For young Indians, it is all about money, honey! Unlike their fathers and grandfathers who had scores of hungry mouths to feed, the Young Turk of today has fewer responsibilities and can barely look beyond their own mouth. Earning wads of money, he is literally rolling in cash. However, are Indians today making the best use of their earnings? Are they investing their money smartly, or just squandering it away with no eye on their future? Read on.
Spending Patterns – Real Change or Unrealistic Math?
Let’s look at the average monthly budget of an average 30-year-old 10 years back. We’ll call him Mr. Jugaad Patel. (you’ll soon know why!) Patel is a young employee at an MNC. Let’s assume he is married (to make the math realistic!)
| Monthly income | Rs. 50,000 |
| Monthly household Expense | Rs. 2,500 |
| House rent | Rs. 7,000 |
| Miscellaneous expenses (Electricity, Cable, Telephone Bills) | Rs. 5,000 |
| Monthly shopping / eating-out expenses | Rs. 1,000 |
| Travel (unclaimed bills) | Rs. 5,000 |
| Total expenses per month | Rs. 20,500 |
| Monthly savings | Rs. 29,500(i.e., 59% of his income) |
Now, let’s look at another average (it’s the ‘aam’ season, after all!) person – Mr. Fizool Kharchawala – of the same age as Patel and working in the same conditions but living in the present day.
| Monthly income | Rs. 1,00,000 |
| Monthly household expense | Rs. 8,000 |
| House rent | Rs. 28,000 |
| Miscellaneous expenses (Electricity, Cable, Telephone Bills) | Rs. 15,000 |
| Monthly shopping / eating-out expenses | Rs. 10,000 |
| Travel (unclaimed bills) | Rs. 15,000 |
| Total Expense per month | Rs. 76,000 |
| Monthly savings | Rs. 24,000(i.e., 24% of his monthly income) |
Despite a doubling of income, savings have nosedived, and Kharchawala is not able to save even 30% of his monthly income.
If you find this math unrealistic, here’s how it breaks up.
Travel Expenses: Vacations abroad used to be the elite traveler’s glass of wine. Today, once-a-year jaunts to foreign locales has become a staple part of even the average middle-class Indian’s life. As exotic as the experience can turn out to be, the travel expenses are no less exotic – anywhere from one lakh to five lakhs for a family of two!
Robust tourism promotion by countries like Thailand, Malaysia, Singapore, Australia, etc., coupled with media brouhaha, airfare discounts, easy payment options through credit cards, advertisement hype of travel sites, have all contributed to this burgeoning slice of the average Indian’s wallet.
Shopping Expenses: A decade back, buying footwear meant just that – getting something that you wore on your feet. Today, form is paramount; function is a has-been. Style and status beat utility silly when it comes to decision-making while shopping. Brands are promoting themselves in such a way that shoes are chosen less by size or color and more by brand image and lifestyle message. Puma, Nike, Reebok or Adidas – take your pick and any of them would easily dent your pocket by a few thousands for a pair of shoes!
Buying ‘footwear’ today is thus more of ‘foot’ing the bill and ‘wear’ing out your wallet. This gets worse in other shopping categories like apparel, accessories, perfume, jewelry etc.
Miscellaneous Expenses: A Nokia 1100 costing a couple of thousands was a treasured possession in the year 2000. And, in all probability, it used to outlast your jeans. Today, mobile phones are picked up off the shelves faster than you can buckle your jeans. A Samsung S3, costing Rs.25,000/-, is obsolete in just 6 months, when the company launches its successor. Apple is not far behind when it comes to tabs – upgraded configurations and operating system versions are releases at a pace that would make a certain Mr. Bolt proud. To boot, Apple is not even the manufacturer of its products!
Living costs: Apartment communities or ‘gated’ communities have become a trend now. And builders are falling all over themselves to label their projects as ‘luxury’ condominiums or ‘elite living spaces’. You buy a flat for Rs. 75 lakhs, but before you set foot in the door, you are asked to shell out an additional 3-6 lakhs to enjoy facilities like gym, club house etc. Interestingly, there is no way you would refuse – the clubhouse membership is a status symbol after all. Not reason enough? Well, all your neighbors are already member, so can you be far behind?
What gives?
The reason Jugaad Patel has morphed into Fizool Kharchawala is mainly due to fatter disposable incomes, options for easy credit facilities and increased awareness. The perennially upward-looking middle class is actually moving up. Or has moved up.
Adverts and credit cards are the two necessary evils of urban life. You don’t feel the pain pangs of losing money when you swipe plastic. Online shopping is not only a boon but also a bane that drives impulsive spending. Added to this, malls have sprouted all over the country like mushrooms, bringing with them their own unique culture of heady consumerism.
Also, with a number of national and international banks making their foray into India, the competition has increased, leading to attractive payment schemes, co-branded cards and free cards.
So, while India is planning to move to a cashless society post the recent Budget, ironically spending seems to be poised to explode more than ever before. For the average Indian, this could mean being spoilt for choice when it comes to brands, products and payment options like credit cards, but it could also mean higher risk of falling into debt spirals and loss of the savings mentality that has stood our society in good stead so far.
Maybe it’s time for Kharchawala to stop ringing the cash counter for a while and hand over the keys to Patel.
What do you think?