If you are struggling to make ends meet at the end of the month, then you are not alone. If bargaining and rationing become your go-to modes by the time the 20th day of the month hits, then you are not alone. Saving indeed is hard. In fact, “the 80-20 investor” Arun Kumar also believes so.
Arun Kumar said a few years ago, he noticed a “strange pattern” in his behaviour that led to him decoding the fact that “saving is super boring and extremely hard” even though everyone understands the importance of saving. It only is going to get worse, he said in his book ‘The 80-20 Money Makeover’, published by HarperCollins.
Looking into his behaviour, Kumar found that he was ordering food online every alternate day, shopping from various e-commerce apps for products he hardly used, wardrobe was expanding perennially, constantly itching to buy the latest gadgets, and even when he didn’t have the money, he did not postpone his purchase. Sounds familiar?
In his book, Kumar delves into why saving has become so hard. Here’s what he landed on:
Mimetic desires: The best way to explain this is the theory of mimetic desires – we unconsciously mimic others’ desires. We compare our mundane lifestyle with that of friends and social media celebrities, which in turn manifests our desires and envy. So what do we do? We spend more money to keep up with it and get things we barely need.
Powerful marketers: Kumar said that marketing is designed to convince us to fix our deficiencies through their products. Companies spend billions to influence our buying pattern. He also gives the example of neuro-marketing, an emerging field that looks into why we buy the things we buy and uses that information.
BNPL: The investor, giving an example of ‘buy now, pay later’ schemes by startups, banks and lending companies, said that quicker loans on lower EMIs are available at the click of a button. With EMIs so low, nothing is unaffordable anymore, and with digitisation, this trend is only going to accelerate, he said.
Frictionless buying: With 10-minute deliveries to one-click payments, buying has become more frictionless and convenient.
However, not all’s that bad, right?
Arun Kumar said that there is, however, a psychological defence system shields us against all that endless paying. Quoting researchers, Kumar said every time we part with money, it causes us pain. But the flipside is that even for the same amount, paying digitally inflicts far less pain than paying in cash.
Cash is more “salient and tangible”, said Kumar. “The more abstract the money, the less pain we experience,” said Kumar, elaborating that cards and UPI only ‘represent’ the money.
But with the advent of automated payments, digital wallets, UPI, credit and debit cards, we will likely find it tougher to restrict overspending, he said.