec 2009 11:06:02 +0000

@Big K: I agree its a liability but most of the things that we do in life are a liability, but we have to do them. It’s the fun/joy/accomplishment associated with them that compels us to do those things.
Some things are beyond money and finance.

By: Sapna

Sapna — Fri, 04 Dec 2009 06:33:58 +0000

@Amit: Totally agree with you on the FD thing. People invest in it just because they feel safe with FDs and PPF accounts as compared to equities.

@Big K: I was of the same view as yours about buying a flat till I came to Mumbai.

Increasing the sources of income again needs people to come out of their comfort zone, which most of them dislike.

By: The Big K

The Big K — Fri, 04 Dec 2009 06:16:30 +0000

@Mayur: Emotions apart, I’m only saying the flat (house) we live in, is a liability. Not an Asset.

By: MayurK

MayurK — Fri, 04 Dec 2009 06:13:11 +0000

I am surprised by your comments on the “Flat” thing. First , I don’t know if you stay with your parents or in a rented place. If you stay with your parents, your comments are understandable because you don’t understand the hardships that they might have faced while building the property. The “three-quarters of monthly salary” you say was paid by them so that you can stay in a nice cozy flat.
If you stay in a rented place, then I more surprised with your views for the simple fact that (considering you pay 10K rent) at the end of the day you don’t have any place of your own after paying so much money. The person who rents this flat is more clever for he gets his flat by only paying half the EMI (the other half paid by you).
Please explain why its not an asset.

By: The Big K

The Big K — Fri, 04 Dec 2009 05:47:36 +0000

@ Amit: No wonder I’m going to author a book titled Management By Common Sense.

PS: I forgot the FD thing. Thanks for reminding.

By: Amit Sharma

Amit Sharma — Fri, 04 Dec 2009 05:42:47 +0000

I am amazed! You wrote a post that made sense! Wow!!

All sarcasm aside, agree with each and every word you wrote here (including the fact that you’re not an MBA )

I don’t get people who buy a flat on a loan, the EMI for which would be three-quarters of their monthly salary, and would run for 25 years!

And I don’t get people who would put their money in a FD rather than invest in the share market or atleast mutual funds. In an FD the value of your money actually decreases, because their rate of interest is less than the rate of inflation.