

savings




All of us who earn, try to save as much money as we can. Naturally, we also get very upset, we are unable to stop the outflow of money.This brings me to a conversation I had with my cousin last week. She was beyond frustrated with her failure at budgeting, the more she tries to save the more she fails to hold on to her money! According to her despite some awesome shopping at discounts, she still had a BIG hole in her budget last month. She is trying to be financially suave but can never get there!A sensible person like her, trying so hard and yet unable to save money, got me thinking and I prodded her for more information. It didn’t take long to figure out that the answer to her disappearing money was in her weekend activities. To be precise her budgets went askew with the beginning of the monsoon sale season! As she narrated her best bargains, I realized she is not the only one being fooled by the end of season sales and big discounts, almost all of us are!She went to buy her husband a shirt, and had set a budget of some Rs. 800 for it. However, at the sale in the mall, she ended up getting 3 shirts for him! According to her it was a steal, she only paid for two as the offer was ‘Buy 2 get 1 free’. She was really happy at the bargain she got, good quality shirts, classy design, 3 shirts for only 1800; that is Rs.600 per shirt instead of Rs.800! She saved Rs.200 per shirt, and in total saved Rs.600 saved, right?Wrong, she intended an outflow of money of 800, needed one shirt but ended up having an outflow of 1800; a thousand rupees more than intended, and 2 unwanted shirts. She wasn’t planning on selling the shirts, so getting the shirts cheaper per piece doesn’t really matter. What matters is that she spent 1000 more than intended and will need to borrow money or use her credit card to finance the gap in her budget.With great offers available on grocery, the efficient, home manager sister of mine, bought 5 kilos of pulses and sugar, and 10 liters of cooking oil. Much to my sister’s chagrin, I joked about feeding a wedding party with all the food! She explained, “The deal was valid only for buying in large quantities, you see, these will last me nearly 2.5 months!” You would say that is fair, but it’s wrong, here’s why:○ She has bought food items that would last far beyond a month. Prices of food items don’t fluctuate majorly and hence, there’s no real risk in buying as much as you need.○ Unless stored properly, food gets spoilt. So there is some amount of wastage, which eats into her○ She ended up spending more than budgeted to accommodate the deals and increased her debt again!She wanted to buy this latest new smartphone and typical of her, she didn’t have enough money for it. So, instead of borrowing the entire money she bought it on EMIs. You might say, there is nothing wrong with EMIs, they’re small, simple payments.This is where you and my sister are wrong again!How does this make sense? So, after a year she will have:○ Paid for a phone more than its price, as she paid interest○ An asset whose value has gone down steeply○ Lost out on investing and return thereon because of her interest payments○ Carried more debtIf you’ve ever faced a situation like my sister, the answer to your frustration is not that you all aren’t trying or are not conscious of your finances. The problem is that your financial paradigms are wrong, you’re looking at money the wrong way and hence getting deeper into trouble!