Changing family structure and pending financial crisis

If you watched Mary Meeker’s Internet Trends Report last week, you might have taken note of the fact that Global internet users growth has flatlined except in India! With 277 Millions users and 40% growth, this is massive. It’s no surprise then that the E-Commerce industry has finally taken off in India, backed by better internet infrastructure. We’ve started buying almost everything online and that’s not just an urban phenomena. Rural India is up there too, shopping online for their favourite jeans!

There has been a massive perception shift, behavioural change and acceptance of new business models and internet enabled services like Ola/Uber, Swiggy, Laundry pickups, Big Basket, etc . Whatsapp and Facebook are ubiquitous apps on every smartphone. We use apps to accomplish everything from getting food home delivered to hiring a nanny. We’re comfortable driving to unknown destinations totally dependent on the GPS for navigation. Despite the cost efficiency and time efficiency offered by the new businesses, there are side effects to technology and we’re either not aware of it or it’s not of immediate concern. Technology is rewiring our brain and there is bound to be some negative side effect to that.

On a similar vein, a lot has changed in the last two decades for Indians. Our education system has become more practical, our jobs have become more complex and demanding, our lifestyles have undergone sea change, our social lives and relationships, our views about money and savings, everything has changed.  Most of us share very less in common with our parents. It’s not just the generation gap. New age economy has brought in more changes than what a regular generation gap would.

Why are we even talking about this? We all have a fair idea and aren’t we the hep and cool generation who’s assertive and has everything from career to love life sorted (or atleast believes that Google or some app can sort it out for us). Well, we thought so too, until this incident happened!

It was a regular day for us at FundExpert. A guy who used to work for a big telecom giant, which was in the same building as ours, walked in and dropped his resume with one of our staff. This was just the beginning. This process continued and over the next few days we had a sizeable pile of resumes in our CEO’s desk. We weren’t recruiting but we just scanned the resumes to see who they were and it shocked us. Software engineers in the 10 – 15 year bracket. They walked from company to company and handed over the resumes. Was the situation that bad? Was the market that bad?

Many Indians in IT will remember 2000 and 2008-2009 period.  The global recession wiped off lakhs of jobs. Many people had no clue what hit them. There were no jobs in the market. People remained jobless for more than a year sometimes. Loans were defaulted. Many had to let go off their luxury villas and 4BHK apartments. Cars had to be downgraded. Eating out reduced drastically. Shopping budgets were fine tuned. Many of us have surely witnessed someone who was affected by the recession.

More than the loss of job and salary, a person’s emotional wellbeing takes a hit. A person senses a loss of identity, loss of status and retreats into a shell. Many people have been scarred by the job losses. The global financial meltdown reminded us that we may have escaped the dangers of being killed by animals in the jungle era, but certain other beasts will kill us if we’re not watchful of our finances.

This whole situation begs for a few introspective questions. Is there something we could have done better? A few wise people understood that their company was about to close and changed jobs to safer places. A few of them had an emergency corpus which bailed them out during their unemployed period. But some of them had to move in with their parents or downgrade their lifestyles drastically. They were dependent on their parents (mostly in Government jobs) to take care of them. Imagine, a software engineer earning above 20 lakhs per annum is financially ill-prepared than his father who takes home Rs 30,000 a month.  No, we’re not exaggerating. This scene was quite common in 2008-2009. As for America, many of them haven’t yet got their jobs back. Life has been bleak for a huge section of population there.

One direction we investigated, as a monstrous change that happened surreptitiously during the decade of fast growth was – the changing family structure. During earlier days, the joint family was your insurance. When you had temporary money issues or huge debt or business loss, the family bailed you out. If you were unemployed, your mamaji or chachaji would speak to his friends and get you a job through recommendation. Your children grew up in a large household and there were no nannies. The children grew up and became the bread winners while the elders retired. But, now that we have all opted for nuclear families, that safety net is no longer there. Also, we cannot depend on our children for our retirement. Those days are gone. So, it’s time we manage our own finances.

Also a lot has changed between your father’s time and yours. When salaries started getting paid as cheques, versus being received as cash, it brought in small changes. Money became a bit abstracted. In the 80s since most familes ran paycheck to paycheck, things were kept under check. There was no excess to splurge on. There were not many avenues to splurge too. Everything was budgeted. There would be no buying on a whim. No unplanned big ticket purchases. When resources are scarce discipline sets in automatically. So, our parents had to be disciplined.  Every travel was meticulously planned in advance. There would be fixed times when clothes were bought. Even desserts were served only on festival days or on occasions. Plus they had the biggest advantage. A government job gives you less money when you’re in active service and more when you retire (that’s how we like to call it). You received a lumpsum amount and a monthly pension which was enough to run your family.

But, we have none of those advantages today. If at all, we have more disadvantages. Our salaries go into our bank accounts. Very few of us even check our accounts regularly. We transact online for most stuff. We swipe cards. Everything is available on EMI. There are thousands of avenues to spend your money. There are many small habits we’ve acquired which slowly, steadily eat into our savings. The weekly twice Starbucks cappuccinos, our 4G and broadband bills, sudden weekend travel with friends, Friday night clubbing, personal trainer fees, the 40% discount on Flipkart on the latest products, etc.  All of these habits and conveniences abstract money from us and over a period of time, we find our monthly fixed expenses always on the rise. The fact is, our salaries do not increase in proportion to these habits that we’re accumulating. So the {Income – Expenses} gap is always shrinking!

We also don’t track or use our money as seriously as our parents did. Many of us may have so many refunds pending, Mutual funds bought and forgotten, reward points that we fail to redeem, clothes bought that were never used, huge amounts of food wasted at restaurants, policies that are never tracked, internet usage that is never regulated, etc. Our money spending habits are elastic and we do over spend quite a bit and lose track of money or investments. Despite the availability of online tracking, easy SMS or phone access for refunds, we’ve become lazy and we find it a better use of our time to spend on hobbies and relaxation than on tracking our finances.

As for our jobs, many jobs are losing their sheen as new industries (IoT/ Data Science) are popping up. Many industries are wiped off without a trace. In the US – Uber has almost wiped off car rental jobs. Amazon has wiped off many brick and mortar stores. If you’re in a waning industry, chances are you’ll not have a job in sometime unless you upgrade to the latest skills. Especially those in IT will have it tough in such a competitive, capitalistic economy. The Happy Days will not last forever!

Here, it’s useful to take a lesson or two from the country all of us are hell bent on emulating. America doesn’t save. Their middle class has a retirement crisis. They are all going to live longer than their predecessors and not have enough saved for those days. Americans don’t save money because the U.S. has made it easy to spend, easy to borrow, and easy to raid savings to spend and borrow more. Also for most of us, saving today for a distant tomorrow isn’t so simple, and has a great deal to do with how people think about money and a lot of discipline and exercising the will power muscle.

We can easily visualize this happening to India too. Unless we pull the brakes and introspect and course correct, we may be doomed for a personal financial disaster. Flat growth or even negative growth,  global slowdown, flat-lining incomes, difficulty in finding jobs in senior roles, skyrocketing health-care costs and overwhelming  school and college tuition fees will put us in an unfavourable spot. Also the level of stress in modern jobs is it will be a miracle if many of us can work till 60. Many may be forced to retire early or cut back on work to take care of their health. With this newfound awareness looming in our heads, let’s rethink savings and emergencies. Let’s cut back on a few habits when times are good. Let us fall back on the basics of good financial planning. Let us redefine salaries not as the amount that gets credited in the bank account end of the month, but the amount that’s actually left after all monthly expenses are met. Now that we’ve introduced the issue and briefly outlined the ways to approach it, we’ll be covering many of these topics in depth in the articles to come. Till then we’ll leave you with the simple quote “Spend wisely, Save wisely”.


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Subha Viswanathan

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