Sunday, September 9, 2007

Are you Loyal to Your EMI

Handcuffed by EMIs

There was a time when company's bound employees through golden handcuffs to retain them in the company. The forms included deferred bonus, esops, loans etc. These do exist in many companies even today, but employees are not very receptive to these ideas and would prefer not to enter into these handcuffs voluntarily.

There is one other kind of handcuff which most corporate professionals have locked themselves into. Voluntarily. They cannot get away with it for years. That is the handcuff of the EMI. Today most professionals have taken loans of huge amounts mostly for purchase of house. The EMIs form anywhere between 60% to 80% of the monthly salary. Earlier nett take home, to decide to move from one company to another, was calculated as monthly fixed cash minus tax payable. Now the nett take home is calculated as monthly fixed cash minus tax minus EMI.

The EMI handcuff has lot of significance. EMI assumes a steady outflow month on month. This means a steady income is needed to service the EMI. If one does not like ones job and wants to move to a job where the pay may not be great but the experience of work is great, one cannot take it. One cannot take a break from work or corporate life to pursue other interests for a while, maybe study, travel etc. One cannot afford to consider entrepreneurship as an option because entrepreneurship means a risk and thus a possibility of unsteady cash flow. One may decide that he could live with lesser money but the banks will not allow you to exercise this option. People crib about their job, the meaninglessness in it, the stress it creates, the imbalance in work-life because of it. Nevertheless they have to be there in the office at 9 the next morning otherwise the EMI cheque will bounce at the beginning of the next month.

We hear of loyalty of people to companies coming down. However, there is another form of loyalty which has got strengthened. People are more loyal to the banks which have given them the loans than to the companies. People can change companies. Can they change banks so easily? One friend of mine has shifted four companies in the last five years. He has been servicing the same bank in the that period. They get more communication from the banks than they get from the company in which they work.

Btw, we also seem to get addicted to the EMIs. When one comes to an end we need to add a new one. When salaries increase and the ratio of the salary to EMI comes down, we will take one more loan and ensure the ratio comes back to its normalcy. Maybe we will buy one more house or one more facier car.

Earlier, spouses particularly the wives were frustrated having to go to work, manage the kids, prepare food, take care of in laws. Now EMIs have been added to the list. A neighbour of mine working in one of the big IT companies had the same complaint. She is tired of doing all that is expected of her in the role of a wife. Now she has to also contribute to the EMI though she would otherwise like to stop working in the corporate. Contribution to EMI is included in the criteria for shortlisting the partner for life.

Life decisions seem to revolve around EMIs.