Very recently I have started reading about things I never thought of reading. But thanks to some random reading triggered from home schooling kids and pandemic situation. This random reading inspired me to read more about financial planning and investments. When it comes to finance and money what I understood till date is that you should save money. That’s how traditional and orthodox approach is, and we all have grown up with that. We never realized the importance of saving and investing.
In all the advises and explanations people said that one
should keep emotions aside and then invest. Be practical and logical about
these investments. Market does not care about your feelings and emotions. You
feel or your gut says that this “Investment” is good is of no use. You need to
do through research and go through a pile of excel sheets before arriving to a
decision. But can we really do it? Is it possible to keep emotions separate
from yourself then discuss and provide genuine feedback or decide.? When it
comes to your hard-earned money how can you consider investing without
emotions. However, I would like to highlight 3 specific areas where I realized
the difference between an “Asset and Liability”. Each one is related to emotions only and
nothing to do financial planning.
- House – The moment you start earning owning a house and living there is one of the most basic expectation you have. Even if it is related to taking a loan and paying EMI. I believed this is an Asset. We all have this emotional need. However, after doing research I realized that this is incorrect. If you own a property (house or flat) and live in it, it’s a liability as we would be paying a huge amount as an EMI and maintenance cost. So, if you calculate average return of investments in both the scenario then you would realize that renting is always better and economical with no headache. But can we accept this fact that we should continue living in a rented property and not think of owning a house and living in there. With real estate prices going high every year, it is becoming difficult to own a house without taking a loan. Even if we have a choice accepting this is extremely difficult. May be for generation next this would be an asset but for us a liability which we must carry as it is extremely important.
- Automobile- This is again a liability as most of us want to own and drive expensive cars based on the budget we have. And yes, as we don’t have so much of money, so we fall into the EMI mode of payment and take loan from the bank. Even though we understand that its value decreases the moment you take it out from a show room. We still buy or aspire to buy as we all have heard stories about our parents bragging about when they bought their first car and how they are unable to sell even if it is not working. Now, with the advent of OLA and Uber this has changed to certain extent. There is no need to own a car, but people still buy the same and upgrade it as well. Another emotional attachment which is difficult to get rid of.
Hence, these are somethings where I feel whatever be the repercussion, but these emotional attachments would remain as is and very few people can get rid of these things. We spend a considerable amount on gadgets as well but that is not included because no emotions are attached to it. If one had access to and can afford would be upgrading every single day. No one is holding on to a mobile as a personal item which is indispensable.
Not sure how next generation behavior pattern would be as
they are very much careless about things they own. They are shocked that there
existed television which was not known as “Smart TV” but was called an “Idiot
Box”. Emotions at that time was not related to the switching of the internet
and I recall the power cuts where we used to talk to our neighbors daily. Now
you hardly know the neighbor. Hoping that whatever be our investment strategy
or financial planning we should not forget to invest in Education, values, health
and personal relationships.
By,
TulikaJV
10/11/21
