With each passing day, Indians consume more and more than previous generations. Their aspirations, dreams and wants are often higher than their salaries. Whenever I am invited to speak to a group of employees on the basics of investing, I hear stories of excessive debt.
There is a growing mismatch between income and aspirations. People buy cars, mobiles, and other gadgets that they cannot afford. I recently started listening to The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime. I disagree with many things said there, and I may never finish the book, but author MJ DeMarco says something that stuck a chord.
If you have to think about buying something then it means you cannot afford it!
I completely agree. People who think about buying something often buy it via loans, making their chances of building wealth much harder. The notion of avoiding loans, waiting, and saving for something we want (without compromising on our investments) is dead.
A few years ago, I overheard some lab staff talking. A middle-aged person, soon to retire, was discussing preparations for his daughter’s upcoming marriage. He aimed to outdo the reception arrangements he had observed in a recent marriage. I was invited to the event and found that it was extremely lavish for the income slab that the person belonged to.
More and more people around us want to blow up their net worth and salaries on disproportionately expensive things.
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Someone I know (who is not so well-to-do) hosts a lavish birthday party for their kid just so that she “fits in” better. Another has purchased a car because that is a sign of moving up the “status” ladder when the take-home pay after the deduction of home loan EMI is barely enough to cover expenses.
It is not a “kids these days” problem. It cuts across age groups. Humans have always gauged and benchmarked by how wealthy and happy other people are, by the kind of clothes they wear, the vehicles they drive, etc.
What role is played by social media here? Today, we can connect with people we barely know and immediately get to know what they buy, where they eat out, and go for holidays. Has this not made such “benchmarking” so much easier?
Has it become easier to con ourselves into thinking that doing/buying certain things (we cannot afford) will make us happy/happier?
From what I see, the low-income group wants to project itself as having the means to live the “good life”. They want the goodies that the middle class can afford. The middle class want to “get ahead” and so on.
No wonder the gap between the rich and poor is getting wider with each passing day: The 80/20 rule: Making sense of the richest 1% of Indians owning 58% of the wealth!
I hate to state the obvious. Our aspirations or how badly we want something must be proportional to our income. There is a big difference between wanting something and wanting something now.
If I earn only Rs. 20,000 a month, wanting to feel cool with an iPhone now is stupid. Not everyone can have everything in life. If we don’t make enough (or at least the means to do so in future), we will have to settle for something less. Life will teach us the hard way tomorrow if we don’t have that maturity today.
Our spending aspirations should be well below our income level. Our earning aspirations should be higher with the necessary effort and sacrifice.
We should remember to cut the cloth according to our coat. I prefer the Tamil equivalent.
Viralukketha Veekkam
This means the swelling on a finger would be proportional to the size of the finger (the little finger would not (should not) swell as big as the thumb would (should)).
The other extreme: Many cab drivers tell me they can make Rs. 4000 to Rs. 5000 after a full day’s work (early morning to late evening). That may seem like a lot. However, if you consider service provider fees, fuel and maintenance costs, loan on the vehicle and monthly expenses, they cannot save or invest anything. Each time they accumulate an emergency fund, it vaporises in the next emergency. They neither overspend nor have any unnecessary debt. Yet they exist from paycheck to paycheck.
A similar existence driven by overspending is a much easier problem to solve, especially if we earn more. But first, we must recognise that there is a problem and work on it before it becomes too late.
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Now watch Let's Get Rich With Pattu தமிழில் (in Tamil)!About The Author
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- Dr M. Pattabiraman (PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras.
- He has over 14 years of experience publishing news analysis, research and financial product development. He has over 28 years of teaching and research experience. He is also a public speaker and keynote presenter.
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This book helps you ask the right questions and find the right answers. It also includes nine online calculators to create custom solutions.
(2) Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want. 
Both the boy and girl versions of "Chinchu Gets a Superpower".
Most investor problems stem from a lack of poor decision-making. We made bad decisions and money mistakes when we started earning, and we spent years undoing them. Why should our children go through the same pain? What is this book about? As parents, what if we had to groom one ability in our children that matters not only for money management and investing but for every aspect of life? My answer: Sound decision-making. So, in this book, we meet Chinchu, who is about to turn 10. The story follows what he wants for his birthday and how his parents plan it, while also teaching him key ideas about decision-making and money management. What readers say! 
Feedback from a young reader after reading Chinchu Gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from a young age. The importance of money management and decision-making based on their wants and needs. Very nicely written in simple terms. - Arun.
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