The EMI payment that eats your salary like a termite

The EMI bug is something that has bitten the entire world. Globalisation has led to an increase in salaries making people more prosperous. As a result, consumerism is on the rise, and adding fuel to the fire is the EMI option or equated monthly installments. Buying on easy EMI often leads to people buying more than required.

Part of the blame lies with the person buying the good or service on EMI. On the other hand, part of the blame also goes to the seller who tempts the buyer with easy monthly payback options. Once the buyer gets into a trap of an EMI, his savings go for a toss and his income starts shrinking.

The 1st week of the month

It’s the 1^st week of the month and along with you, the entire family heaves a sigh of relief. Salary has been finally credited to your account. In the post-pandemic, it’s the lucky ones who are still getting this message. However even before they can rejoice the 5-figure salary in the bank, the bank acts like a villain. The account holder gets a message from the bank asking to maintain sufficient funds as the EMI for the housing loan will be presented the next day.

The housing loan EMI and the Auto loan EMI are part of the standard deduction from the salary. There are times when one feels that his net income is down by 1/3^rd just because of the two EMI. But this is a myth. The EMI of Housing and Car is fixed so one knows in advance how much amount will be deducted. But the real problem comes when the unplanned expenses jump out of nowhere. And the rest of your 2/3^rd salary goes for a toss taking care of it.

A new expense from the school that adds to the existing EMI

The School fee is a part of your regular monthly outflow apart from the EMI. But every six months there comes an additional charge from the school in form of either the bus expenses going up or an adventure trip to a nearby hill station.

Your wife will not compromise on your kid missing out on the adventure trip. The school has planned the stay at a 5-star property. Sometimes it makes you wonder why you never incurred these expenses during your school time. You used to travel to school by the local city bus as private buses were for few privileged ones. The only adventure trip for you was the cricket match for which you had to travel to a different school. That travel was also by the local city bus.

Then there are these notorious expenses that keep popping up now and then. Sometimes in form of buying instruments for a science exhibition or in form of a new outfit for a fancy dress competition. The result is that your balance in the bank keeps getting low.

There is a wedding in the family

This is one expense that normally pops up once in a year but eats your bottom line like anything. In the face, the expense seems reasonable. You have to attend the wedding with a gift. But the moment the invite card mentions Mr and Mrs. with family at an exotic locale your expense multiples 5 times. The cost of the gift moves to the bottom of the expense list.

The first expense starts with getting new dresses for everyone in the family. There are three major functions at the wedding so for a family of 4 you need 12 new dresses; one for each occasion. As this turns out to be an expensive affair, you make the first sacrifice by cutting costs on yourself. You ask your spouse to take out your woolen suits for dry-cleaning. It creates a guilt factor in your spouse’s mind. She decides to have a look into her saree collection and finalizes one that she has not worn at any other function and so is still a virgin dress.

The daughter is still not happy even though mom has promised her three new dresses. The reason is that she needs a couple of more for the in-between occasions.

Birthdays and Anniversaries

You were born in a family where the family tree if drawn on paper runs into a couple of sheets. The more the members in the family the more fun except in the month that has their birthdays. There are times when you wonder if it was just a sheer coincidence that all the couples in the family decided to have kids at the same time or was it a random act. But things can’t change now.

The last month of the financial year is the month of birthdays for most of the nieces and nephews. It also happens to be the month of tax savings. This double-edged sword leaves a cut so deep in your pocket that you take a couple of months to recover. One thing you have realised that with every passing year, birthdays are becoming more expensive. And if one has to buy gifts for at least 5 members in a family in the same month then you can imagine the person’s plight. Soon a time will come when you will use the EMI route to buy gifts.

And then there few guys like me who celebrate their anniversary and spouse’s birthday in the same month. Believe me, it is quite challenging.

The frequent breakdowns that can’t be resolved by the EMI

After the housing and Car EMI and other surprise expenses you heave a sigh of relief! Finally, there is some money left in your savings account that you can call savings. But middle-class families are not so lucky. The moment you are checking the account balance on the banking app on your phone, your spouse calls that the washing machine has broken and the service guy needs to be called.

A visit by the service guy means another expense. You are happy that your machine is covered under an AMC (annual maintenance contract). But the service guys will find a fault in one of the parts that happen to be the most expensive one in the machine like the motor or PCB. As luck would happen this part is not covered under the AMC and you see your savings getting transferred from your bank account to his pocket.

The expense that missed from your list

It’s the month of March and after all the EMI and expenses your financial position is very similar to that of the Indian Government. The fiscal deficit is negative meaning that your expenses are more than the income. But you are happy that the deficit is within the manageable limit of 3.5% of GDP. In other words, your expenses have crossed by 3.5% of your income for the year.

Meanwhile, you get one phone call that spoils your mood. It’s from your Mediclaim insurance agent. A premium of Rs 40,000 has to be paid before the due date of 28^th March. How could you have missed this? Now you will have to borrow to pay it off.

Well if the Indian government can borrow from the RBI at the end of the fiscal year then what is the harm in borrowing from your RBI (read spouse).

You can enjoy reading more such stories on my blog. Click on the following link:

Salary and Expenses:Two sides of the same coin

The last week of the Month – the days of Bankruptcy