We have all faced this - it’s the 20th
of the month and we are deep in thought of how we’ll manage finances till the
next salary. At the start of the month, we eagerly await that message from the
bank “xxxxx credited to your account”. Tragically this is very quickly followed
by few more messages which go like “Rs. xxxx debited from account” – the EMIs
for purchases against credit cards, home loans, etc. By midmonth, we are in a
bad mood; come 20th, we are dreaming of the salary day. If your
story is somewhat similar, don’t worry we are one of millions who are in the
same (sinking) boat. Forget about savings and investments, we are talking about
merely getting through the month.
It is one of the biggest culprits why we
are getting the dreaded EMI messages. Marketing in 2023 is about how to target
your nervous system. You’d think that this is a biology field but the truth is
marketing in these times is gone beyond segmentation and brand positioning.
Marketeers who successfully create the “Fear of missing out” in potential
customers are successful. Basically a need is generated in our minds not
because we have a utility of the product or service but because we fear that
our peers, our colleagues at work, our friends, our icons are all using it and
we are not. Psychology is at play here – humans do not want to be “left out”,
we are a social animal after all.
Once a lifestyle need is created in our
minds, we need to finance it, rather have to finance it. When the lifestyle
needs are outside our spending capacity, we require credit. There are some
genuine credit requirements – home loans, financing for business, etc. However,
we are talking of credit to finance our needs which regularly exceed our means.
Talk Amazon, Flipkar, Myntra, Nyyka and so on. Easy credit is everywhere. We
don’t go a day without getting phone calls from a Bajaj Fianance or the other
offering a loan. The personal loans and loans without collateral are on the
rise. So much that even RBI is alarmed. Credit card usage is growing. It is
very easy to buy something now and pay later. This is perfectly fine when expenditure
is planned. The problem is putting the expense on a credit card or taking a
personal loan for the new iPhone is an addictive habit. You get conditioned to
the fact that you can do purchases which are generally outside your capacity
which leads to purchases that we do not really need and therein lies the
problem. As a general rule, the luxury purchases keep piling up and so do the
EMIs.
Psychology, lifestyle and easy credit are
inter-related. In the hierarchy of needs from basic needs to lifestyle needs,
one generally moves up the ladder with an increase in income levels. When you
are barely saving anything, you generally would not think of buying a car. But
with easy credit, it becomes easy to make that luxury purchase that you would
have otherwise avoided. Again, it is fine when the car is a necessity for your
work. But when the driver for the purchase is FOMO or gullibility to social media
marketing, you are stretching yourself. We see that the favourite movie star or
cricketer or the persistent social media influencer is shaping your choice. So
when you see all your friends using fancy sneakers and you are tempted to buy a
pair worth Rs. 8000 with a monthly salary of Rs. 40000, think again.
There are some expenses that are recurring and known and some expenses that might be unexpected. Staying financially healthy starts with knowing the current financial position, anticipating future expenses and breaking the salary into expected outlays, a portion kept aside as savings and a portion kept aside for unexpected outlays. One must set aside around 30% for savings, and the rest for the expenses, taxes. Not knowing the salary after tax deductions is harmful. This generally happens when one just starts with a job.
Now you know better! If you found this interesting, check out 5 Useful Money Concepts that you should know!
Comments
Post a Comment