Attention Are you also selling your ‘freedom’? Know how the EMI trap is taking away your financial freedom

Financial Freedom vs Debt Trap: Nowadays, be it electronic goods or expensive clothes, everything is available on EMI or ‘Buy Now Pay Later’ (BNPL) is easily available. Loans, once taken out of compulsion, have become a part of today’s modern lifestyle. Gradually it is taking away people’s financial freedom.

According to Vivek Iyer, partner at Grant Thornton in India, the original purpose of the credit was to provide some liquidity to the salaried class so that they could meet their needs. But now people are spending more than their capacity, not as per their need, but due to the influence of the market.

What is systematic risk?

When people start taking loans more than their capacity and banks also start distributing loans without thinking, then it becomes a threat not only to an individual but to the financial system of the entire country. This is called ‘systematic risk’ It is said.

balance of savings and investment

A scheme like BNPL lures you to buy today, but it blocks your future earnings in advance. According to Iyer, rapidly increasing consumerism is now spoiling the balance of savings and investment. Now most of the people have started giving more importance to today’s needs and facilities instead of saving or investing money for the future.

For financial freedom, Vivek Iyer insists on adopting an old and effective formula. That’s it…

• 50 percent- Necessary expenses (food, rent, clothes)
• 30 percent- investment (for future)
• 20 percent- Emergency fund (avoidance of major trouble)

If the total EMI of the loan you have taken is so high that it is eating up 30 percent of your investment or 20 percent of your emergency fund, then understand that you are slowly getting trapped in the debt trap.

Also read: Government’s big decision amid Iran-Israel war, extended time for LPG cylinder booking; Now we will have to wait for so many days

How is your freedom being snatched away?

Iyer says that real wealth bank balance And it is made from investments, not from things you buy with borrowed money. They say that credit is a tool, if you use it properly you will get progress, if you spend it wrongly then your freedom will be snatched away. Next time before you hit the checkout button, ask yourself – is this thing really necessary or are you trading future peace in exchange for it?