FIGHTING THE ‘BIG BILLION’ SPENDING..!!!

There is none among our generation, who haven’t received an advice from elders not to spend money on unwanted items. Also none among us would wantonly wish to spend money. Indian mind-set is such that, given a choice we would choose to save than spend. That enunciates the motivation behind ‘big billion’ purchases. Why is it that, despite such saving mind-set, we observe our wallets keep getting emptied uncontrollably? It is in this context, individuals can consider below thoughts before spending.

Firstly, understand the difference between reducing and controlling expenses. Reducing expenses may be referred to the habit of reducing the quantity or frequency of usage of an item. Instead of watching four movies a month, one can restrict to two, for instance. This is tantamount to sacrificing the joy of utility, hence not recommended. Controlling expenses is the habit of setting a target quantity or frequency of usage of an item, and aiming to strictly not exceeding the target. Preparing monthly budgets, keeping track of each expense on a daily basis, matching targets to actuals are few simple practises to control expenses. Note that we are referring to quantitative targets. Alternatively, one can keep targets in rupee terms as well. But, chances of getting influenced by emotional decisions, impulsive purchases, and salary day confidences are higher. Hence, it is recommended to control expenses in unitary terms.

Secondly, differentiate between items that are “need-to-have” and “nice-to-have”. While it is difficult to give examples, as this purely depends on the social status of an individual, keep in mind, at any level of status you are in, there will be a set of products that would not be really essential. Need-to-have products also, after a level of quantity used, can become nice-to-have. 

Thirdly, differentiate between the value of a product and cost of a product. The smile on your kid’s face will definitely give you bliss when you buy him a toy. If the toy’s durability is low, associated accessory costs are high and if your kid’s excitement is temporary, you know the value of the product. Compare such value with the total cost of buying, and buy the product only if the value is at least equals to its total cost.

Fourthly, differentiate between the planned purchase and impulsive purchase. An impulsive purchase occurs, when you buy a product out of emotional non-resistance. Before entering the shop - even if it is online portal - ensure you have the list of the items, description and quantity you wish to purchase is ready with you. Convince yourself that you will come out of the shop only with the items from that list only, nothing in excess. Remember the fact that a discount sale by a shop, does not necessitate you to possess that product.

In the times of multiple exposures to persuasion by aggressive marketers at every minute of a day, self-control is the only way out to control expenses. Remember, a rupee saved is a rupee earned.

Author is a Faculty in Finance and a PFP Consultant

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