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Old 14th March 2012, 14:15   #16
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Default Re: Debt free life?

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Originally Posted by carbookie View Post
As I said, it is just a mindset. I will generalize now, but you get the idea. People use loans to buy luxuries. Then they pay interest to fund those luxuries. The monthly fixed commitments are high, and the salary vanishes before it arrives. Next thing you know, you need a personal loan to survive. And the cycle continues.

Why do you need a loan to fund your Motorcycle? Either you can afford the motorcycle or you cannot. And If you cannot afford a motorcycle, it is a luxury for you. You don't need it. (The only exception to this rule is if you are planning to use motorcycle to generate money. Going to office on a bike is not the same)
Sorry, but I don't agree with you, like you I also started from scratch, as I started my career in a city long way from my hometown. Then I moved to another city and the house rent is ever increasing. I can afford them but if suddenly someone asks you shell out 10 months rental in advance how do you do that? Thats not a luxury but need of the hour to either take a loan from Bank or office to meet demand, to meet this particular demand with your savings is foolish to me, as saving are for futures & emergencies.

Then you plan to settle in the same city for next 10 - 15 yrs and you calculate the total rent and you find its more than 15 Lac you pay as rent, does not make sense if you can afford a home loan, at the end of the 10th Yr if you leave the city, either sell it or rent it out, at least you get some return but if you want to live debt free for those 10 yrs, at the end you are at loosing point. These are just examples so don't generalize all credits with Luxury, sometimes they are SMART moves.
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Old 14th March 2012, 14:21   #17
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Default Re: Debt free life?

to acheive what you dream of you need money,passion,hobbies & knowledge are no more feelings but a way of spending the hard earned money,few have money in abundance & the other few just crave for it,
debts are not bad if it is used for the growth of a family,personal & institutional.
debts are bad when it is used to buy luxury with which we can live
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Old 14th March 2012, 14:22   #18
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Default Re: Debt free life?

I believe in the old saying of living within your means. I don't have any credit card and have not taken any loan. I believe in saving and then buying rather than buying and then paying.

For me, loan is mentally disturbing because of the EMI that you have to pay. You are getting Rs.X as salary but actually you receive Rs.Y,this makes me sad. Also due to loan,you end up paying more than the value of the product.

I agree on the home loan front,only if the EMI that you pay for the loan is almost equal to(or atmost 150%) of the house rent you pay for a rented house.

Last edited by ashis89 : 14th March 2012 at 14:30. Reason: Accidentally submitted post before completing
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Old 14th March 2012, 14:22   #19
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You can get a loan and do a investment (like real estate) where you can earn more. Even if you lose your job, your investments can more than pay off what you owe.

Just being debt free for the sake of it is useless to me. Most companies, jobs are created by borrowing and making the borrowings work and create more.
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Old 14th March 2012, 14:24   #20
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Default Re: Debt free life?

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Originally Posted by carbookie View Post
I believe it is just a mindset. I come from a poor family. My parents could hardly make ends meet. When I started working in my job, I started at exact ground zero. Over the years, I have bought two cars, multiple properties and other things which money can buy. But never ever taken a loan. For me loan is never a option on the table.
If you don't mind me asking, what was the year in which you managed to purchase multiple properties in Bangalore using only your salary income, without any loan whatsoever ?

I assume it must have been the eighties or nineties. With the current property prices, do you think it is possible for a salaried person to buy a decent apartment without a loan ?

I totally agree with you that buying luxuries on loan is wrong. But IMHO a decent home is a necessity, not a luxury.

Rohan
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Old 14th March 2012, 14:34   #21
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Default Re: Debt free life?

Quote:
Originally Posted by carbookie View Post
I believe it is just a mindset. I come from a poor family. My parents could hardly make ends meet. When I started working in my job, I started at exact ground zero. Over the years, I have bought two cars, multiple properties and other things which money can buy. But never ever taken a loan. For me loan is never a option on the table.

As I said, it is just a mindset. I will generalize now, but you get the idea. People use loans to buy luxuries. Then they pay interest to fund those luxuries. The monthly fixed commitments are high, and the salary vanishes before it arrives. Next thing you know, you need a personal loan to survive. And the cycle continues.

Why do you need a loan to fund your Motorcycle? Either you can afford the motorcycle or you cannot. And If you cannot afford a motorcycle, it is a luxury for you. You don't need it. (The only exception to this rule is if you are planning to use motorcycle to generate money. Going to office on a bike is not the same)
I agree wholeheartedly. The basic essence is Need vs Want/ Luxury. Where our parent excelled was in prioritising nees and fulfilling them with their own funds.....hence most of us grew up in an environment where, to quote an old hindi adage, "strech your legs only as much as your blanket allows". Nowadays, with the marketing houses and banks shoving "easy credit" down our throats on a daily basis, most of us have begun to confuse wants with needs, and run to fulfil these wants thinking them to be needs.

I want to buy an endeavour, but i Know i cannot afford it, so will wait till I have enough money to buy it outright. Till then, i am happy with my current ride as it gets the job done for me. Buying a car on loan, which is a depreciating asset, is not the wisest financial move to make.
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Old 14th March 2012, 14:41   #22
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Default Re: Debt free life?

Quote:
Originally Posted by rohan_iitr View Post
If you don't mind me asking, what was the year in which you managed to purchase multiple properties in Bangalore using only your salary income, without any loan whatsoever ?

I assume it must have been the eighties or nineties. With the current property prices, do you think it is possible for a salaried person to buy a decent apartment without a loan ?
I did not want to share these details publicly, but what the heck. Here you go.

I graduated in 1998. I was joining software industry in Bangalore. I came to the city with 10 thousand rupees given by father so that I can pay deposit for rental house. For next 3 years, I kept saving money. By that time most of my friends had bought costly bikes or cheap cars. I had only bought shares, mutual funds with my savings.

In 2001, I bought my first property. Total money required was less than 2 Lac. I still kept saving. No bike, no home, nothing.

In 2002, I bought my second property. Total money required was less than 2 lac. I still kept saving. Still no assets.

In 2004, I bought my first apartment in Bangalore with my savings. Still kept saving.

At this point I had been working for 6 years. Still never bought a bike. Travelled by BMTC bus.

In 2005, I went to buying spree for myself as I got married. I got a car, moved into my own apartment. Furnished the apartment with lavish money. This was the year I spent like King of Dubai. But all this from my money of shares and mutual funds. Still no loan.

In 2009, at the height of recession, I bought my second apartment in Bangalore from a distress sale.
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Old 14th March 2012, 14:44   #23
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Default Re: Debt free life?

The idea of credit card or a loan is not a bad. It depends on how it is being utilized.

I have a Citibank card which returns me nearly 1% cash back as reward point is a saving for me. Similarly, my Stan Chart card saves me 5% on supermarket shopping. I wish to use my credit card online over debit card as its easy and gets me reward points. As long as my spending is within my budgets and I make payment on time, its a good idea.

Likewise, I can not afford to buy a car or house without a loan but as long as I can make sure that my repayment is within my earnings, I shouldn't worry.

I have seen some friends and colleagues who swipe their card to the limit and look for another loan to repay. There, they are in trouble.
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Old 14th March 2012, 14:52   #24
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Default Re: Debt free life?

Companies continuously work on debt, and they need to monitor the health of the company (Kingfisher is probably an exception). There is nothing bad about having debt, if managed well.

From a personal perspective, I believe that:
- A debt may be taken if its repayment matches a stable source of income
- The debt must not be delayed, else it becomes a bad debt for both parties
- The debt must be cleared asap, unless there is a stable investment with returns higher than the interest rate of the loan

I use credit cards for the sake of convenience, and repay them promptly. I do not use the card just because I 'have a limit'
I may take a house loan, since it is an appreciable asset. But will frown on taking a loan on a car, I will prefer a entry level car that I can afford.
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Old 14th March 2012, 14:53   #25
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Default Re: Debt free life?

When I was working in Bangalore (this was in in end-2000 or early-2001), one day my friend took me to a plot of land he had bought recently at a layout called HSR Layout. He had bought it for about Rs.550/sqft. He asked me if I wanted the 1200sqft plot next to his, which was also for sale. I calculated that 1200*550 = Rs.6.6L+registration. I would've had to take a loan, interest rate was high and the EMI would've cost nearly half my take-home salary at that point of time. So I said no. Just about 2 years later, in May 2003, I rented the house 2 plots away from my friend's in the same HSR Layout. The plot which was offered to me was still vacant, but now the cost was Rs.3000/sqft - many times more than the money I had saved during those 2 years. What's more, my salary hadn't gone much by too much in those 2 years and if I were to buy the plot in 2003, the bank would've refused the loan because the EMI would've been more than 50% of my take-home salary.

So, while I agree that the concept of debt-free life is great, for salaried people like me, it's not very easy to implement these days - unless we forgo certain things like buying a house or a nice car (while we are still young enough to use/enjoy using them).
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Old 14th March 2012, 14:54   #26
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Yes, if not the only one you are among a rare species who are about to go extinct. I certainly agree that debt can lead to unforseen problems and constant bother at the back of your mind but if managed wisely one can live at a higher standard of living than by using hard cash. And on top of that you can't hope to get a decent shelter for yourself by that means.

And if everyone starts going by this mantra then then we would all go back to ploughing the fields, well I am not saying that I am a corepathi to own one

Debt free is a good concept, but don't take it to mean literally forever.

Last edited by zaks : 14th March 2012 at 14:55.
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Old 14th March 2012, 15:02   #27
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Default Re: Debt free life?

constructive debt is good ,it is like making your money work harder for you even when you can afford to pay full .like buying a flat screen in 0% interest ;buying gold in emi without any interest etc where you pay in small instalments and the money in bank actually earn meagre / marginal interest . If you are enterprising / risking taking types you could even earn tidy monies in equity.

Due to easy availability of Homeloans the average age of buyers has come down drastically compared to 10-15 yrs, if we had to buy any asset without debt the entire economy wouldn't have grown at the current pace and many a dreams would have remained stil.

However debt for flashy cars / gadgets / holidays is strict no-no
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Old 14th March 2012, 15:03   #28
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Default Re: Debt free life?

Loan is not bad infact it is good sometimes.
In earlier post, someone was telling that he still holding on buying a home. With real estate growth being at top - say 20% to 30%, someone could never catchup to buy a home. Loan helps here. With home loan interest rate at half of real estate growth rate percent, it is actually beneficial to take loan + the tax savings associated with home loan.
For someone who manages his funds, loan is not bad.
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Old 14th March 2012, 15:10   #29
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Default Re: Debt free life?

Quote:
Originally Posted by carbookie View Post
I believe it is just a mindset. I come from a poor family. My parents could hardly make ends meet. When I started working in my job, I started at exact ground zero. Over the years, I have bought two cars, multiple properties and other things which money can buy. But never ever taken a loan. For me loan is never a option on the table.
Wow.. that is cool. What profession are you in, if you dont mind sharing?

When we wanted to purchase a home, we took a home loan. At that time, the apartments in our area were reasonable. If we would have waited till now (around 7 years) to save that money, we couldnt have afforded it now. Most of it is repaid. So i would say the loan worked fine for us.

Quote:
Originally Posted by carbookie View Post
Why do you need a loan to fund your Motorcycle? Either you can afford the motorcycle or you cannot. And If you cannot afford a motorcycle, it is a luxury for you. You don't need it. (The only exception to this rule is if you are planning to use motorcycle to generate money. Going to office on a bike is not the same)
Because i cannot purchase a car with my months salary and changing 3 buses and spending about 3 hours to reach office doesnt make sense while i can cover the same distance in my car in about 45 mins. After all, time is money Autos are exorbitant in Bangalore and are much costlier than maintaining an entry level hatchback, depreciation, service charges, fuel included.

In my life's math, not only money but comfort and convenience in life too counts. From strictly money point of view, your theory is absolutely right. But we are humans and would like some comfort in our lives. Else why slog for a higher paying job?
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Old 14th March 2012, 15:15   #30
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I also believe in debt free life. The only loan I had taken was for my car, that too from my employer since there was a car scheme.

I have seen many folks without much savings after working for a decade or so drawing decent or very good salaries - I wonder why. I am not saying that I saved each and every penny from my salary for years... only key is know your income well, and decide on your expenditure. Recently I have bought a property, that too without taking any loan, since I had the power of my savings.

The inevitable will come soon, a house loan But I will minimize it to whatever extent possible and try to pay it back as soon as possible. I don't even believe in keeping a heavy house loan for life to save income tax.

It is not 'loans that I need to take' I am worried about, but the loans taken by my friends from me... it is really hard to make someone re-pay a personal debt. In come cases, it is next to impossible if that person has decided not to return your money.

Last edited by clevermax : 14th March 2012 at 15:20.
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