This used to be the usual comment from my friend Hari's father, that we folks do belong to a generation which can be called EB Group. My mom used to sing the same song. The song that they managed families within 4 digit incomes, many more children, limited spending, and safe savings. The usual complaint not just from these two parents but almost all of the retired group that I met was that the young generation do not know the value of money. Most of the young lot would just knock their ideas and suggestions by saying that these people never know to enjoy their lives.
All her life, I have not seen my mom even accepting a debit card from the bank, for she thinks that the 1- 2% charges of the shopping made by swiping the debit cards is also ridiculous. And a credit card is a definite no-no. But to us, plastic money is handy, convenient and a usual thing. What started as a pride to have credit cards, slowly became an addiction to spend more. Thinking that every transaction has a record, and the convenience to purchase what we want at the time of when we want, irrespective of when we could afford in fact had ruined many people who never tried to look at the backside of their credit card bills. The cumulative effect of the interest rates laid, the hidden costs, taxes and service charges, surcharges and every aspect of the charges levied have a Banking Act reference, making it a more legal document. It is like signing an P-note without reading it at all.
In US, I have seen people making payments even for $1 by credit cards. There are no hidden charges that threaten the people here as the system is so regulated and controlled. But that is not the scene in India. We do not have the option of declaring individual bankruptcy and taking the social security to fight our difficult situations. The thing which started as a pride on the day you went to an ATM to draw money from your debit card, lured by the well-trained credit card agents of various banks who made you feel like a king when the offer is made is in long run a doom. Taking multiple credit cards to manage one after the other and finally by just making the minimum balance payments, the 45 day cycle of the credit time given expires to land up in more cumulative costs which the customer is not even aware of. The banks which have their own primary system of call centre followup on credit card payments, and legal letter and notices on defaulters, and subsequent personal visits of the credit collection agents of the banks have also the secondary system of collections. The system of Dada-giri or goonda-giri which I am sure the massive defaulters would know what I am referring to.
The second most biggest threat in a bad economy for the salaried middle class is the EMI's. In 1980's, I have seen people struggling to get a home loan, which was given by LIC, or few banks after so much of documentary verification and assessment. In beginning of 2000, this changed drastically, where Loans were sanctioned at the click of few mouse strokes. Online processing, real estate melas, and limited verifications, and minimum requirements like 2 months salary slips, confirmation from employer, 10 open cheques, few photographs made loans for homes, cars, and foreign education, personal needs like marriages, household goods, foreign travel a reality to many people. All for an easy-monthly-installment.
For almost 40% of the salaried class in urban India today, nearly 20-40% of their monthly income goes of in paying for the credit cards or EMIs.
The Third biggest disadvantage of the EB generation is investing in the speculation market. Nearly 20-25% of the investment of young India is shares and stocks, with limited or near to no knowledge on the markets is a major risk. Expecting high returns, quick money and going by own assessment would prove costlier in a bad economy. The concept of recurring deposits, investments in nationalised banks have considerably reduced.
One good option that survived is investing in the yellow metal and real estate that for sure in India is ever booming. Though in general, we hate to adhere to the advice of our old gen, sometimes, giving a thought too helps.....
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