Following is a summary snippet from a discussion with the client(Sarath) on Buying a Car (or) Invest for Kids education
Sarath: Mr. Ravi, I want you to help me out with rational decision making as I’m confused about buying a car
Me: Sure, What’s your problem?
Sarath: I want to buy a car, I have 2lacs which I can use for downpayment and remaining 9lacs I want to take car loan and monthly EMI is coming to 9400 approximately
Me: Okay, then what’s the problem?
Sarath: I will not have any surplus if I take this car loan so worried if this is the right step, I also want to save for my kids they are currently aged 7years and 4years and till now not saved anything for their higher education and marriage
Me: Okay, I can expect what kind of thoughts you might be undergoing. So tell me why do you want to buy a car?
Sarath: I have a bike and with two kids, it is getting difficult and risky to ride a bike with 4 people. So if I have a car we all can travel safely compared to a bike
Me: Okay, how frequently you travel along with family and would you expect to use a car for office commutation?
Sarath: With family, I would say 3 to 4 times monthly within the city. For the office, I use my bike or do Work from home so I don’t want to use the car for office commutation
Me: Okay, so the cost of the car you are planning to purchase is 11lacs and how much do you think you will have to spend on fuel(petro/diesel) monthly?
Sarath: That will be around Rs 3000 to 4000 monthly
Me: Okay, so coming to kids higher education and marriage. How important are these for you compared to Car
Sarath: Both are important
Me: Okay, Can you prioritize them
Sarath: Priority1- Car, Priority2- Kids education, marriage
Me: Okay, so buy a car with downpayment and take a loan. We will discuss your kid’s education and marriage when you have surplus money
Sarath: Err…Scratching head, in low voice…..I want to plan for kids also now
Me: Do you have surplus money after allocating Rs 9000 to car EMI?
Sarath: No
Me: Then how can you plan when you don’t have money?
Sarath: So no other option?
Me: Do you think you can use Uber/Ola and if you use how much would it cost in a month of 3 to 4 travel trips?
Sarath: It depends upon travel trips and distance, minimum 1000 to max 4000 monthly
Me: So this means if you buy a car or not, you will spend on average Rs 2000-3000 (for fuel or for uber)
Sarath: Yes
Me: Okay, So don’t you think that instead of buying a car, you can use Uber/Ola and invest monthly Rs 9000 for kid’s education and marriage?
CAR is a LUXURY and kid’s education is a NECESSITY. Though many people argue with me that CAR has become a necessity, but its still a LUXURY
Make sure you are not buying WANTS and LUXURIES at the cost of NECESSITIES and NEEDS
My objective during a conversation with clients is to ask RIGHT questions so people can realize and take informed and RIGHT decisions than decisions driven by emotions and sentiments and at the end, I will always leave the decision making choice to the client because they have every right to do what they want to do with their money
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