Some days ago I received my credit card bill and it was about ₹ 24,000. This was expected as I had done a lot of shopping when there were raining discounts on products on Amazon and Flipkart. When I was about to transfer money from my account to pay the bill, I realized that I don't have the money in my bank account to pay the bill. I was awestruck. This has never happened to me before. I logged into my bank account to look at my transactions. At that moment I realized that I had lent some money to my friend and I had less than ₹ 20,000 in my account. I paid whatever was available in my account to avoid the huge interest that they usually charge on credit cards.
Obviously, this is not a big issue. But this did make me realize one thing - I would have never spent money on shopping if I didn't have enough of it in the first place. Where is the money coming from when my spending limit should not be more than my in-hand salary? The answer is - the money comes from the huge spending limit that I have on my credit card. My spending limit is ₹ 2,50,000 which is about 5 times more than my salary. The card is my default payment method on all the websites. It is saved for faster checkout. I wonder if the websites even care for us. They care for our money. They save our details so that we only have to enter the CVV and complete the transaction. They don't wish to see any friction that might prevent us from completing the purchase.
American Express offers cash points on transactions. More the transactions more are the cash points received. These cash points can then be used to get discounts on luxury hotels, resorts, tourist packages, coffee at Starbucks or Thai spa. Here is the fun fact - I would never spend my hard-earned money on luxury that is not even worth the price I pay for. But, if there is a tag that says "50% discount", I might start to consider the offer even though I don't need it. This is what consumerism is all about - the singular concept on which capitalism works. Companies convince you that you need the product that they are selling. If they are unable to convince you, they will convince your friends. Once you begin to see that your friends use the product, you will be very much convinced to buy it (mostly under peer pressure). What can stop you now? Don't you have the money to make the purchase? Don't worry, there are credit providers who will give you the credit to purchase it (and also partly earning their commission). Are you still not convinced? How about a 20% discount that is only available when you purchase two of the kind. Their job is to sell and they will do it no matter what.
Manufacturers are selling products, institutions are selling degrees, banks are selling loans, insurers are selling insurance for the loans and corporates are selling shares and bonds. The goal is to increase the per capita consumption of the economy. Consumerism is ever-increasing, just like entropy; it takes a certain amount of work to be done to control it. I took out some time to analyze my expenses and come up with some ground rules for myself to keep my consumption in check. Here I enlist them as following:
- Get rid of your credit card. It was solely created to increase the capacity of consumption of an individual. If you still wish to keep one then make sure that the credit limit is no more than the amount that you think you should spend.
- Add a lot of friction for yourself to complete a transaction. Most of the shopping we do today is through websites or mobile apps. Turn off the notifications that you receive from such apps. Opt-out of receiving offer emails. If you still receive them, mark them as spam. Remove all the saved card details on the websites. Avoid window shopping. Often it leads to a completed purchase if you see even a small discount on the products.
- Never get overwhelmed by the discounts on the products. If there is a discount, the product is far cheaper than what you would be spending on it. Think very carefully about it. Check how useful will the product be. How frequently would you use it?
- Save! Save! Save! You always have more than you need. A small amount of misery in your lifestyle can make a huge difference to your attitude toward saving. Don't waste food. Spend less on fancy food. Spend less on branded clothing. See if there is a cheaper alternative. Research before you purchase. The levels of savings will depend on person to person. Relatively, try to spend less than what you usually did.
We didn't inherit this world from our forefathers. We borrowed it from our children!