Buying on EMI (Equated Monthly Installment) has become a common practice in today’s world. It allows us to purchase our desired products without having to pay the full amount upfront. This convenience has made EMI a popular choice among consumers, especially for big-ticket items like electronics, furniture, and even cars. However, while buying on EMI may seem like an easy and affordable option, it can quickly turn into a debt trap if not planned properly. This is where the 2-6-10 rule comes in.
The 2-6-10 rule is a simple formula that helps you decide the right price, tenure, and EMI based on your salary. It is a practical approach that can prevent you from falling into the vicious cycle of debt and help you make informed decisions while making purchases on EMI.
So, what exactly is the 2-6-10 rule? Let’s break it down.
The first number in the rule, 2, represents the maximum percentage of your monthly salary that you should allocate towards your EMI. This means that if your monthly salary is Rs. 50,000, then your EMI should not exceed Rs. 10,000 (i.e., 20% of your salary). This is a crucial step as it ensures that your EMI payments do not become a burden on your monthly budget.
The second number, 6, represents the maximum tenure of your EMI. Ideally, you should aim to pay off your EMI within six months. This may seem like a short period, but it is a smart move to avoid paying excessive interest on your purchase. The longer the tenure, the more interest you end up paying, making your purchase more expensive in the long run.
Lastly, the third number, 10, represents the maximum price of the product you should consider buying on EMI. This means that if your monthly salary is Rs. 50,000, then you should not purchase a product that costs more than Rs. 5,00,000 on EMI. This is to ensure that your EMI payments do not exceed 20% of your monthly salary, as mentioned in the first point.
Now that we understand the 2-6-10 rule let’s look at how it can benefit us.
Firstly, it helps us make a realistic budget. By limiting our EMI payments to 20% of our monthly salary, we can ensure that we have enough funds for our other expenses. It also prevents us from overspending and getting into debt.
Secondly, it helps us save money in the long run. As mentioned earlier, a shorter tenure means paying less interest, making our purchase more affordable. It also helps us avoid the temptation of buying expensive products on EMI, which may not be necessary.
Lastly, it promotes responsible spending. The 2-6-10 rule encourages us to consider our financial situation before making a purchase. It reminds us that we should only buy what we can afford and not get lured by the easy EMI options.
However, it is essential to note that the 2-6-10 rule is a guideline and not a hard and fast rule. It may not be suitable for everyone, and there may be exceptions. For instance, if you have a stable income and can afford to pay a higher EMI, you may consider extending the tenure to reduce the monthly burden. Similarly, if you have a fluctuating income, you may opt for a longer tenure to ensure that you can make the EMI payments comfortably.
In conclusion, buying on EMI can be a convenient way to make purchases, but it is crucial to plan and budget wisely. The 2-6-10 rule is a simple yet effective formula that can help us make informed decisions and avoid getting into debt. It promotes responsible spending and encourages us to live within our means. So, the next time you consider buying something on EMI, remember the 2-6-10 rule and make a wise decision.
