Rita: Hi Mohan, I need some advice. Every month, my salary gets credited in the last week, and within hours, most of it disappears into EMIs. I feel like I’m stuck in  this vicious circle. With the festive season approaching, the offers are so tempting, but I’m worried I might overborrow again.

Mohan: I hear you, Rita. This time of the year is designed to make spending irresistible. The EMI culture makes it even easier to fall into the trap. Have you thought about how these EMIs are affecting your financial health?

Rita: I know the interest rates are high—somewhere around 12-20%. But when I see those “pay just Rs. 3,000 a month” deals, they seem manageable. It’s only later that I realize how much extra I end up paying.

Mohan: That’s exactly how they get you in the debt trap. Most people focus on the affordability of the monthly payment, not the total cost. But what if I told you there’s a way to avoid this EMI trap altogether? There’s a way out

Rita: Avoid EMIs? How? I thought they’re the only way to afford big-ticket purchases.

Mohan: Not at all! You can create a ‘Corpus’ fund. It’s simple—you set up an SIP in a short-term mutual fund with the same amount you’d typically pay as an EMI. Let that fund grow, and when you’ve saved enough, use that money to make your purchase outrightly. Don’t wait for the festival times.

Rita: Hmm, that sounds interesting. But how is it better than just buying on EMI?

Mohan: Think of it this way: With an EMI, you’re paying an interest rangig from say 12-20%, which means your purchase costs significantly more over time. With a Corpus build up, instead of paying interest, you earn returns—in the range of 6-8% since you are investing with debt funds for a period ranging from 6 months to 18 months max.

Rita: That’s a good point. But what if I want something immediately? Waiting for my fund to grow might not be feasible.

Mohan: Fair concern, but this approach will gradually teach you to keep your patience and financial discipline. If you really can’t wait, you can use part of your savings as a buffer. Over time, the habit will pay off. Also, if you save consistently, you’ll eventually have money ready for future purchases.

Rita: I like this idea. It’s like paying myself instead of the lender. But how do I start?

Mohan: Pick a short-term mutual fund suitable for your needs. Start an SIP with the same amount as your typical EMI. Think of this fund as your expenditure fund, not savings. Use it only when the balance is enough for your desired purchase.

Rita: Makes sense. I can also show this concept to my kids—it’s a great way to teach them financial responsibility. Maybe I’ll even use it to buy them something better in the future.

Mohan: That’s an excellent idea, Rita! It’s a practical demonstration of how patience and time can help you grow your money. Once you see the results, I’m sure you’ll never want to go back to the traditional EMI culture.

Rita: Thanks, Mohan. I feel like this is the mindset shift I needed.

Mohan: Great decision, Rita! Your future self will thank you. And who knows, maybe by next festival times, your fund will be ready for something bigger and better.