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3/29 Thread (General):
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Where are you from?
It’s been real uncle D, but the bag has called
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6 months worth of buffer for the following items:
1. Housing
2. Utilities (++ Internet, phone)
3. Transportation
4. Groceries
5. Entertainment (Netflix, etc.)
Interest is generally considered haram, so cash or cash equivalent is recommended.
Ameen
6 month expenses, these are uncertain times. Keeping them in a HYSA makes it less hard to do.
Engaging thread - thanks for the good discussion. This thread is interesting and does highlight the ambiguity with Islamic finance in today’s modern economy, which revolves around credit and is fiat based - interest rates/profit margins/fees/yields etc. exist to account for the fact that fiat currency loses value over time. In the prophet’s SAW time, lending was intended to a charitable activity, not unscrupulous one in which someone (or a business) could profit, but this was before fiat currencies were introduced. At that time prior to fiat, debt could be repaid exactly at the same value that it was lended because they were backed by real assets e.g., land, cattle etc.
Even though Islamic banks don't charge interest, they often set the rent or profit margin in a way that ensures their total return is competitive with the interest rates offered by conventional mortgages, generating the a similar level of profit as they would if they were offering a traditional interest-bearing loan, while still claiming to adhere to sharia law - there is a reason why your rates are similar (or sometimes more expensive than conventional options). Technically, Islamic financing should be cheaper given financial risk is minimized, because the bank legally already owns the property in their name and is selling/leasing shares to the beneficial owner over time- so we should question why islamically financed rates are pegged or often higher than conventional rates.
It feels super shady that somehow just slapping a different name on a concept can somehow make it halal. (I mean seriously, what is a “halal” bond?). Words are human inventions, whether one calls it "rent" or calls it "mortgage payment", the underlying structure is the same, or even worse for some Islamic banks.. this is why there needs to be a basic understanding of finance to see that Islamic financing isn’t all that different than conventional financing. In a nutshell ... the whole modern financial system is driven by credit which has an element of debt/riba. I applaud the work of scholars and Muslims who want to do the right thing and find ways to work within the system, but where I take issue is good Muslims who are (or may) be unfairly taken advantage of in the name of religion.
But again, not dismissively, to each their own - this is a deeply personal topic and everyone needs to form their own opinion through study (including understanding the scholar perspectives). Ultimately, religious beliefs leave room for interpretation.
Chief
So to hedge against inflation in a halal way without resorting to the evil that is interest/riba, it depends on your risk tolerance and your situation. If you want to invest it then you can. I’d invest mine in a broad market index fund or ETF because long term it does tend to go up even if there is a disastrous drop in the short term. You can invest in gold, which also does well long term.
If these are too risky, you can do a halal savings account (sukuk) with UIF. I might do this as I build up my EF
Interesting discussion here! Shoot me a DM to connect on LinkedIn