By Anisa Virji
Did you get a sticker shock the last time you bought a cup of coffee? The cup costs 5-10 times more than it did a few years ago. When I was in college and wanted to sit at a café with a friend, we would pay Rs 6 for a Nescafe cup. Today, when I leave home with the same intent, I often find myself sprawled in an armchair in Starbucks with a Grande cappuccino that leaves me poorer by Rs 200.
Life is more expensive now and it's not just about inflation, but also about upgradation. Our lifestyles have changed and the quality of life has improved. The standards of service and professionalism that we expect in our daily lives are higher.
If a fancy cup of coffee is a luxury that does not represent your spending habits, consider this. More than a decade ago, school fees were less than Rs 3,000 a year. Today, the same school charges about Rs 30,000 annually.
However, now we don't want to send our children to such schools. We dream of our children going to international schools, where they are taught with the care and creativity we wish we had in our childhood. The average international school in Mumbai charges Rs 3 lakh a year, which is 100 times more than that paid by my father for my solid Catholic school education.
This fact extends to all areas of life, big and small, luxuries and necessities. Today, we are not paying just for the same things at higher prices, but are actually paying for bigger things.
While expenses are rising, so are our incomes, and significantly so. Professionalism and good education are valued with higher salary packages. A graduate from a top B-school has lucrative offers falling in his lap even before he leaves the campus.
As you become wealthier, your expenses increase to keep up with your income. Your tastes become more sophisticated and luxuries turn into necessities. Of course, the whole point of making more money is to enjoy spending it, and you certainly should do so.
However, the only problem with expenses keeping up with your income is that your savings are in greater danger of being neglected. As your standard of living increases, you move into a swankier house and buy a bigger car, and all your associated living expenses increase, except your savings. Instead, the opposite should happen. As you make more money, your savings pot should get bigger before you start spending indiscriminately.
There are two ways to save more: you can either earn more to maintain your expenses and have more to put in your savings pot; or you spend less and, thus, add more of your income to your savings. How can you earn more?
There are again two ways to do so. One is to prove yourself as a more valuable employee and increase your primary income. To do this, you might need to work harder and longer, and learn more financially valuable skills. The other way is to create additional streams of income that add to your main salary. There are many doable, practical ways to earn extra money by working additional hours every week.
A good area of opportunity lies in the online sphere. Monetise your hobbies, interests and talents. To spend less, you need to be prudent.
However, recognise that 'prudent' is not the same as 'frugal'. Frugal means to scrimp and save, and cut corners until every rupee that leaves your pocket seems to create a hole. Being prudent, on the other hand, means to spend wisely.
When I was buying a new car, I was determined that it should be German. I could splurge on a Mercedes or a BMW, or get the same German precision and beautiful design for a fifth of the price in a Volkswagen Polo. It doesn't have the same appeal, but the Volkswagen is loved around the world and has the prestige of being created by Porsche. That not only satisfied me, but made me truly happy.
The key is to find intelligent luxuries and wallet-friendly alternatives that give you the right level of satisfaction at the right price. Some day, when my net worth is higher because I made the decision to save rather than splurge today, I could be driving a BMW.
For now, I enjoy driving my prudent, yet luxurious, Volkswagen, or what I call my 'intelligent luxury'. It fits right into my budget and leaves me with lots to put in my savings pot. I employ this prudence to all areas of my spending. It is an effort at first to figure out less expensive, but equally satisfying, alternatives to expensive desires. It also helps me keep my priorities straight and my savings high.
(The author is the Managing Editor of CommonSenseLiving.co.in)
Did you get a sticker shock the last time you bought a cup of coffee? The cup costs 5-10 times more than it did a few years ago. When I was in college and wanted to sit at a café with a friend, we would pay Rs 6 for a Nescafe cup. Today, when I leave home with the same intent, I often find myself sprawled in an armchair in Starbucks with a Grande cappuccino that leaves me poorer by Rs 200.
Life is more expensive now and it's not just about inflation, but also about upgradation. Our lifestyles have changed and the quality of life has improved. The standards of service and professionalism that we expect in our daily lives are higher.
If a fancy cup of coffee is a luxury that does not represent your spending habits, consider this. More than a decade ago, school fees were less than Rs 3,000 a year. Today, the same school charges about Rs 30,000 annually.
However, now we don't want to send our children to such schools. We dream of our children going to international schools, where they are taught with the care and creativity we wish we had in our childhood. The average international school in Mumbai charges Rs 3 lakh a year, which is 100 times more than that paid by my father for my solid Catholic school education.
This fact extends to all areas of life, big and small, luxuries and necessities. Today, we are not paying just for the same things at higher prices, but are actually paying for bigger things.
While expenses are rising, so are our incomes, and significantly so. Professionalism and good education are valued with higher salary packages. A graduate from a top B-school has lucrative offers falling in his lap even before he leaves the campus.
As you become wealthier, your expenses increase to keep up with your income. Your tastes become more sophisticated and luxuries turn into necessities. Of course, the whole point of making more money is to enjoy spending it, and you certainly should do so.
However, the only problem with expenses keeping up with your income is that your savings are in greater danger of being neglected. As your standard of living increases, you move into a swankier house and buy a bigger car, and all your associated living expenses increase, except your savings. Instead, the opposite should happen. As you make more money, your savings pot should get bigger before you start spending indiscriminately.
There are two ways to save more: you can either earn more to maintain your expenses and have more to put in your savings pot; or you spend less and, thus, add more of your income to your savings. How can you earn more?
A good area of opportunity lies in the online sphere. Monetise your hobbies, interests and talents. To spend less, you need to be prudent.
However, recognise that 'prudent' is not the same as 'frugal'. Frugal means to scrimp and save, and cut corners until every rupee that leaves your pocket seems to create a hole. Being prudent, on the other hand, means to spend wisely.
When I was buying a new car, I was determined that it should be German. I could splurge on a Mercedes or a BMW, or get the same German precision and beautiful design for a fifth of the price in a Volkswagen Polo. It doesn't have the same appeal, but the Volkswagen is loved around the world and has the prestige of being created by Porsche. That not only satisfied me, but made me truly happy.
The key is to find intelligent luxuries and wallet-friendly alternatives that give you the right level of satisfaction at the right price. Some day, when my net worth is higher because I made the decision to save rather than splurge today, I could be driving a BMW.
For now, I enjoy driving my prudent, yet luxurious, Volkswagen, or what I call my 'intelligent luxury'. It fits right into my budget and leaves me with lots to put in my savings pot. I employ this prudence to all areas of my spending. It is an effort at first to figure out less expensive, but equally satisfying, alternatives to expensive desires. It also helps me keep my priorities straight and my savings high.
(The author is the Managing Editor of CommonSenseLiving.co.in)
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