Description An American An Indian (not Red Indian)Period of Comparison 36 months 36 mtsItem Cost 10,000.00 10,000.00Immediate Spend 10,000.00 0.00Paid by Credit card10,000.000.00Interest paid for Credit Card or Received onsavings (Debit/Credit)using reducing balance@12%Paid for 3years –EMI 332.141,957.04@9%Receivedfor 3 yearssaving277.78/mth1,517.14Net Item Cost Cost + Int 11,957.04Cost - Int 8,482.86Relative Cost Difference LOSS3,474.18GAIN 3,474.18MORALE:1.
If Debt via credit card is used for consumer item, it is irrecoverable expense. The item alsodepreciates over 3 years, so that realizable value also diminishes.2.
If no debt is used for consumer items, but savings resources were used instead, the cost of theitem is reduced by interest income on savings.3.
Debt is useful for a businessman because he employs the amount for earning. Though he paysinterest, he also earns income or profits. His loss or gain is the difference between the two. It is“two way traffic” for him.4.
For an employee, having no other income than salary, he loses on contracting debt, because noincome is created out of debt. It is a “One way street” for him – loss only.This is why the East is asserting on West now. America is technically bankrupt with years of consumer spending financed by Credit cards. Eastern countries like China, India and other Asiannations have acquired wealth due to their reliance on savings rather than debt.
Make your First Million by Savings (very difficult), Subsequent millions are easy.
Making first million in any currency anywhere in the world is extremely difficult. One makes orloses continuously, learning all the time. The balance so accumulates make the million after longtime, may be 3 to 8 years.Once one has made real one million in the currency of his country, he has sufficiently learnt the art of making a million. If he is able to hold on that million for at least 3 months, making of furthermillions become relatively easy process. There is a saying that “Money attracts More Money”. It works both ways – once one begins to lose, the lost money attracts more money from the holder,compounding the losses. Similarly, when one has made a million, the chances are the money that he holds will attract more money inward to make him rich.So let us make our first million in the currency of your country. A million is a million, regardless of any currency. The PPP or Purchasing Power Parity operates silently in every currency to make theabove idiom true.
Bank Deposits vs. Bonds; Currency Risks, Capital Risk and Exchange Risk
Each country has its own products for savings. For instance, it is easy to buy Treasury bonds inUSA, howsoever small amount may be. In a country like India or Hong Kong, the availability of Treasury bond is limited to large amount, often 250,000 minimum. An ordinary saver can not handle such amount. He is not millionaire yet. Now again, I remind you of the difference between“Savings” and “Investment”.