By Mukund Seshadri
Founder Partner, MSVentures Financial Planners
Nitin Gupta (name changed), age 33, works for an MNC and his wife Radha Gupta, age 29, works for a law firm. They got married four years ago. Under increasing peer pressure, they decided to buy their dream house, as friends and family would rate their degree of success in life on the basis of their flat in Mumbai.However, this turned out to be a costly affair and they ended shooting up their budget after buying a lavish apartment with 85% loan. The renovation of the house cost another Rs 20 lakh, for which their personal savings were used and they had to take a personal loan too.

Moreover, peer pressure made them buy a sedan car as well, though both of them could have managed without one. Credit card was their best friend and came handy in managing their lavish lifestyle as it demanded that they pay only the minimum balance at the end of the month and not the full amount which indeed looked very attractive. Savings took a back seat and almost the entire earning was spent in paying EMIs and bills.
With rising inflation, interest rates started zooming up and so did the EMI figures. It started to eat into the so called personal funds which the Guptas had saved. With the sword of recession hanging on their head, Nitin was told that as many as 300 employees could be laid off by his company.

He is not sure whether he would be able to manage even the next three months' expenses if he loses his job.

Moreover, stress and pressure in the workplace has caused deterioration in Radha's health but she cannot afford to leave her job because the couple has to pay their EMIs.

The question is: Is all this worth it? Should we succumb to lifestyle pressures and take such steps? Is a certain lifestyle the only thing we need to achieve and maintain? Well, the answer is quite tricky and each one of us needs to decide only one thing: Are we making short-term gains for longterm pains!

I often have people coming and telling me that if we do not go for foreign holidays now or do not drive that car today then when will we do these?The answer is very simple. It is not important whether you go on that holiday today.

What matters is, can you at least, manage your basic lifestyle even in the future. With medical expenses skyrocketing and the cost of children's education going through the roof with no guarantee in the jobs we are in, are we sure that we will have a sustained income and meet the necessary expenses comfortably? What is the solution then?

Have a ceiling on your desires. But that's easier said than done. However, there are a few things which we need to keep in mind:

Need Vs Desire

Before we buy a product or a service please ask yourself the one golden question: Is this a need or a desire? If this is a desire, I am buying it at the cost of a need. Buying a mobile phone could be a need but buying that expensive handset with so many features I can barely use could be a desire. So every time I pay cash or swipe my card the one question I need to ask myself is: ‘Do I need it?'

Asset vs liability

This definition needs to be very clear. An asset is one which generates further income. When I buy a house in which I live (self occupied property) is it really my asset? If tomorrow the price of that property goes up how do I benefit? I still have to stay in the same place and if I want to sell it and shift, in most of the cases, the other place will be equally expensive or may be more.

Fixed cost vs variable cost

Buying a house with a swimming pool and a gym is a great idea but what about maintenance cost? We may barely use these facilities on a regular basis but will have to pay high charges for them. Similarly, I might take a loan and buy an expensive car, but an expensive car could be a white elephant and might incur huge insurance and maintenance cost and could give low mileage.

So just stop for a moment and think. Whether this is what you want and how can you sustain it? If you are married, please do share this with your spouse. Understand your short- and long-term goals in life. Differentiate between needs and desires.

And please remember that it is not just a single goal that we thrive to achieve but there are many which have to be attained simultaneously.