Debit Vs Credit


First let me quote few examples:

Person A: He saves all the money in his PF account. He would buy grocery in minimum. say, only 1/2 kg sugar. when his wife say its over, he would take his bike and go to the nearest shop and buy it. basically they dont buy and store anything. He doesnt believe in Hight-fi schools. He would join the kids in near by school, he will do the teaching part after going back home.

He saved for 12 years, and then borrowed little money from brothers and father without interest and bought a 2 bedroom house. Yes, he didnt take any loan. he bought a house in his budget and he says he would do the interiors when he has money.

Person B: This person is habituated to using credit card and loans. So, he bought a house as soon as he got a job. He took loans from private bank as they were also giving a top loan and person loan with house loan. He bought a 3 bedroom house in same floor as Person A.  he manages house on credit basis only. i.e, he would shop for thing and stock it up, buy cloths and gadgets in EMI schemes. but ya, he is regular in paying all his bill, but he has NO savings.

Now, both A and B are there. A had to forgo so many So called luxury, wait till he has all money to buy the house. But B, thought he is really young, managed to buy a house, but its in loan. B is enjoying the  life without saving, but has everything. A waited to fulfill his desires one by one.

whom do u think is really smart??  its always a question in my mind. Is it good to buy things In EMI schemes??

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13 thoughts on “Debit Vs Credit

  1. Like Comfy, I believe both the cases are extremes. Balancing it out would work best. Personally, I can’t connect much with A. But then I am lot a lot like B either.

  2. Balance is the key! I think both the cases are extreme and most people fall somewhere in the middle, where they take loans for things like house and car, pay the loan on time but the house expenses are taken care of without loans.

  3. Financial Management differs for each individual and should be in line with needs without having a heavy burden of loans!

  4. I would say it should be a mix if both to offset the risk. But I have been Person B, I have bought all big ticket items in my life with loan . But I always ended up closing them ahead of time because I think like person A. Don’t like to have big debt with me. In this era I would say we can find more person B than A.

  5. that’s a good question.. For Person B, all will be well until everything happens in the happy path as he predicted. He is enjoying luxury at the cost of a major unknown risk. As long as the risk doesn’t raise its head he is fine.
    I would prefer to strike the right balance. Its not necessary to buy “things-that-we-want” on EMI scheme but we can buy “things-that-we-need” on EMI scheme. Also, its always better to have a proper backup plan in case of any shift from assumption.
    Its easy to act like Person A but to act like Person B and not burn our hands at the same time it needs tremendous effort of planning and forecasting.
    I would prefer a mix of both..

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