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Here’s an unusual financial planning conversation I heard from a colleague at lunch today –
Seems my colleague wanted to get a borewell dug at their residence. But when the contractor visited her premises for a site evaluation it was discovered that the compound wall of the house had to be torn down in order to accommodate all of the digging machinery. So when all the costs (including reconstructing the compound wall) were added it ran up to around Rs 200,000.
Here’s what my colleague reasoned –
Rs 200,000 in a fixed deposit would yield around Rs 18,000 per year at 9% rate of interest. That’s about Rs 1,500 per month or Rs 375 per week on an average. The cost of a tank’s supply of water in that area is around Rs 300 — Rs 350 and that water lasts for about a week. So, it makes no financial sense to go ahead and dig the borewell. Not only does the interest earned from the fixed deposit cover the cost of external supply of water but you get to keep the principal amount as well (rather than it becoming a sunk cost and really sunk if the borewell were to run dry).
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