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  1. #1
    rmsh16 is offline Senior Member
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    Learning from Lehman's Crisis

    Hi

    Excellent read!!!!!!!!!!

    It's interesting article by Mr. Yogesh Chhabria - Investor, Entrepreneur, Educator & Happionaire.



    LATELY, I have been thinking a lot about the Lehman crisis. Spending money that they didn't have and going beyond their means is one of the main reasons for their situation today. In fact that is the cause for the 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 with loans.

    But of course, the times have changed now. Everyone I know has a loan. The buzz word is EMI (Equated Monthly Installment). Today, you can buy everything on EMI - a house, a television, an i-Pod. In fact I know of someone who just bought a fancy BMW 3 series on EMI, instead of buying a cheaper car outright with cash. I mostly prefer to take public transport, but then I am 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, yet buying a house worth Rs. 65 lakh, in the hope of selling it for a higher 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 went and bought assets worth over USD 600 billion. Isn't it suicidal and simply foolish?

    I am sure things would have been different, had I been the head of Lehman brothers. But who wants an old conservative man like me to head a complex financial institution.

    But there are a few lessons that we can learn:

    1. Live a balanced life and avoid overspending.

    2. Don't buy things we don't need.

    3. Don't buy Branded good's. Don't buy excess Food, Cloths, Cosmetics, Footwear, electronics and Fashion accuracies just think before you buy.

    Tip: World still has a lot 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 of wasting our precious little on things we don't need.

    4. Try to balance life with work (No one is happy to work in their professions).

    5. Don't stress out your self, after work try to do some extra activities like swimming, yoga, walking, running where you can divert your mind from stress. A thumb rule: Health is more important than money.

    6. Try to understand each other (Wife and Husband) in financial matters and help each other.

    Tip: As soon as you get your monthly salary, set aside a fixed amount, usually 35 per cent, for insurance, savings and investments. You can then spend the rest.

    7. Not all loans are bad. Loans that are 'need based' (home loans, education loans) can always find a place in your finances against those that are largely 'want based' (Credit cards, personal loans, car loans).

    8. 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 WARREN BUFFET. He has lived in the same ordinary house for over three decades, drives his own medium sized car and leads an extremely regular 'middle class' life. If that's all it takes for the richest person on earth to be happy, why do all of us need to take extra stress just so that we can get things which aren't even essential.

    Cheers
    Rasna

  2. #2
    SUDHKAMP's Avatar
    SUDHKAMP is offline VIP Member
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    Re: Learning from Lehman's Crisis

    Quote Originally Posted by rmsh16 View Post
    Hi

    Excellent read!!!!!!!!!!

    It's interesting article by Mr. Yogesh Chhabria - Investor, Entrepreneur, Educator & Happionaire.



    LATELY, I have been thinking a lot about the Lehman crisis. Spending money that they didn't have and going beyond their means is one of the main reasons for their situation today. In fact that is the cause for the 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 with loans.

    But of course, the times have changed now. Everyone I know has a loan. The buzz word is EMI (Equated Monthly Installment). Today, you can buy everything on EMI - a house, a television, an i-Pod. In fact I know of someone who just bought a fancy BMW 3 series on EMI, instead of buying a cheaper car outright with cash. I mostly prefer to take public transport, but then I am 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, yet buying a house worth Rs. 65 lakh, in the hope of selling it for a higher 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 went and bought assets worth over USD 600 billion. Isn't it suicidal and simply foolish?

    I am sure things would have been different, had I been the head of Lehman brothers. But who wants an old conservative man like me to head a complex financial institution.

    But there are a few lessons that we can learn:

    1. Live a balanced life and avoid overspending.

    2. Don't buy things we don't need.

    3. Don't buy Branded good's. Don't buy excess Food, Cloths, Cosmetics, Footwear, electronics and Fashion accuracies just think before you buy.

    Tip: World still has a lot 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 of wasting our precious little on things we don't need.

    4. Try to balance life with work (No one is happy to work in their professions).

    5. Don't stress out your self, after work try to do some extra activities like swimming, yoga, walking, running where you can divert your mind from stress. A thumb rule: Health is more important than money.

    6. Try to understand each other (Wife and Husband) in financial matters and help each other.

    Tip: As soon as you get your monthly salary, set aside a fixed amount, usually 35 per cent, for insurance, savings and investments. You can then spend the rest.

    7. Not all loans are bad. Loans that are 'need based' (home loans, education loans) can always find a place in your finances against those that are largely 'want based' (Credit cards, personal loans, car loans).

    8. 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 WARREN BUFFET. He has lived in the same ordinary house for over three decades, drives his own medium sized car and leads an extremely regular 'middle class' life. If that's all it takes for the richest person on earth to be happy, why do all of us need to take extra stress just so that we can get things which aren't even essential.

    Cheers
    Rasna
    Thanks Rasna, to you and Yogesh Chhabria. Can you please give me source where you read this.

  3. #3
    rmsh16 is offline Senior Member
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    Re: Learning from Lehman's Crisis

    I read this article in Economic Times. Sorry, I am not sure on date of edition?

  4. #4
    andychan is offline Newbie
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    Post Re: Learning from Lehman's Crisis

    Hello there,
    I'd like to share some of my opinions about this article.
    I'm a uni student. My tutor told me that in USA, even take the new-born baby into account, everybody has 3 credit cards. It might be the result of US economic system, which is shareholder-oriented. In order to satisfy shareholders, firms have to sell as much product as they could. So marketing is everywhere in USA, people may tend to buy something they don't need. However is it negative? Yeah but now, because if every American could be rational as he said in the article then who is going to buy those new-lauched product? The whole nation is based on such pre-consumering culture why change it?
    I think the crisis of US economic is not because the ordinary people wanna buy BMW or I-pod. It's because those financial companies made wrong decision of their investment strategy. And the collapse of any big financial company like lehman Brothers would lead to a chain reaction to the society.
    Perchasing power is really important in USA, so I don't think EMI should be retricted as for ordinary people only on 'need based' rather than 'want based'. Instead the US government really should those big financial companies debt and investment. Market is not perfect, government need to play a positive role in it sometimes.

    Best regards,
    Andy

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