Rakesh sometimes calls Vilas to drive his car whenever the latter is free from driving one of the radio cabs of Mumbai. He used to drive Rakesh’s son’s school van earlier but recently moved to radio cabs solely for the higher earning potential. This week, before starting the car, Vilas plugged his new phone to the car charger. Rakesh noticed it was a fairly large-sized phone from a reputed brand and casually asked him about the new phone once they were en-route. Vilas answered that he had bought it last week for Rs.22,000/-and rattled off the model number. Being about 25, just married and staying with his retired parents, Rakesh certainly felt concerned about the phone’s affordability to Vilas. However, Vilas noticing the surprise in Rakesh’s eyes, added a bit apologetically that he had taken the phone on an EMI of Rs.1800 per month to be paid over the next 12 months.

Being an investment professional, the first thing that came to Rakesh’s mind was, had Vilas done the right thing by buying such a costly phone. Also, why this phone when there were other affordable phones with similar features. Going a bit extreme, Rakesh thought about the impact if Vilas lost the phone for some reason. Would he be able to bear the loss as EMIs would continue? Certainly this EMI may not prove to be a ‘Good EMI’ for Vilas.

What, then, is a good EMI? A SIP or a Systematic Investment Plan in a  mutual fund is like a Good EMI as it aims to meet important life goals. A phone is just a life style expense and has no value after 1-2 years. Think about goals such as buying your first house, educating your kids, investing for their future like marriage, career, etc. Retirement is also an important goal. Why not pay EMIs for these goals in the form of a SIP, which helps to lead a ‘good’ life.

Use the SIP calculator to calculate your returns on your monthly investments.

All names and situations depicted in the blog are purely fictional and serve the purpose of illustration only. Any resemblance between the illustrations and any persons living or dead is purely coincidental.