Stuck in EMI debts? Understand this lesson from Warren Buffett while it's still available...or else you'll only be left wishing later.

These days, most people buy everything, from cars to mobile phones, on EMIs. If your life depends on EMIs, then you should definitely listen to the advice of Warren Buffett, one of the world's leading investors. Here, learn how EMIs are secretly destroying your dreams of becoming rich.

EMI (Equated Monthly Installment) is becoming an integral part of our lives today. We rely on EMIs for homes, cars, gadgets, and even small expenses. While EMIs help us purchase big things, they also trap us in debt. If your life is dependent on EMIs, then stop and understand a key lesson from Warren Buffett, one of the world's most accomplished investors.

Warren Buffett always says that the biggest financial losses are often caused by our habits, not just the market. They say that what you don't save today is wealth that eludes you in the future. Warren Buffett has always emphasized the importance of saving and investing. One of his greatest teachings is understanding the power of compounding and staying away from debt. He believes that debt is something that constantly holds you back. When you pay EMIs, you are actually losing out on future returns. This leaves you significantly behind in achieving your dream of becoming truly wealthy.

The EMI Trap: How Does It Make You Poor?

Let's understand this with a simple example. Suppose you have taken a personal loan of Rs. 1 lakh at an interest rate of 15% per annum for 2 years.

Loan Amount: Rs. 1,00,000

Interest Rate: 15% per annum (1.25% per month)

Term: 24 months (2 years)

Your estimated EMI for this loan would be approximately Rs. 4,849.

Over 24 months, you'll pay a total of: ₹4,849/month * 24 months = ₹1,16,376.

That is, you're paying ₹16,376 in interest for ₹1 lakh.

What if you had saved these EMIs and invested them?

Now imagine if you hadn't taken this loan and invested ₹4,849 each month in a place that would have earned you an average annual return of 12% (which is possible with a good equity mutual fund).

Monthly Investment: ₹4,849

Annual Return: 12%

Term: 24 months (2 years)

After 2 years, you would have accumulated approximately ₹1,31,238.

This is a small example, but it illustrates the power of compounding and the "opportunity cost" of EMIs. Warren Buffett says that when you take out a loan, you're eating into future earnings.

Warren Buffett's 5 Golden Tips for Freedom from EMIs

Not all debt is bad, but debt with high interest rates is the most dangerous. Credit card debt or personal loans are often very expensive. Buffett recommends getting rid of these expensive debts first. When you pay off these debts, you actually avoid "earning" the same amount that was going towards interest.

Buffett believes that you should spend what's left after saving, not what's left after spending. As soon as your salary arrives, set aside a fixed amount for savings. This habit will gradually strengthen your financial position.

The biggest secret to Buffett's success is the power of compounding. He says, "If you invest in something for 10 years and it grows at 10% annually, it doubles after 10 years. But if you invest for 20 years, it becomes six times, not four times." The earlier you start investing and the longer you invest, the greater the benefits compounding will yield.

Buffett himself lives a very simple life, despite being one of the richest people in the world. He doesn't waste money on expensive cars or branded clothing. He believes that unnecessary expenses only hinder your financial freedom. Before every purchase, ask yourself, "Do I really need this?"

Buffett always emphasizes reading and learning. He says that the best investment is an investment in yourself. Increase your financial literacy, learn how money works and the different investment options. The more you know, the better you can make financial decisions.

If you're in debt, keep these things in mind:

Note how much you owe, the interest rate, and the EMI.

Focus on paying off the highest interest-charging debts first (like credit cards).

Look at your wasteful spending. Create a budget and make room for savings and debt repayment.

Try to increase your income by taking on a side hustle, freelancing, or learning a new skill. The extra income will directly contribute to debt repayment.

Once you're free from expensive debt, start investing your monthly EMI amount systematically.