Expert advice

Oct 15, 2015,14.20 IST

Five common behaviours that determine your financial health

Nitin Vyakaranam
Arthayantra.com

Traditionally, India is known as a savings friendly country. In majority of cases, people are seen endeavoring hard towards making sufficient savings irrespective of their earning capacity or other obligations. In comparison to the households in developed economies, Indian households have lower debts by the virtue of savings. But having said all these, there are still some areas where our spending is way high; although occasional, these expenses leave a lasting impact on our finances and are often detrimental to the health of our savings.

1)Festival expenses

India is a country of festivals. Families ensure extra savings to celebrate various festivals. We tend to get into the mode of squandering our savings, or money that can be potentially saved for our personal security, in the name of celebration. To exploit this habit of spending, online and offline commerce come up with attractive sales offers hard to resist. These expenses are called non-committed expenses which must be predetermined in order to mitigate impact on the future of income.

2)The race of status quo

Believe it or not, sometimes ‘envy’ is a major instigator for all our unnecessary spending. We compare our financial status to that of our next-in-kin, or friends, or families to prove our superiority over them. And this behavior is exercised at the cost of our immediate and necessary objectives. Desire to live a better lifestyle is not condemnable but such ‘aspirations’ must follow priority objectives such as planning a better future for the child ranks higher on priority list to going abroad with family for holiday. Also, consider this when one buys a luxury car over a fuel efficient one, for mere status symbol. And again, to exploit such spending behavior, automobile companies, banks offer such lucrative buying plans, making it hard on us to decide the best.

3)Eating out

This habit is more noticeable among young professionals who believe in the ‘work hard, party harder’ policy. Ideally it is not that bad but on practical grounds, it has implications pretty serious to health and finances. Often factors such as splitting of large families to individual and nuclear ones, to urban migration for employment opportunities or job relocation/transfers etc. are also responsible for the rise in this trend of eating out. As a result of this consumerism, there is a rapid increase in fast food joints funded by investors considering it to be a great market and its growth potential. Besides this, technology also plays the spoil-sport as in the name of saving time for cooking, an app enables home delivery at one click. Imagine now, it is not only your hunger satisfied with mouthwatering food, in the name of saving your time, you are also charged a bomb and a nasty possibility of falling sick, called, food-poisoning.

4)Look and feel

Honestly, this is one of the most compelling areas of noticeable over-spending that has no real holistic contribution to our wellbeing. We are so much hardwired about this ‘look good- feel good’, that we don’t tend to keep a check on our expenses, particularly pampered by hundreds of marketing/advertising campaigns of cosmetics, clothing, personal care, personal hygiene, etc. all leading to overspending. Just because a model is made painted well in certain cosmetics, we don’t care splurging as much whether or not the product takes care of our real health, or say for least, the advertised benefits.

5)Loans

Contrary to what we were already talking about India’s generic interest in savings in comparison to the other developed countries of the world, we still do have cases where needs exceed earning capacity. And to fulfill these needs, we resort to formal and informal loans. Unless it is a super emergency, taking loans for luxury is a debt resulting into lower disposable income. We must not forget that loans are one of the most important parts of our expenses and it should not exceed 40% of our incomes.

To turn this around in favour of your finances, take your lead today, forget comparison and exercise restraint on your non-committed expenses. For help, look out for a personal financial advisor.
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