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Photo: iStock
Photo: iStock

Opinion | Covid-19-induced need versus greed decisions

If needs get subsumed by greed more often, then recalibration is in order

I could not believe my credit card bill when I clicked it open a few days ago. The card that pays for petrol was zero. Zero. The other one was down to 20% of earlier spends. And I consider myself frugal—spending on what I need and not what I greed—and yet the difference a lockdown made to my own spends left me quite amazed. My age cohort and I grew up in an India of very limited means, choices and options. Basics like milk, water and electricity were in short supply. Less than five homes in 100 had a phone in most middle-class metro colonies and if you owned a car, you had either inherited it or were up to no good in that business of yours. But our generation was also on the ground floor when India opened up and was able to ride the wave of growth that lifted a lot of boats. Things began to change, but slowly. By the time the 1990s kids were born, small luxuries were becoming commonplace—eating out was not that budget breaking exercise that it used to be. The ’90s kids still remember a money-careful approach and some built money habits that usually last a lifetime. It is the parent and kids cohort of the 2000s and above that probably is really struggling with the new tight-money reality of the pandemic.

There are already stories of kids having breakdowns because the parents can no longer afford to send them abroad to study. Super-competitive higher education with an unrealistic demand for almost perfect scores in India has resulted in an annual exit of thousands who are going for undergrad courses that are fully paid for by doting parents who also cover housing, transport (buying a car in some instances) and other lifestyle costs. It used to be postgrad or doctoral work earlier that would get some scholarship or stipend to reduce the cost burden on parents, but the rising tide of incomes for a slice of Indian homes allowed an earlier exit for kids right after finishing school.

A mix of the desire for kids not to have to repeat the brutal higher education entry, soaring confidence in the ability to keep earning and peer pressure to stay in the conversation about which Ivy League your own kid was going to made us, the parents, raise expectations of the kids. But suddenly, almost overnight, there is a return to basics as jobs are uncertain in many areas, there are salary cuts and deep cuts in the value of money earmarked for the kids’ education.

This is a time for each family to go back to the drawing board to see what the new reality looks like. A big takeaway has been the realization that a month actually costs much less than what we were spending. This is an important moment to hold onto and build the saving habit, especially for those who were living the American dream in India—always having more month left at the end of the money. A good use of the money saved during this time is to pay off your debt—personal loans, credit card debt, education loans—in an uncertain job market it is essential to be debt-free. A debt payment needs you to keep running just to stay in the same place, being debt-free allows for some breathing room. Having a money cushion is invaluable in tough times—and the effects of the pandemic may last for at least two years in terms of a health crisis and longer in terms of an economic one. It is a bad idea for parents to risk their retirement corpus to fund a degree aboard that may half get done through online lectures without the “experience" and “networking" that the brochures promised. This is their coming-of-age moment.

We read about coming-of-age moments and watch such stories in movies. This is one such collective moment for a large swath of the Indian mass affluent who had forgotten the lessons of being money-wise. There is a fine balance between being pessimistic about the future and hoarding for an end-of-the-world situation and spending as if indeed there will be no world tomorrow. One question that has always helped me decide on whether to spend or not is to answer this: do I need this or do I greed this? Sometimes greeding is just fine, but if needs get subsumed by greed more often, then recalibration is in order. Another way to do this is to ask: do I really want this or do I want to be seen owning this? We give undue importance to peer pressure and opinions of others on what we wear, eat, drink and drive. Finding comfort in our own skins costs less and is less stressful than trying to be somebody else. Good things don’t cost that much—we just have to go find them.

Monika Halan is consulting editor at Mint and writes on household finance, policy and regulation

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