LATELY, I have been thinking a lot about the Lehman crisis। Spendingmoney that they didn't have and going beyond their means is one of themain reasons for their situation today। In fact that is the cause forthe 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 withloans.But of course, the times have changed now. Everyone I know has a loan.The buzz word is EMI (equated monthly instalment) . Today, you canbuy everything on EMI - a house, a television, an I-Pod. In fact Iknow of someone who just bought a fancy BMW 3 series on EMI, insteadof buying a cheaper car outright with cash. I mostly prefer to takepublic transport, but then am I 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, yetbuying a house worth Rs. 65-lakh, in the hope of selling it for ahigher 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 wentand bought assets worth over USD 600 billion. Isn't it suicidal andsimply foolish?
I am sure things would have been different, had I been the head ofLehman brothers. But who wants conservative man like me to heada complex financial institution. But there are a few lessons that wecan learn:
1. Live a balanced life and avoid overspending.
2. Don't buy things we don't need.
3. Don't be so specific to go for Branded goods.
4. Don't buy excess Food, Cloths, Cosmetics, Footwear, electronics andFashion accuracies just think before you buy (Tip: World still has alot 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 ofwasting our precious little on things we don't need).
5. Try to balance life with work; no one is happy in their profession.
6. Don't stress out your self, after work try to do some extraactivities like swimming, yoga, walking, running where you can divertyour mind from stress. A thumb rule: Health is more important than money.
7. Try to understand each other (wife and husband) in financialmatters and help each other (Tip: As soon as you get your monthlysalary, set aside a fixed amount, usually 35 per cent, for insurance,savings and investments and may 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 againstthose that are largely 'want-based' (credit cards, personal loans, carloans).
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- WARRENBUFFET. He has lived in the same ordinary house for over threedecades, drives his own medium sized car and leads an extremelyregular 'middle class' life. If that's all it takes for the richestperson on earth to be happy, why do all of us need to take extrastress just so that we can get things which aren't even essential?
Life is like a cardiogram; you live till it has ups & downs and diethe moment its steady॥ So welcome every ups & downs - live strong.
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 withloans.But of course, the times have changed now. Everyone I know has a loan.The buzz word is EMI (equated monthly instalment) . Today, you canbuy everything on EMI - a house, a television, an I-Pod. In fact Iknow of someone who just bought a fancy BMW 3 series on EMI, insteadof buying a cheaper car outright with cash. I mostly prefer to takepublic transport, but then am I 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, yetbuying a house worth Rs. 65-lakh, in the hope of selling it for ahigher 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 wentand bought assets worth over USD 600 billion. Isn't it suicidal andsimply foolish?
I am sure things would have been different, had I been the head ofLehman brothers. But who wants conservative man like me to heada complex financial institution. But there are a few lessons that wecan learn:
1. Live a balanced life and avoid overspending.
2. Don't buy things we don't need.
3. Don't be so specific to go for Branded goods.
4. Don't buy excess Food, Cloths, Cosmetics, Footwear, electronics andFashion accuracies just think before you buy (Tip: World still has alot 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 ofwasting our precious little on things we don't need).
5. Try to balance life with work; no one is happy in their profession.
6. Don't stress out your self, after work try to do some extraactivities like swimming, yoga, walking, running where you can divertyour mind from stress. A thumb rule: Health is more important than money.
7. Try to understand each other (wife and husband) in financialmatters and help each other (Tip: As soon as you get your monthlysalary, set aside a fixed amount, usually 35 per cent, for insurance,savings and investments and may 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 againstthose that are largely 'want-based' (credit cards, personal loans, carloans).
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- WARRENBUFFET. He has lived in the same ordinary house for over threedecades, drives his own medium sized car and leads an extremelyregular 'middle class' life. If that's all it takes for the richestperson on earth to be happy, why do all of us need to take extrastress just so that we can get things which aren't even essential?
Life is like a cardiogram; you live till it has ups & downs and diethe moment its steady॥ So welcome every ups & downs - live strong.
0 comments to "Lessons from Lehman Brothers crisis"