Money, loan, EMIs etc. have been bothering me for some time now. So one day I sat up and did my excel file of the formulas that will help me understand if paying up for home loans and other loans EMI’s better than paying up all the loans in one shot.

I love my excel sheets and the formulas that have always helped. Many a times I have actually created new formulas working from the most basic and building them with more complex money matters. And trust me, always the number have told me the blunt truth!

Truth about money matters is most important part of happy living now a days. If that part is taken care of everything else will be sorted out to your liking.

So this write is for all the people especially the IT guys and gals who are working day in and day out to make their companies rich  and ofcourse earning a handsome salary every month.

In the race to earn money, to go to the top of the rank ladder most IT guys and salaried people forget the most basic fundamental of money. It is savings!

It’s not how much you earn each month, but how much you save matters! It’s this monthly or yearly savings which will differentiate between all same salaried people around you.

How is it that one man with same salary as you has more number of flats and assets than you?

Does that mean you have to have a second source of income and only then you can come up to his level of owning assets? Nope!!!!

Actually the difference lies in the amount and way of saving money.

Most of us are very good in earning but very bad in saving.

The day you learn the simple fundamental behind this word called saving, no one can stop you from becoming richer than you are now.

Remember I have learnt to compete only against my own self. So I will not want you to think or compete with your neighbors’ assets or lifestyle. Most people are losers when it comes to real savings.

So how do you save?

Simple. First and foremost write down your expenses in an excel sheet and in another sheet write down your income sources. Well it’s your home balance sheets to be precise.

SO you know now every penny moving in and out of your home.

Next get rid of all the home loans as soon as possible. !!!!!

Yes that is the mantra to saving money safest and easiest way. Obviously you have till date heard every word against paying up your loans. But once you do the maths, you will realize that the only people who are making money out of your paying the EMIs every month are the banks! I would like to apologize to all the banks, their sales people and those CAs who purposely have tried to complicate this simple matter till date. And the worst part is the most hit by this myth that paying up slowly your loans through the EMIs is the best way to keep one financially fit, are the majority of the IT guys. They earn huge but save nothing. Every year they earn more and end up taking up one more loan for something that is useless wants created by the consumer industry.

Well if you have made a new TV you had better sell it!  And when you want to sell your product, ethics goes down the drains. Humanity takes the toll. Goodness goes to the geese! So the company has to sell their new product by hook or by crook. Now a days the best hook is emotional drama which is promoted best by the crook, the Television. Imagine the plight of any of these companies if there were no TV! Suddenly the want that you felt to badly is no more! Suddenly the guilt that you felt to provide a better product for your family is no more. The family does not demand any more useless things. Kids do not cry for silly toys any more.

But then we have TV. And we have to live with the advertisements created by the very smart creative teams. Now the fight is between your wants which are falsely created by the TV ads and your logical brain. The common sense ( actually it should have been named the seventh sense) fails every now and then. The greed is presented to us in a very emotional packaging that has several confusing layers to be unwrapped. And as we unwrap these emotional layers we end up forgetting the real need. And we end up buying what gives pleasure only for a few moments or may be only when compared to the neighbors.

So let me come back to the loans. We end up taking more loans for another house or another car. Again the viscious cycle to meet these new demands of new EMIs force us to work harder for more salaries!

Did you get the time to stop and think, how about taking a course on how to save more money than always taking courses on how to earn more money?

Are there any courses actually being run by any financial institutes, CAs or any one that you are aware of?

No!

Why?

Cuz, financial institutes survive on your EMIs. CAs survive by trying hard to keep your financial matters complex to you. So who will guide you or me as to how we can save more money against earning more money?

Well if you think you have found someone you can trust for the tricks of how to save more money do mail me too and keep a good relation with that person. Cuz they are rare.

Now again let me bring you back to the loans.

Recently after doing my math and taking time out from the everyday busy schedule of earning or trying to earn (thanks to Robin Sharma’s book on Family Wealth), it finally was like a big bang to me.

My excel file was shouting back at me that how we have been paying up our hard earned money to fill the coffers of the banks. Yes no doubt when you are young and starting out to build your homes, you may need these home loans and other loans. But let me guide you without mincing any word. The sooner you start earning good money and start getting those bonuses, quickly start paying up the principal amount as frequently as possible. Do not try to invest in gold, mutual funds, stocks and any other assets except land, unless you have cleared off your loans entirely. The earlier you are loan free the faster you will be able to build your real asset. You will be free from any stress of losing your job as the main reason why people fear it is because of the huge loan EMIs that have to be paid every month. Trust me, your needs and expense becomes very tiny when there are no EMIs’ to pay. And that’s when you can look for the work that gives you immense pleasure and satisfaction. That’s when you can follow your passion.

Ideally you should keep three to four months or a maximum of six months’ salary in savings account and rest should be paid up to reduce the principal loan amount every month. Do not get tempted to invest in any other place.

How much ever a scheme is attractive and promises to give you heavy returns with high interest, trust me it can never be more than the savings you will end up doing if you first cleared off the loans.

Investing with your loans also going on is like putting your monthly income into a two pots. One  pot which has a very big hole at the bottom (your EMIs going to the banks) and the other which has an imaginary tap trickling drops of money (your investments). Even a duh will be able to say which is making more loss to your monthly income. Obviously it’s the EMIs pot which needs to be broken first than trying to fill the investment pot! Breaking the EMI pot here means, getting rid of the EMIs completely. And how? Again I will repeat by paying up the principal amount as frequently as possible.

People in business especially coming from the core business families know this simple fundamental from the time they are born. They will live in rented houses but buy a shop. They will never take loans, but give loans. They keep their expenses small and their lifestyle simple. They take loans to make money on that loan by giving it on higher interest.

Banks are surviving only because of ignorant, simple hearted but big ego people from the salaried background, who have to be kept emotionally confused hand in gloves with the consumer companies. Now does it ring any bell when you see builders and banks joining hands together? Or your banks and insurance companies joining hand together? Or your bank and many lifestyle product companies joining hands together? All these have very fine, shrewd and creative minds trying very hard to come up with new marketing strategies to be able to dig your pockets deeps. Mostly so deep that it leaves a hole behind!

All those who are interested in getting a copy of the excel sheet may click this link.

I thank my brother who heads one of the Multinational Bank’s IT for conforming my fears and clearing my doubts.