Simple Tip : Get the EMI experience before buying that house

I am not really into buying a house (see here and here) and definitely not multiple of houses, especially via home-loan route. I have seen too many examples of people

1. Buying house and then forced to significantly cut-down their living standard
2. Getting cheated by even reputed builders (delayed projects, poor quality, document frauds etc )
3. Not really getting huge ROI (which is often the primary motive)

Yes, I know of many people, who don't enjoy life 'today' in the hope of a better 'tomorrow'. Some people take home-loans with EMI portion as high as 60-70% of their monthly inflow and then think millions of time, spending on smaller (but important) aspects of life like upgrading their car or buying new life insurance policy or a family vacation. We, Indians, are specifically tuned in "saving" mode from childhood. 

I was talking to a friend, who was very keen on buying a house in Bangalore. He was willing to take an EMI burden of close to 50% of his income. I believe that "experiencing the situation" usually helps in preparing for that tough time (think of mock interviews), so I suggested a simple method to him. I asked him to create a recurring deposit (tenure not less than a year) of exactly the max EMI he is willing to shell out.  Why a year he asked? I said, a full year will take you through all the planned and unplanned expenses that can occur like an illness in the family or a sudden trip to home-town or school fees for the kids. So he started an RD of 60K per month in his salary account. 

He came back only after two months and said its an eye-opener. As soon as his salary comes, close to 50% is gone from his account. So he has to manage the entire household expenses in the remaining amount. Six months later he prematurely cancelled the RD, but thankfully he realized that he is not yet ready to buy that house via home-loan. 

It is a simple trick but very effective to experience the burden of an EMI. As a side-effect you also get to create a good corpus once the RD matures. Try it and share your experience.