Spend, Save and Invest Smartly
The newspapers these days are filled with only a single news. The Greek Crisis….You must be wondering what this is all about. Greece just like most European nations wanted to join the “Eurozone ”. Nations in the eurozone adopt a single currency called the “Euro”. Greece also joined the Euro zone and was looked up by most European nations aspiring to join the euro zone, as a shining example. All this changed in 2009, when after the Wall Street crash in 2008, cracks began to show up in the Greek dream. Greece admitted that it had borrowed heavily to fuel its Eurozone dream. It also hid its borrowing (showed lesser deficit figures), which when found out, led to the Greek crisis. Greece borrowed heavily from France and Germany to stay afloat. Greece then borrowed from IMF , EU as well as ECB to repay these debts to France and Germany. Now Greece has to repay all these debts and just doesn’t have the money….
Can you repay what you have borrowed?
You have to pay EMI’s on your home loan , car loan as well as your personal loan. Are you comfortable with your loan repayments? If your answer is no, then you need to do something about it.
Is the cumulative EMI (sum total of all EMI’s you pay each month), more than 50% of your take home salary?
If yes, then you must postpone all unnecessary purchases till the time your income increases.
Remember:If you buy things you don’t need, then you will have to sell things you need. You may have pledged your home and your car to avail a home loan and the car loan. If you do not make your repayments these assets will be seized by the lender (bank), and you will lose assets of high value. Greece borrowed heavily from Germany and other EU nations and organizations. It now has to listen to their terms and conditions and impose austerity measures on its citizens.
The debt trap:
You have availed a number of credit cards and you are now struggling to repay your credit card dues. For several months you have only been paying the minimum amount due on your credit card each month, just to avoid the defaulters tag. You are now deep in debt. You have to borrow just to repay your credit card debts. Credit cards charge you a very high rate of interest. This may be as high as 3-3.5% a month. You will have to avail a personal loan just to pay off your credit card dues. These personal loans also charge a very high rate of interest and you will soon fall into the debt trap. Greece initially borrowed heavily from Germany and France. It then borrowed from EU and IMF to repay this debt. Soon Greece was heavily indebted to a number of Nations and Organizations.
You have high expectations:
Are you expecting a hike in your pay soon? Have you already started spending in anticipation of that pay hike? You are definitely not the first. If you are borrowing heavily with an anticipation of a salary hike think again. There is always the slip between the cup and the lip. What if you do not get that salary hike? Do not avail too many loans or spend recklessly on your credit cards in anticipation of a salary hike. Greece borrowed heavily from a number of European nations and Organizations with the hope of a better life in the Euro zone.
Keep an eye on your credit score:
Banks simply hate to lend blindfolded. They like to have their facts right. Banks want to know as much as possible about you, before they sanction you a loan. When you avail a loan from a bank, your bank creates a credit information report (a detailed report on your loan repayments). Your credit information report is then sent to Cibil which then assigns a score between 300-900.Banks have real time data on your loan repayment abilities and can easily decide whether to sanction your loan or not. Your credit information report is then sent to Cibil, which then assigns a score between 300-900. If you have a Cibil score of 700 and above, your loans are easily sanctioned. If you borrow heavily and struggle with your repayments you will have a score < 700. You will not get any more loans. Greece is heavily in debt and struggles to raise money to pay its dues. It has a low credit rating and has to pay a high interest on the money it borrows.
Learn to live on what you earn:
You must have heard the word impulse shopping. What does it mean? If you enter a shop with the attitude “See something .... Buy It whether I need it or not” .You would then use a credit card to make the purchase. Soon you would fall behind in your repayments and fall in debt.
Remember: If you do not have enough money in your bank account, then postpone your purchases. Live within your means and you will have no regrets. Greece borrowed heavily to fund a dream. Extravagant spending on borrowed money led to the Greek Fall. The Greek tragedy may be bad, but there are lessons to be learnt from it.