By Vishesh Jain:
“Bhai, what’s my share?” I asked my friend.
“Rs 2500.” he replied. We were partying for a friend’s birthday at a café near Hauz Khas Village in Delhi.
Grudgingly, I took out my debit card to pay the bill. It was the middle of the month and I was already low on cash, which meant that I would have to ask my parents for money again to survive till the end of the month. I felt a bit ashamed; this wouldn’t have been a problem if I were ‘forever twenty-one,’ but I am not. I am twenty-five.
Can you imagine how embarrassing it is when you work as a middle-level executive for a start-up, have taken a decision to live independently against your parents’ wishes, and still have to ask them for money time and again? What makes it even worse is that my parents and family members are generally good with managing money (Baniya blood. Sigh).
As I wallowed in self-pity, I looked around and saw that my friends had the same expression (the one that says, “I swear this is my last outing for the month!”). As each of us paid our share and headed home, it struck me, that most of my friends had the same financial struggles that I did. It’s almost as if we were a new generation of ‘poor’ – ‘the privileged poor’ – young working professionals with minimal savings and investments, living from paycheck to paycheck, with parents acting as a Federal Bank ready to bail us out should we go bankrupt or need excess funds to buy fancy things we couldn’t otherwise afford.
My friends and I weren’t the only ones as well – reading through some personal anecdotes and financial reports online, I learnt that most millennials around the world had the same financial struggles. We all made the same pattern of mistakes – We would delegate most of our financial responsibilities to our parents and would not feel the need to save money on our own. Second, we had more avenues to spend money on than what the past generations had: the latest gadgets, outside food and drinks, and recreational activities such as movies, events, and travel. Third, most of us were victims of marketing messages such as YOLO and Travel Now, Save Later, and had a subtle fear of missing out on buying things or social activities that we saw our peers indulge in on social media.
For me, the result was that I had overused my credit card limit, had meagre savings to support me during times of financial need, and didn’t have an investment portfolio for myself. This essentially meant that I was not only spending more money than I should have every month but also was losing money to inflation every year. The magnitude of the situation finally hit me when my car loan application got rejected because my ‘credit score’ was too low (I had missed some payments on my credit card). What’s worse – now I wasn’t eligible for any loan in the near future whether it be an educational loan for my MBA or a home loan for a future house I wanted to build.
Luckily for me, when I switched to IndiaLends, a Financial Technology company, I learnt so much about financial planning and debt management that I no longer faced these issues. But that’s also when I realised I wasn’t the only ‘privileged poor’ out there. So many of my customers struggled daily with managing their money and remained in debt – consultants who earned over five lakh rupees a month – yet were drowned in credit card debt, first-time borrowers unable to get personal loans because their savings were not enough to pay back the EMIs, etc. These people didn’t belong to the traditional image of people struggling with money – uneducated, unemployed, or low-income demographics. They were the kind of people you and I interact with every day – our family members, our friends, our neighbours, our colleagues.
What’s common to all of us who are the privileged poor is that we take for granted our financial health without realising that it influences every sphere of our lives – be it our professional life, our personal life or our dreams and ambitions. Everything from our standard of living to the life choices we make depends on how financially secure and stable we are. And that’s why it’s so important for all of us to kick-start building our financial acumen and health from an early age.
So where should you begin? To help you, here are three simple lessons you can start following from today for a healthy financial life:
You either spend your income on necessities or luxuries and while you can’t eliminate or reduce involuntary expenses such as rent, phone bills, commuting bills, etc. you can certainly reduce expenses on recreational activities. The easiest way to do so is to create a budget for recreational expenses in a month and to spend within that budget amount. What’s more, start tracking all the small purchases you make on a daily basis – the random coffee, the Uber ride back home, the sudden drinking plan, the short weekend gateway; all these small expenses can aggregate into large amounts.
Start investing simply by allocating some portion of your salary in a recurring fixed deposit that offers a higher rate of interest than a simple savings bank account. Once, you have learnt to commit some expenses to a recurring FD periodically, you can move on to other financial products such as mutual funds and corporate bonds that are low risk and give better returns than FD.
If you plan to buy a car, home or want an education loan in the future, build a solid credit history first. You can do this by taking a small personal loan from online lending platforms or by applying for a credit card at your partner bank. When you make timely payments on your loan EMIs or credit card purchases, you build a positive credit history and banks become more likely to lend to you at lower interest rates in future.
Essentially, the greatest lesson I learnt was that all money issues boil down to one thing – Priorities. If you get your priorities right, the money will get right as well.