Expense Account, Mint
We like to deal with money as a block and are loath to break it up into smaller bits that will do different things. The same pot of money can do a variety of things if put in different products, but we would rather take a neat decision of swinging the whole pot at one problem. Splitting up the money would make more rational economic sense, but we end up not doing that. But luckily financial planning is about the human being at the centre of the problem and cold logic need not always win. And that is what happened last week. Sitting with a friend and working out if he should repay the home loan or invest the money in something, again brought me face to face with this problem. He had enough money to pay off the loan but was attracted to the rising market and wondered if he should invest it instead. His key worry was the servicing of the equated monthly instalment (EMI) in the months that his consulting income was not enough. He heard me out as I drew diagrams to explain how periods of high inflation work to the advantage of the borrower and how he, with his steady practice, an existing pool of paid-for real estate assets and fairly large (though irregular) inflows could more than sustain the loan. But when I asked him to create a pool with six months worth of EMIs to de-risk this income variation and invest the rest, he hesitated. He wanted to get rid of the whole amount and did not want to break it up.
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