Why is India, 130 crores populated country afraid of Credit Cards, and Loans? A lesson on Financial Planning…

Financial discipline is a subject that nobody can claim to have mastered. Because there is no standard level set. Everyone has their idea of financial discipline depending on their planning. While it’s subjective, it’s also impossible, Maybe to the majority of people.

There are multiple things that fall under the financial planning. Starting with the most basic concept of savings, in the early 20th till the late 20th century many believed in the savings way of life. People made sure to have a particular amount of money saved in their bank accounts. There are few who have always felt the best way of saving for the future is by investing in land and buildings. But things have changed forever in the past years. Especially in the early 21st century.

The change reflects the behaviour of individual and lifestyle differences. Now the best way of savings is by consuming. People have more or less moved away from savings to lead the best kind of living. Not so long ago even a rupee spent on an item was thought out for minutes and even days. But now,  thousands of rupees are spent within a fraction of seconds with no real planning or the fear of being cashless. Added to this we have the idea of ‘Debt’ and ‘Credit’.

Debt and Credit – Economy is calling for it, but we are not good at dealing with Credit.

Yes, you, your friend, your parents, your relatives or for that matter your company – all of us are one way or the other connected to the idea of debt. Starting with the least amounts of debt for purchasing a mobile to large amounts of loans for purchasing houses. The levels of debt had increased incredibly in the Indian market in the last 10 years. Not just that, the levels of government debts are also going up rapidly.

But the moot point here is, should you go for debt? Yes, would be the answer from the banker, no would be the answer from your well-wisher but Yes (be disciplined) would be the answer from an economist. A Yes from the banker is to make the most of your need. He will make you greedy by offering special discounts and push for purchases which you would have not purchased otherwise. A no doesn’t need any explanation, it’s purely and out of experience asking you get away from the ‘trap’.

Then comes the economist view, who would argue with you to buy a credit card and live with it. Because he understands the reasons for owning a credit card. A Credit Card is a basic necessity in America and most of the developed countries. Like in America, there are $1.89 billion credit cards in circulation, while the entire world is at $2.8 billion credit cards.

Shockingly! Accept or not, the debt instruments are the key drivers for the growth of the economy.

Whether it is America or Australia or Europe, most of the development nations run on the debt instruments.

Let me go back to where I started, we are in times where we get influenced by the peers and jump onto products to purchase. The apples, mac books, glamourous clothes, beautiful costumes. You can purchase all this. But not through someone’s influence or pressure. It should be out of your own interest and most importantly when you can afford it.

The thing is Indians have no clear idea of how a credit card or a debt instrument works. Agreed because none of us is given financial education. If Sex Education is not easy to be taught in schools, at least the financial education is important. Applying and acquiring the Credit cards and Debt instruments doesn’t mean to jump onto costly products and lavish life, it’s for right purposes.

Just for info, in developed countries, the maximum loans are highest for education and houses. All that I am trying to tell is that we Indians must be well aware of Loan Facilities and Credit Card facilities and shouldn’t feel scared for using them. Instead, use them for the right purposes and only when in emergency needs.

No of Credit cards in India: 5 Crores 76 lakhs – Value of transactions: 45 lakh lakhs

In the next post, I would correct the mistake that has been happening in India. I will try to bring out the best ways of using the Credit card without making it boring and out of my personal experience!

Published by Sriram

A Teacher trying to Learn new things and explore the world each day! Believe in Happiness by the virtue of sacrifice and forgiveness.

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