Why is ‘money management’ not taught at school level?
This was what I asked myself when my kid asked me, “Dad, why do bare necessities like food cost so much?”
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(This essay was originally written as an explainer for my daughter. But I published it online as I believe the content may also be of use to the public)
Introduction
When we sent you to school, the goal was to help you master a profession, get a job and make money. The question is what’s the point of learning how to make money if you don’t learn how to manage it? You could end up ruining your life, and the lives of all those who depend on you.
Let me give an analogy. You took driving lessons at a driving school. Yet you asked me to spend time helping you improve your driving skills. Why? Because you are aware that 500 kg of metal moving at 40km/hr is not just a vehicle, but also a missile with the power to destroy property and lives. The skill of the driver is what keeps the car from morphing into a missile.
Well, the same applies to money. What keeps it safe is your skill in managing it. Never mind schools, even in most Indian homes, this essential lifesaving skill is hardly discussed let alone taught (though there are some exceptions to this rule).
This suited young me as I had zero interest in finance. If the subject ever came up in any discussion that I was a part of, I would tune out. To me, finance was a chore. You make money, spend some, save some, invest some, and forget about it. Too many people have this attitude in India, which is why financial literacy is very low in India. See below.
I admit I have been one of India’s financial illiterates for most of my life. So I may be the wrong person to answer your question. The right people might be finfluencers (financial influencers) who are experts on the subject, and some of them are quite good.
But there are a few issues with finfluencers.
Firstly, the subject is so vast and deep that it would take you a lot of time and effort to get even a basic idea of financial management. Secondly, most kids find the subject too boring as compared to the fascinating dopamine-hit-inducing stuff they get on their Instagram feeds. Many finfluencers try to tackle this by breaking the subject down into small bits and explaining it in simple everyday language, and I have linked a few such videos in this post. The problem is that still means you know nothing about finance in areas that weren’t covered by the financial videos you viewed. And make no mistake; one mistake is enough to ruin you. Thirdly, people no longer read. They go on the net and listen to videos or podcasts to learn stuff.
Isn’t reading outdated?
So why did I still go ahead and write this post? Yes, reading is a dying form of communication. But as a writer, I’m intrigued by the challenge of generating interest in such a notoriously dry subject. There’s also the possibility that I can cover whatever little I have learned about finance, in a single post. This way, I can give you a bird’s eye view of the field, which is definitely something no one would dare attempt in a single video. Finally, by using my personal experiences, I felt it might bring alive the subject matter and make it easier for people to relate to finance in real life.
Let’s go.
Take care of your money or it will be taken from you
Here’s a hard truth. Like it or not, the world revolves around money. And if you don’t take care of your money, it will be taken away from you right under your nose. It has happened too many times to me. The only reason that I and many others in my generation are still wealthy is we got lucky.
Traditionally, Indians always invest in real estate and we were no different. But as luck would have it, there was a real estate boom cycle just when I invested in land. My investment value has gone up by 20x or more. All our other financial moves were hit or miss, and mostly miss.
Let me give you an example.
Money in a bank depreciates every day. 5 years ago, I noticed that the value of money we had saved in the bank was falling. It was supposed to be growing because we were earning an interest of 5% via fixed deposits in our bank. However, the prices in general, were increasing at 7% (India’s official rate of inflation), which meant our money value was falling at a net 2% per year. Besides, the government deducts tax on FD income even before it is credited to your account (TDS or tax deduction at source). So we might be getting only 4% after taxes. On top of that, we were pulling out the interest from our FDs to pay for our living expenses. All this meant the value of our money in the bank was falling alarmingly, every year.
Legally scammed At that point, a salesman from India’s largest bank SBI visited us and suggested I invest in a mutual fund. This is a fund that invests your money in the stock market, where it generates higher rates of return. He showed me the Fund's past performance, which was around 9%. The fund had a disclaimer ‘Past performance is not an indicator of future performance.’ But I thought that SBI’s money managers would easily manage 9% as most people who invested in shares easily made more than that.
The bonus was that SBI combined life insurance with investment in the fund they recommended to me. If I lost my life by accident or any other cause during the 6 years of the scheme, my dependents would get a huge sum.
I must add that your mother, a CA, recommended that combining insurance and investment is not a good idea. But since she didn’t have an alternative suggestion for our rapidly depreciating funds, I went ahead and invested in that SBI Mutual Fund.
Big mistake.
Paying for bad advice In February ‘24, it will be five years since I started the fund. But it has yet to turn a profit. To be precise, the fund has made 0.025% profit in 5 years, which might be a record for the lowest profit ever made by a fund. Whatever money was generated went to pay off the fund manager’s fees, and the insurance premiums. Putting my faith in SBI’s fund managers was dumb. They have no accountability, as they get paid whether the fund makes a profit or not. If I had just left the money as an FD in the bank, I would be sitting on at least 50% growth. Right now, I’m hoping against hope to get back my capital, plus at least some profit, by February ’25 when the fund matures. But it’s highly unlikely that I will come close to even FD returns from this point. Those incompetent fund managers at SBI had taken me for a ride.
But the reality is the fault is mine, not theirs. I’m paying the price for not learning how to take care of my money.
If you don’t like finance, consider a Financial Advisor
For some reason, most Indians don’t like paying for financial advice. We would much rather figure out things by ourselves for free.
Pinching pennies For instance, I do a lot of studying before I buy anything. Like I recently decided to buy a TV. After doing a ton of online research, including some suspect Amazon reviews, I realized that 43" 4K TVs were affordable if I were willing to compromise on brightness and brand. So I shortlisted a vague brand called TCL, and moved to the next step of offline research. This was at the Lulu showroom where I got to compare the picture quality of different TVs placed side by side. The TCL TV I had shortlisted was definitely not as bright as some of the other brands. But those brands were far more expensive, and I didn’t think getting a brighter screen was worth that much of a premium.
Besides, I have always been worried about turning into a couch potato. So I have a strict rule of watching TV only after dinner, as I generally crash in an hour or so. Anyway, once it’s dark outside, screen brightness is not really relevant. So I finalized the TCL TV. Now I moved to the last step, price research. My Chrome extension told me the lowest price to date was ₹16,999. So I monitored the price on online platforms till I found a great deal during the Flipkart Billion Day Sale. I was able to bring down the price via discounts and credit card cashback to ₹16,769. Deal closed.
Buying with my eyes closed I narrated the above boring TV story just to illustrate how careful I am about spending money. But here’s the thing. That mutual fund I bought from SBI cost far more than the TV. Yet I did absolutely no research and bought it on the sole basis of the fund’s past performance records as shown to me by the SBI salesman.
It took such a huge loss for me to learn that lesson. Financial decisions involve a lot more money, and so need far more research than everyday expenses. If you don’t have the time or the inclination to research and understand a financial product, you should pay a financial advisor to do it for you. Like, any financial advisor would have told me that mixing insurance and investment is a bad idea and suggested better options.
Of course, I would have to research the track record of my prospective financial advisor and make sure he knows his stuff. I should also check that he has no conflict of interest. For instance, a financial advisor, who has tied up with SBI to sell their mutual funds, will recommend that fund to me despite being aware that this is bad financial advice. Conflict of interest.
Finding my Advisor After my SBI mutual Fund debacle, I located a friend who has many years experience of working and trading in the stock market. He agreed to advise me on stock market investments. Our deal is simple. I mirror his portfolio. He’s a stock market trader and not an investor. This means I have to create a trading app, open it during trading hours, and watch out for any messages from him. Basically, he does all the research and study and tells me what and when to buy, sell, or hold.
In return, my advisor gets a small cut of my profits. The clincher is he earns only if I make money. This is a win-win situation. Unlike my SBI Mutual Fund Manager who gets paid even though he is responsible for my huge losses.
This is why I strongly advise anyone engaging a financial advisor to insist on payments being linked to profits. If you can’t find a financial advisor who agrees to these terms, you had better take an online course in finance management, and get some basic idea of how to manage your money yourself. If you don’t have the time or inclination to learn finance, you are better off leaving your money in bank FDs as I learned the hard way.
Financial Advisors as tutors
The arrangement with my financial advisor is I execute the trades in my trading account myself, based on his instructions. This means I’m in effect, a trainee trader, apprenticed to my advisor. This allows me to closely monitor what he’s doing, and ask questions. If I don’t understand some particular explanation of his, I go online and research and figure it out.
Over time, I should be able to develop enough understanding of the stock markets to be able to understand what’s going on after a couple of years. In the best-case scenario, I may become proficient enough to start trading by myself. In the worst-case scenario, I will be able to monitor my portfolio more closely as I will have a better understanding of what’s happening, and even suggest ways to increase our income.
For instance, my advisor is not tech-savvy and prefers the old-school method of paid brokerage, which is a percentage of your trading amount. However, I like tech and observed that in some deals, my broker was making more than me. So I moved my trading account to Zerodha, one of India’s largest online brokers. What made them No. 1 is they charge no brokerage fees (except for a nominal DP fee of ₹16 DP or Depository Participant fee, for every sale transaction; a flat fee regardless of the number of shares in that transaction). My friend observed what I was doing, and eventually followed my advice and switched to Zerodha himself. He saved tons in brokerage as he trades in much higher volumes than me.
Finance can be Fun
It was only last year that I realized that finance could be fun. This happens to people in different ways. Your mother being a chartered accountant enjoys analyzing company finances and writing reports. My elder brother likes placing orders for his pharmacy business… don’t ask me why.
For me, the turning point was when I first made money by trading in the stock market. I had bought ₹30000 worth of shares of a bank and sold it for a profit of ₹2000 four days later. Though it was a small amount, I could see the huge potential. Trading a bank’s share got me a 6% profit in 4 days. Whereas investing in that same bank via FDs would get me 7.5%. The catch is 7.5% is for a whole year. Besides, once I complete a trade, my money is available for me to reinvest and make more money. Whereas money in that FD is locked away for those 365 days, and unavailable to reinvest.
Of course, the stock market is volatile, risky, and so unpredictable that I could have just as easily made a loss instead of a profit. After all, if anyone can make that kind of return consistently, no one would put money in FDs. However, there are certain skills you can learn to improve your chance of making a profit. That was enough for me, and I was hooked.
Thanks to my financial advisor, I have managed to nearly double the FD rate while minimizing the risks of making losses. This is a big deal.
“The reality is less than 1% of active traders earn more money than a bank fixed deposit over a 3-year period.” says Nithin Kamath, CEO of Zerodha, one of India’s largest broking company
I do get a kick when we spot a trend, jump in, and make money on the trade. The trick is to only trade in stocks with good fundamentals. In simple terms, this means that if you check the company’s background, it should reflect that the company is in a business with solid prospects, have a good past performance in terms of revenue and profits (top line and bottom line), be run by a good management team, have a lot of orders in hand, have minimal debt, etc. I have yet to develop the ability to spot danger signs in a company’s balance sheet, but am working on it. Your mother, being a Chartered Accountant, can do this with her eyes closed. Unfortunately, she has the same issue that I used to have — she’s simply not interested in it because of the risk involved.
And make no mistake, this is a risky business. Beginners often get tempted to leverage (trade with borrowed money) as theoretically, you can make much more. But if you lose, you will lose big time, and run up huge debts. That’s why I only trade with the money I have in hand. And I make sure it is money that I can afford to do without for months/years, as there are times when it takes a long period for a stock to do well.
For instance, the market is down right now, and my portfolio is currently showing an unrealized loss of 5.5% for this financial year. But I had already realized profits of 15.5% in the previous five months of this financial year. So on a net basis, I’m still ahead at 10% as against the 7.5% of bank FD rates. Besides, that unrealized loss will disappear or even turn into profits if I hold on till the market recovers. 15% may not seem like much, but it’s quite good considering I only deal with sound stocks. Theoretically, I might make a lot more if I invested in stocks that may give higher returns. But those high-growth stocks come with risks, and I could lose big time. This is why we have the stat of only 1% of traders in the stock market making returns that exceed the bank’s FD rates.
Mutual Fun
Success whetted my appetite to get deeper into finance. A little while ago, for instance, I was listening to a podcast that explained the difference between active and passive mutual funds. In an active mutual fund, (like the SBI one I invested in), a fund manager monitors my fund and constantly changes the shares in my fund so as to get me better returns. In return, he gets a fee. But the catch is he gets paid regardless of whether he succeeds or fails in making money for me.
In passive mutual funds, there’s no fund manager. The fund copies a stock exchange index which is pre-decided, like say Nifty 50. This means we save on the fee we pay to that fund manager, which can drop from 1.5% to 0.2%. That’s not an insignificant amount over a long period of time. In the example given below, if you invest ₹ 10L for 20 years, the fee charged by the active fund is ₹33L more than the fee charged by a passive fund. That’s big money, and that’s why I just opted to invest the money you gave me in a passive fund.
The money you gave me? Yes, do you recall giving me around ₹20,000 that you had received as birthday cash gifts, and asking me to keep it safe? This was a few years ago. As I didn’t know what to do with it then, I put it into my bank account as an FD for you. But it was growing too slowly. A couple of weeks ago, I pulled out the money, rounded it to ₹30,000, and moved into a new passive mutual fund launched by Zerodha, which indexes the Nifty large and midcap companies. If the fund hits a return of 15%, that ₹30,000 will turn into ₹4.5L in 20 years. ₹4.5L will be worth a lot less in 2043, but if it even can buy ₹1L worth in today’s money, it’s still a sizeable amount. But we don’t want to count the chickens before they hatch. It’s a few days since our fund officially began functioning, and we have so far made a princely profit of ₹698 on our investment of ₹ 31,100. That’s pretty good.
Bidding in auctions My next financial mini goal is to bid for Tata’s first IPO in two decades, the Tata Technologies IPO. This is short for Initial Public Offering, which is when a company lists its shares on the stock exchange for the first time at a certain valuation (price) so the public can become shareholders in the company. Usually, if a company has a good reputation, its share value shoots up after the IPO. So whoever buys during the IPO will make a tidy profit. Naturally, there’s quite a demand for IPO shares of good companies. To control the demand, stocks are auctioned during an IPO, and investors have to bid for them.
I usually bid at the lowest price, which in this case is 30 shares at ₹475–500, which means an order of around ₹15,000. But I have yet to win a bid in an IPO. I’m curious to know and can’t wait till Dec 1, 2023, when they announce the results of the bidding. My guess is I won’t get it, as the IPO was oversubscribed by 8 times on the first day of the IPO. When this happens, there is a lottery drawn to allot the share. So I have a one-in-eight chance of getting the share, but the IPO is still open. Most probably, my IPO bid will be unsuccessful. I might buy the shares in the open market when it lists, if the premium isn’t too high or if there is a dip in the price.
This is what I mean when I say finance doesn’t have to be boring. You can make it interesting by taking a learning approach like I’m doing.
Coming back to your original question, I don’t have a short answer. It seems specifically about food, but if I read between the lines, you are also asking how can one manage within a tight budget if prices are so high.
So my answer also is in two parts. The first part focuses on the basic principles of managing money so as to either reduce expenses, or increase income, or both. And my experiences in applying these principles in my life, with varying degrees of success. The second part is specifically related to high living costs with reference to food and other basic necessities.
About Managing Money
This is so vast a subject that I don’t know where to start. Maybe let’s just break it up into broad categories, and I can count up to seven:
- Income
- Expenses
- Savings
- Debt
- Insurance
- Medical
- Investment
Some of these will overlap, and some will have sub-categories. A good money manager will cover all these bases. I will be linking it up to our family finances to make it easier for you to relate to.
Income
In general, one should maintain multiple streams of income. This way, if one dries up, another keeps coming. Our turf business is down due to heavy rains and competition, but FD rates are high as compared to the past few years. So it sort of makes up for our loss of income. Here are our income sources.
Salary: I don’t have a regular salary as I’m self-employed unlike my wife who has a job and so has a fixed monthly income
Interest from banks: Rates are at a multi-year high. It’s good money and a reliable income stream so we keep a bit of money in FDs for easy liquidity
Business: I try to generate income from other sources, like
— Turf: Returns are down with rains and too many new turfs competing for the same pie
— Real estate: I’m part of a group that builds and sells apartment complexes. Sadly, we have yet to turn a profit.
Mutual Funds: This is good provided you invest prudently. I didn’t… we’ll come back to this.
Stock Trading: I trade a bit in the stock market, and am in the market on most working days. But trading is not dependable for regular income, as stock markets are volatile. Last month, the market crashed and my income was almost zero. Still, if I average annually over a longer period of 4–5 years, I may end up with double the returns of an FD, and that’s good enough for me.
Stock Dividends: Minimal, because I’m more into trading than investing. Plan to change the ratio and get a bit more into investments.
Solar Plant: This income is stuck because of some legal issues
Farming: Started this as soon as the unseasonal heavy rains gave us some respite. Planted 100+ banana trees. Each tree will yield about ₹500 worth of fruit in 6 months. With two crops a year, it will be 2x500x100= ₹1,00,000. Seed and labour may eat up half the income. So net profit is ₹50,000/year. That’s peanuts for the work we do, but will help reduce out-of-pocket expenses on maintaining the farm. Fingers crossed, as it’s experimental.
Expenses
Rents: It is one of the largest regular expenses for most people. Buying your own home may be an option, but it’s an expensive proposal (we’ll come back to this). Moving to a cheaper city may be a simple solution.
Bills: Internet, electricity, water, gas, waste disposal, etc
Food: Groceries and Provisions
Transport: Maintenance, fuel, and insurance
Education: Fees for Uni, hostel, exams
Medical: Whatever pops up as we don’t have medical insurance
Insurance: Yearly premiums have to be paid
Salaries: Domestic help, drivers
Property: Maintenance costs are high. Floods happen, walls collapse…
Consumer goods: Buying & repair of laptops, mobiles, TVs, fridges…
Taxes: Land, house, income, capital gain, and even GST on everyday bills…
Leisure: Holidays, entertainment, eating out
Investments
Our only really successful investment was real estate. We got lucky as there was a real estate boom. However, if I had been financially literate when I started working, my investment plan would probably have been like this:
- 20-30% of my income in equity (high growth, high risk)
- 30-40% in asset classes with low risk like gold, FDs, tax-free bonds, corporate debt, etc
- Balance in a mixture of maybe real estate and FD savings that’s easily accessible for emergencies
If you start off with a high salary in your first job and can afford to cover your living expenses with say 30% of your income, I would suggest you invest the remaining 70% in an equity portfolio every month and forget about it. The value of your portfolio may fluctuate for the first few years but in the long run, equity always gives you much higher returns. The big deal in this approach is that in 20 years, the income from that investment may even be more than the income from your salary at that point. You could possibly retire and live happily after on the income from your investments.
Debt
These days, most people have some sort of loan going on all the time, be it for their house, car, two-wheeler, fridge, and these days, even mobiles. However, I’m not too fond of the idea of buying things on loan. Somehow it seems silly to pay more (via loan interest) when I can pay less. So I always try to max the discount and cashback, and that makes me feel way ahead.
Having said that, all over the world, business runs on credit. That’s because financially literate people know how to re-invest borrowed money and earn returns that are substantially higher than the interest they pay for the loan. So in effect, they are making money using other people’s money. However, if you are not financially literate, it’s better to avoid loans. Our house in Dubai was the only thing we bought on a loan. If we had sold when the price of the house peaked, we would have been smart. But we didn’t, and weren’t. Never taken a loan ever since.
Credit Card Debt
Credit cards are such a big rip-off in the debt world that I’m giving it a section by itself. I have around five credit cards. But credit cards only make sense if you are extremely self-disciplined. You must always pay the full amount due on your credit cards, within the credit period of around 45 days. If you can’t pay the full amount on time and opt for the minimum amount due, you will pay an exorbitant amount as interest, and probably sink into a credit card debt trap. You may only emerge from it after years of interest payments that will be in lakhs.
Let me illustrate this. Say, I’m buying an iMac worth ₹1,00,000. I don’t want to buy it on a loan, as I have to pay interest for the loan; if interest is 10%, the iMac’s value goes up by ₹10,000 if I repay the loan in one year. Keep that figure in mind.
Anyway, the simple rule is to buy only things you can afford. So what is affordable? One rule of thumb is you must have in your bank account at least twice the amount you plan to spend. Say you have ₹50,000 but want to buy the latest iPhone which costs over ₹1,00,000. Well, don’t buy it unless you have enough money in the bank to buy two iPhones, ie ₹2,00,000.
Let’s go back to the iMac. Say I have some income expected in the next month, which when added to my savings, will be enough to buy an iMac. This means I can clear my credit card bill in full when it becomes due. Secondly, I have heard that there’s a price hike coming for iMacs so it’s better to buy now than later. I’m also aware of an instant discount of ₹5000 if I buy the iMac using a particular credit card. If all these are valid, I will go ahead and buy the iMac. What’s most important is that I pay the entire amount due on my credit card (₹ 95,000) when the bill becomes due the following month. This is a smart way to use a credit card as I’m taking advantage of all its positives, and not suffering its negatives.
Cash in on offers and cashbacks If you have discipline, the above is not the only advantage of credit cards. For instant, my Amazon Pay Card gives me 5% cashback on anything I buy on Amazon. It may not seem like much but I used this cashback to buy the big Amazon Echo speaker which cost around ₹8000. You like travel and holidays, don’t you? Have you noticed how your cousins in Scotland, are masters in accumulating credit card reward points? They use those points to get free holidays at expensive tourist destinations all over the world. There’s other stuff like free access to airport lounges, free movie tickets, free insurance, etc… If your cousins have figured it out, why not you?
Avoid Cash Advance Credit cards have lots of traps. For instance, let’s say you need ₹100 cash to buy a T-shirt you saw in a roadside stall on Commercial Street in Bangalore. You don’t have cash on you, and your UPI isn’t working. So the vendor suggests you withdraw cash from the ATM. You are not carrying your debit card, but you have your credit card. Your friend vaguely recalls that you can withdraw cash using your credit card. So you go and withdraw that ₹ 100, assuming that the max the card can charge is say ₹10 or so.
Big mistake. They charge crazy fees for cash advances. Let me google it.
Cash advance fee: This is the fee charged every time you withdraw cash using your Credit Card. Typically, it ranges from 2.5% to 3% of the transaction amount, subject to a minimum amount of Rs 250 to Rs 500 and is reflected in the billing statement.
Wow, you may have to pay back up to ₹600 for that ₹100 withdrawal. (I think you also have to pay interest on your outstanding amount after a cash advance.) In short, it’s the most exorbitant loan ever. If you ever take a credit card, go online into the settings of your card account, and disable the ATM usage to ensure you never fall into this trap.
There are many more hidden costs in credit cards. But I don’t recall most of these hidden. Let's see if the finfluencers have a podcast on it. Here’s one.
The Trap of ‘Minimum Amount Due’ The biggest mistake most people make is to pay the minimum amount due instead of paying the bill in full. Let’s say ₹5000 is the minimum amount due on the card. You pay the rest as instalments at 3% interest. What the credit card companies are hiding is it’s 3% per month. That’s 36% per year. Or ₹2500 as interest every month. Or ₹30,000 extra by year-end. This is such a ripoff and I don’t know why the government hasn’t banned it.
What this means is if you don’t fully pay up your credit card bill when it initially comes due, you will end up paying ₹1,30,000 for the iMac whose actual cost is ₹1,00,000. It would have been cheaper to take a loan and buy the iMac as that would have only cost you ₹1,10,000.
What’s worse is most youngsters rack up huge credit card debt before they realize what’s going on. The credit card companies craftily give huge limits for the credit card and youngsters keep buying stuff they can’t afford like expensive phones. Finally, one day you realize you have Rs 5,00,000 of credit. Even if you destroy that card, you will still be paying Rs 15,000 as interest per month for years. You could easily end up paying 2 lakhs as interest to the credit card companies. But most kids don’t stop using their cards even when they are in debt. They become cash cows for the heartless credit card companies for 4–5 years, with often over half their monthly expense going towards credit card interest payments. Let me close this part with a stat. Nearly half the income (44% to be precise) of SBI’s credit card business comes from interest payments. Ouch!
One simple way to avoid this trap is to set up auto-pay on your credit card. Basically, you link your credit card with your bank account, and on the credit card bill's due date, your bank account automatically pays the entire amount that’s due. All you have to do is make sure you have enough money in your bank account to clear all dues. I do this, and it’s why I’ve never missed a credit card payment.
To summarize, the simple rule is to never ever buy on your credit card anything you can’t afford to pay off in full when the bill comes due in 30–45 days. If you can’t afford to pay in full, either don’t buy that thing or take a loan to buy it. If you don’t have this self-discipline, then avoid credit cards like the plague.
Insurance
I paid a premium of ₹6,108 this year as comprehensive insurance for my car. Though I paid ₹5,75,000 for the car, it’s now 5 years old, and the insurance company values it at ₹2,75,655. Now suppose I accidentally smash up my car so badly that it has to be written off, then the insurance company will give me that amount. If I hit another car and the fault is mine, and the cost of repairing that car is ₹1,00,000, my insurance company will pay that car’s owner something like ₹95,000 (less service charge of 5% or something).
A person on a fixed income may not be able to pay such huge unexpected expenses. This is why the government has made insurance compulsory for vehicles. What makes this whole insurance business viable is most people don’t have accidents, and so don’t claim insurance. In my case, I paid insurance premiums totalling ₹30,000 for my car over five years but only claimed insurance of ₹10,000 or so in the fifth year. So the insurance company made ₹20000 from me in 5 years for giving me protection. Also, if you make a claim, your premium will be higher the next year.
However, life insurance is the real issue. I pay around ₹ 25,000 a year to insure my life. If I’m killed in an accident, my family will get ₹50 lakhs. The idea is the family should have some money in hand if the breadwinner passes away unexpectedly. This is why everyone should have insurance.
Medical Insurance
This is the same as the previous one, except it’s for hospital bills in case you are hospitalized. Like when your grandmother had a knee replacement, about 90% of the ₹2,00,000 cost was covered by her medical insurance.
We haven’t taken medical insurance policies, and that’s not too smart. Hospitals in India are notorious for their cutthroat approach of charging the maximum possible from anybody who has the misfortune to need their services. The company your mother is working for provides medical insurance for her as well as all her family members. But that will barely cover hospital expenses. So, we need to have our own medical insurance, and I need to do something about it as insurance costs are going up.
Investments
Let’s say you land a job paying ₹2,00,000 every month and save half of it. So you save ₹12,00,000 a year, and ₹1,20,00,000 in ten years. Now that money in the bank generates interest. For every ₹1,00,000 you save at 7% interest, you make ₹7000 a year. That quickly adds up as the years go by and is a huge bonus for you to splurge on holidays or whatever catches your fancy.
You would seem to be managing your finances quite well. But are you?
With prices going up, the value of your money will be going down all the time. At India’s official inflation rate of around 7% and TDS (tax deduction at source) on FDs, your money will only be worth half its current value in ten years. Your ₹1,20,00,000 will only be worth ₹ 60,00,000 in ten years.
Put another way, ₹ 1,20,00,000 will make you the proud owner of a luxurious 3-bedroom villa today. But that same money will only get you a tiny one-bedroom apartment in ten years. And that too if you are lucky considering the difference between real and official inflation rates.
The way out of this conundrum is to learn how to develop multiple income streams. For instance, if you can make your money grow faster than inflation, then that would become an additional income stream for you. That’s why managing money is as important as making money.
Financial Freedom and Happiness
Most people desire to be happy. But you are unlikely to be happy if you are working at a job you don’t like. Conversely, if you are doing what you like, you are likely to be happy. Most people are doing the former because they need the money.
If you have financial freedom, you don’t have to work for money. So you are more likely to work on what you like and more likely to be happy. So financial freedom should be our first goal.
But how does one define financial freedom? How much money does a person truly need to achieve financial freedom? You can’t look at it in terms of material wealth, because that’s subjective. What seems enough money to you may be insufficient to someone else. Like, having one car may be enough for you, but even three cars are not enough for your cousin.
One way to get around this is to define financial freedom in terms of time. If you have created an income stream that gives you the freedom to avoid spending your time working on a job you don’t like, in a place you don’t like, with people you don’t like, then you have financial freedom. To illustrate, if we still had our farm and rubber estates generating ₹5 lakh every month after all expenses, that would be financial freedom. We are free to do whatever we want with our lives without money being a factor.
Here’s an example. Your cousin is a lawyer. If she has financial freedom, she doesn’t have to take up every client who walks in. She can focus on causes or cases in areas she is passionate about. She can even work on a pro bono basis as payment is no longer the criterion to work.
Inflation is like cancer on your savings
Inflation can be defined as a decrease in the purchasing power of money, as seen in an increase in the prices of goods and services in an economy.
Prices can go up for many reasons. The food price rise is one reason. There are other factors like war for instance. If the current war in Israel escalates, it may affect the transport of oil from the Middle East. When there’s less oil in India, fuel prices will go up. When that goes up, the price of everything will go up as you need fuel to deliver food to your grocery store, to fill your petrol tank to travel, and so on.
India’s official rate of inflation is around 7% but the real rate is higher. Like the bananas I bought for ₹50/kg a year ago now cost ₹120/kg. The mobile plan that I just recharged your phone with cost ₹2545. That money got you 12 months of service last year, but only 11 months this year. We can go on with petrol and whatnot. Do the maths. That’s the real inflation.
How does inflation affect you?
Let me illustrate with another example. A car that cost ₹1000000 last year, will cost ₹ 1070000 this year if we go with the official inflation rate. If you don’t have that extra ₹70000, you can’t afford that particular car. Inflation causes the value of your money to constantly keep going down.
If your income doesn’t keep up with inflation, you will have to compromise on your lifestyle. In other words, you become poorer as the years go by.
Income Streams
This means that if you wish to maintain your lifestyle as time passes, you will need multiple sources of income.
One source can be a regular income (like from a job or a business) to pay for everyday expenses. This is critical. Because if you don’t have an income, you will have to sell off any assets you own to pay for your living expenses. That means you will soon have little or no assets, and eventually be unable to afford your current lifestyle.
Secondly, you must make your money work for you. The money you have is your capital, and you must use it to generate a second income. At the very least, your capital should grow at a faster rate than inflation.
Most people put their money in fixed deposits (FD) in banks. Currently, FD rates in India are high as compared to the last few years. You can get around 7.5% for an FD, if you shop around at different banks. But if you consider that inflation is 7%, all the money in the FD is doing is just about holding its value by beating inflation.
That’s not good enough. If you want your money to generate a second income, it should grow by an extra 5% at least. That is to say, you should look to generate at least 12% from your money. Preferably more.
High-growth assets and the concept of risk
Is it possible to make 12%? Yes, you can generate it by investing in growth assets like real estate, mutual funds, shares in a good company, etc.
Let’s discuss one of these high-growth assets, real estate because if I discuss all asset classes, this neverending post will really never end.
Real estate usually means property like land, buildings, etc. This is one of the asset classes that generates the highest growth. It’s a simple law of economics. If the supply of a thing is inelastic, and demand is elastic, its price will go up. Land is a finite resource. As the world’s population rises, more people will compete for the same land. The higher the demand, the higher the price goes.
The problem with real estate is it’s a cyclical business. A cycle of zero growth can last for decades followed by a cycle of high growth. My ex-boss used to own some land in a prime area in Bangalore. It stagnated for years. He got tired of waiting and sold it in the early 1990s. A couple of years after that, the IT boom happened. His ex-patch of land is now worth millions.
Likewise, we bought some land in India around the time that you were born. We were lucky to hit the beginning of a real estate growth cycle. It is now worth 20–30 times what we paid for it. There’s no way you can get such returns by putting your money in a low-risk asset like a bank FD. But this high reward comes with a huge risk factor.
Allow me to explain with another example from our life. Remember the flat we owned in Discovery Gardens? We bought it to reduce commute time and move closer to our workplace. We could have rented the place but the monthly installment for repaying a home loan was less than the monthly rent. So we took a loan and bought the place.
The apartment cost us AED 700,000. Within one year, its price doubled to AED 1.5 million. I suggested to your mother that we sell it. But since we bought the apartment to escape the awfully long commutes to our workplace in Dubai, your mother felt we shouldn’t sell. So we held on.
The thing was that our apartment was highly overvalued at AED 1.5 million. The price was pure speculation by punters who kept buying apartments hoping that prices would go even higher, and they could make a killing. I suppose your mother and I were aware of this. But we convinced ourselves that prices would fall max by 10–20%.
Bad move. When the punters realized prices weren’t going any higher, they started selling their flats, and in the ensuing panic selling, Dubai’s real estate bubble burst. The crash took the price of our apartment all the way down to AED 350,000. Our 750k profit turned overnight into a 400k loss.
Now if you can’t pay your home loan instalments, the bank can legally ask us to vacate the flat. They then sell it off to recover their money. But since the bank would only recover 350k, we would still owe them 400k. Imagine having to work for years to pay for a flat that will never belong to us.
This kind of high risk is why most people stay away from real estate.
What saved us was the rents remained stable. That rent paid off the loan instalments for a couple of years. Meanwhile, the flat’s price rose back to 730k, which was close to what we bought it for. At this point, we rid ourselves of that hot potato. It was the closest we came to being in debt, and we have never again put ourselves in such a situation.
Our big mistake was to mix up emotions and investment. That flat was an investment, not a home. If we were clear about this, we would have sold the flat at its peak price. If we then put that profit in a bank, just the interest it generated might have been enough to pay the rent of the same place. Or we could have bought two similar flats at the rock-bottom price of 350k. The price is around 750k now, which means we would have made another 700k.
Risks and Rewards of Real Estate
As you saw, the worst-case scenario with high-risk investments is you may lose your entire capital, and often even pile up huge debts. But there are other lesser risks involved with high-growth assets.
Incomplete construction: We bought the flat in Discovery Gardens, Dubai, while it was under construction. There was a risk construction may not be completed for some reason. We did move into our flat and had a good few years there. But not all my friends were as lucky. Many of them who had bought flats in other projects in Dubai, lost their money when the builders didn’t deliver the flats. Most of the builders were outright frauds, and my friends had no chance as the country was an autocracy where the building companies were owned by the land’s rulers. But even in a democracy like India where law can be enforced, if a builder claims bankruptcy, a court may force the company to sell their assets. But since that may be at a throwaway price, you may get only a fraction of your money back.
Rental income: Most people take a loan (mortgage) to buy apartments as the monthly repayment is often less than the monthly rent. But if the rent is less than the repayment as it is in India, you will have to pay the difference out of your pocket. Also, there’s always the risk you may not get a tenant, and have no rental income. We were lucky as the rent was high, and we always had tenants so the apartment paid for itself till we sold it.
Property Depreciation: All buildings are subject to wear and tear as time passes. My brother had to spend all the rent generated in five years just to renovate a building he was renting out. If he didn’t bring it back to a liveable state, the value of that house would have depreciated to zero. No one would have been willing to pay for the house.
Property Maintenance: This is an additional cost that we often don’t account for when investing in real estate. In the last few years, a lot of our income has gone into servicing property we own. For instance, we had to put an expensive roof on top of our old ancestral home as it was leaking badly, and waterproofing it would have been only a short-term remedy. Repainting and repairing the place also cost a bomb.
Natural disasters also affect property. Like when our back wall collapsed a few years ago during heavy rains. Even as I write this, a wall in another bit of land we own is in danger of collapse because of the recent floods.
Locational risk: My brother’s house, which I referred to earlier, used to command a high price because it was located beside the National Highway. But that highway was rerouted, and the price of the land in that area has fallen. This was something my brother could not have predicted when he invested in the place.
Likewise, my engineering classmates had teamed up to build an apartment on the other side of our hometown. But the location turned out to be not too much in demand. There are a few unsold apartments even though it is situated on top of an airy hill with a fantastic view, and the building is top quality (customers who live there vouch for it). The money invested in those flats is stuck till those last three flats are sold. That’s risk!
Construction delays: We received our Dubai apartment nearly a year later than the promised date of delivery. So we were paying rent elsewhere for a whole year when we should have been living rent-free in our own apartment. That’s a lot of money gone in rent. However, we were still lucky as many people have had to wait many years to get their apartments.
Tax changes. In India, there is currently no inheritance tax. But in many countries, you have to pay a tax on property you inherit, which could be anything from around 10% or more of its value. So if you inherit an ancestral house valued at Rs 1 crore (10 million), you will owe the government Rs 10 lakhs in taxes just to keep that home.
I don’t know if the Indian government will ever introduce such a law. But it is certainly a risk. Real estate is a legal loophole for people to hide/convert their black or unaccounted money. Like when they buy a property, the seller will undervalue the official sale price of the property, and not account for the cash component he gets from the buyer. But when the buyer later sells that property, he will sell it for the actual value. Real estate is thus a tool to convert black money into white. Putting an inheritance tax on property makes this asset class unattractive to the black money crowd as that huge tax factor could undo the gains of black money conversion.
Liquidity risk. Unlike money in a bank, which is safe and available to you at any time, money in real estate is not liquid. Liquidity is the technical term for funds being accessible. Say suppose you need a lot of money for something at short notice, you won’t be able to sell off your property instantly to get that money. This is why we often see ‘distress’ sales on property. I have a friend who emigrated to Canada and sold his villa in Goa for cheap. If he wanted to find a seller at the market price, he would have to hang around in Goa and wait, and he wasn’t willing to do that.
Capital Gains Tax Risk Our land investments may have appreciated massively, but we can’t convert that land into cash as you have to pay a substantial percentage as capital gains tax. This can take a huge cut of your profits while selling. However, you can claim an exemption against the capital gains if you use the sales amount from land proceeds to buy a house property, as you may end up paying no tax on your gains.
Rewards of Real Estate This liquidity issue is why it makes more sense to generate income from land and property rather than sell it. For instance, if we build an apartment complex, it will generate rental income for many years. And we still have the land asset which will substantially appreciate in value as the years go by. I mean why would one sell land, unless we can invest in something that gives higher returns, and it’s hard to match the combination of income and appreciation that land gives.
So why haven’t we done that? Because building stuff requires capital, and we don’t have that kind of loose money lying around. Also, there is a glut of unsold apartments in our city at the moment. In fact, we still have three apartments unsold in my construction business. This is a venture that I am involved in with a few engineering friends. I can add that construction is almost a full-time activity, so it can be stressful for the builder.
High-growth assets: Business
The land we bought was generating constant expenses as maintenance kept happening. I needed to find some way to generate funds from it and began to research the market. Artificial turfs had just started popping up around that time, and I saw an opportunity. So a couple of years ago, I partnered with a local turf group to start a small turf in one of these plots of land. But there’s always risk in business.
When people see there’s money to be made, they will rush into the business. My city had around 30 turfs when we opened up 3 years ago. It now has 160 turfs. Income has halved but fortunately, we recovered our money in the first two and a half years, which is an ROI of close to 50% which is pretty good. Whatever we make in the remaining five years of the turf’s life after expenses, is pure profit.
There are other risks in business, which are specific to it. In the case of the turf, it is located in a low-lying area so there is a danger of flooding. To prevent this, we made sure the turf was several feet higher than the surrounding area. What we didn’t account for was that the locals would build a concrete road that raised the road level by three feet.
Sure enough, as luck would have, this year we had the heaviest rain in the last 100 years. There’s a drainage system along the road that drains into a nearby stream. But it got blocked in the heavy rains, and the entire area was flooded. We were lucky that the turf was still a few inches higher than the road. So even though the turf premises were flooded, the actual turf stayed above water. Another six inches more of rain, and the water would have entered the turf, and the underlying tiny rubber balls in the turf (which are what make it springy) would have floated up and been washed away.
We would have had to spend tons of money to raise the turf by another foot or so to keep the enterprise going. If we didn’t have the money, we would have to shut down the turf. This is why business is risky. There’s always something unexpected happening that can throw a spanner in the works.
High-growth assets: Equity & Debt
As I mentioned earlier, I got into trading and investing in equities. But I started late. You are still in Uni, but it pays to be financially literate as that will give you an edge when you do start working. Like if you start investing even a small amount right from the day you get your first paycheck, you will be so much ahead of the game. You will probably be generating a second income from your investments by the time you retire.
The principle of compounding isn’t complicated. In simple terms, if you put ₹100 in the bank at 7% interest, you will make ₹107 at the end of one year. The second year you will 7% of ₹107, which is ₹ 107.45, The third year you make 7% of 107.45… as you can see your capital increases every year, and that makes the interest also increase. Over a long period of 40 years, this can add up exponentially to a huge number. That’s called compounding as it’s based on the principle of compound interest. The finfluencer dramatises the point very well in a video short.
The finfluencer in the link below goes a bit deeper about the importance of starting investing in equities early. She points out the benefits of compounding your money. This means if you start investing ₹10,000 every month from the age of 21, you will have ₹5,75,00,000 lakhs (5.75 crores) when you reach the age of 60. Whereas if you start saving only at the age of 40, and save the same ₹ 10,000 every month, you will only have a miserable ₹75,00,000 lakhs when you reach the age of 60.
Actually, this video is a bit advanced and I’m only posting it because I think it’s vital you understand the need to start investing early. A lot of what she says in the video may go over your head, but keep listening to such videos to become financially literate. In fact, I listen to her advice a lot while navigating through the financial world of investing. Her analysis of the Tata IPO was what convinced me to apply for the stock.
Risk is everywhere
With money, there’s always a risk. For instance, take FDs, which are considered the Holy Grail of safe investment. It's simply not true. If a bank fails, you could end up losing the money you have in FDs at that bank.
Technically, every bank is insured against failure and should be able to pay off depositors in case it goes bankrupt. The catch is that insurance covers only ₹5 lakhs worth of deposits per account holder. This means there’s no guarantee for anything over ₹5 lakhs in one bank account.
There was this bank called PMC which failed during Covid. Those with deposits of less than ₹5 lakh got back their money but only after some serious panic and delay. Those with deposits over ₹5 lakh at PMC will only get back their money after 10 years depending on the account balance, and they will not be paid any interest for the delay. Ouch!
Ideally, if you have FDs, you should not keep more than ₹5 lakh in one bank account. This means if you have ₹20 lakhs in FDs, you should open bank accounts in four different banks so that your entire ₹5 lakhs is insured and will be returned to you if the bank fails for any unexpected reason.
Finance products are too often a con job
Though it seems a lot, I have barely touched the surface of the world of finance. But what thing is common with almost all finance products is there’s always something hidden from you.
For example, in my SBI Mutual Fund misadventure, the hidden fact was that the fund manager got paid regardless of whether he made me a profit or loss. This meant he didn’t care what happened to the fund once I signed on, and locked myself in for six years. There may not even be a fund manager for all I know.
I recall when your mother and I once went to buy a computer outside a store that claimed to offer a 25% discount. We went in, asked them to give us the offer details, and started converting those percentages into actual rupees. Turned out that they were actually selling at 10% higher than if I bought it directly from the manufacturer. When confronted with the numbers, they admitted it. Numbers never lie.
Or take loans. I never take loans, if possible. But if you do take a loan, be very careful. Say you come into some money and decide to foreclose to save on interest payments. You could be ripped off by foreclosure penalties. But there’s also a possibility the foreclosure penalty may be lower than continuing the loan. You have to just dig a little deeper like I did that computer on-sale scam, and you'll figure it out. The video short shown below has two finfluencers talking about this.
Another con job is the no-cost EMI schemes that people are falling for on most e-commerce sites. When I got you the Pixel, there was an option to buy the phone at no-cost EMI. On the face, it seems they are allowing me to pay for the phone in instalments at no cost.
This is simply not true. Firstly, the retailer charges you a processing fee. Secondly, you don’t get the 10% discount you get by paying upfront, which is in thousands of rupees. Thirdly, this 10% discount is given by the manufacturer to the retailer to sell the phone. So if you buy on EMI, the retailer often pockets the discount (in full or in part) that the manufacturer had given for customers.
Finally, the discount they do give is usually the interest you would have paid for the loan. Technically, you don’t pay interest for monthly instalments. Calling it a no-cost offer is being too clever by half. Here is another finfluencer explaining the same. He also discusses the pros and cons of buying stuff on credit. Those cons are quite an eye-opener that you need to be aware of.
Conclusion
At this point, I have to wax a little philosophical. Life is full of obstacles, and if we allow the stress to get to us, it can knock the smile off our faces. But if we look at it from the perspective that a life without obstacles will be boring, and approach our financial issues like an obstacle race, managing money can be fun. It’s all about attitude.
We had planted 100 banana seedlings a week ago, and then it rained non-stop for six hours last night, and this morning the whole blinking plantation has gone underwater. I couldn’t help but laugh (life is what happens while we are making plans). Seeing this, my farming guy says, “Don’t worry, if these seedlings die, I will plant new seedlings at my cost.” I’m not going to let him do that. But I was impressed at how my laughter had perked him up. It’s all about attitude.
About higher living costs
Skyrocketing fertilizer prices
One of the reasons food prices go up is the price of fertilizers.
Back in the 60s when my parents had a farm, we didn’t need fertilizers. The land we grew our crops on was interspersed with a wild assortment of plants and trees including coconut, tapioca, bananas, jackfruit, mangoes, cloves, nutmeg, cocoa, mangosteen, custard apples, betel nut, cherries, cotton, neem, pepper, tomatoes, chillies, and more. Besides, there were lots of wild animals that lived in and around those trees, as well our domestic animals like cows, chickens, cats, dogs…
Put together, they generated a lot of animal and plant waste, which was put back into the soil. This is the perfect way to replenish soil after each harvest as this waste is rich in organic content. That’s why your grandparents bought very little artificial fertilizers, and that was true of most farmers of those days. This in turn was why food prices in that era tended to be stable and low.
All this changed around the 70s when the big fertilizer companies arrived in India with their magical chemical-based fertilizers that doubled a farmer’s crop. Indian farmers were mesmerized by the idea of doubling their income, and they fell lock, stock, and barrel for fertilizers. Next, these fertilizer companies advised farmers to cut down the trees and get rid of their livestock to clear up more land for crops (and buy more fertilizer from those companies). Seemed a no-brainer, so the farmers got rid of their trees and a lot of their livestock.
The problem is that chemical-based inorganic fertilizers boost production only in the short run. What makes the soil rich is the organic part which has millions of microscopic lifeforms living in it. Without tree cover, these lifeforms are exposed to harsh sunlight and many of them die. Besides, when farmers cut down trees and substitute natural fertilizers with chemical fertilizers, the soil is not fully replenished as the organic part is missing. Many studies have shown that today’s food has fewer nutrients. For instance, you need to eat eight oranges today to get the nutrients that you used to be able to get from just one orange grown in the last century.
This issue gets aggravated with each harvest. The soil becomes less and less fertile as organic matter removed in a harvest, isn’t replaced by plant or animal waste. To maintain food production, farmers use more and more fertilizer. To pay for this, farmers are forced to borrow, and if for some reason the harvest fails, the farmer has no way to repay his debts. Even if he sells his farm, it may not be enough. And how does he feed his family if he has no farm?
This was what led to an alarming increase in farmer suicides. It’s not just in India. The profession with the highest rate of suicides in the US is farming. Some fertilizer companies have realized the problem they have created and started developing organic fertilizers. But these are prohibitively expensive and are not really feasible for the majority of Indian farmers who own small farms, and lead a hand-to-mouth existence.
Large-scale farms with thousands of acres can get around this issue as they can employ modern farming techniques and even create environment-friendly farms with lots of tree cover. They can do this because of the economies of scale, and especially since farm income is tax-free in India. But large-scale farming will take time to catch on in India.
Many countries including India have begun encouraging farmers to create tree cover to protect and replenish the soil. Hopefully, other countries will follow this lead.
This isn’t just a theory. The effect of tree-felling is visible from the sky while traveling by plane across India. What used to once be greenery as far as the eye could see, is now mostly dusty brown landscapes.
Capitalism without ethics is dangerous
Fertilizers are not the only reason why food is becoming more expensive. There’s the capitalist angle. Capitalism has a positive side as it rewards those who work hard and come up with innovative ideas that benefit all of humanity. The negative side of capitalism is that without ethics, it can do great harm, and unfortunately, most companies fall into this category.
Any company selling a product is constantly trying to make more profits and so make the owners wealthier. More profits also means the share value of the company will go up, and again the owners will become richer.
Your muesli-maker is probably no different. He wants to make more money. One way to do this is to cut costs by constantly replacing nutritious ingredients with inexpensive ingredients that have poor nutritious value. Take a good look at the label of your muesli. For instance, if it claims to have walnuts, then look at what percentage of the muesli is walnuts. It will probably be less than 1%. Most of what goes in that muesli will be some inexpensive not particularly nutritious grain.
You recall how ten years ago, I banned Bournvita from our house. The slogan on the bottle, ‘Tann ki Shakti, Mann ki Shakti,’ translates as ‘Strength for body and mind.’ But the table of ingredients on the bottle clearly admitted it was 50% white sugar.
That’s so unethical. I mean how can anyone involved in making or selling Bournvita look at themselves in the mirror every morning, knowing that their company’s goal is to try to con kids and parents into downing large amounts of sugar twice a day? Extrapolate this to dozens of unscrupulous companies peddling unhealthy food disguised as healthy food to innocent kids, and it’s no wonder so many kids in India are obese or have health issues.
The company which makes Bournvita is Cadbury, a massive global brand, and a subsidiary of Mondelez International. When we switched from Bournvita at home, we decided to try pure cocoa. So I checked out Cadbury Cocoa. Not surprisingly, it too was stuffed with sugar. That’s when we stumbled upon Looms & Weaves, a local brand based near our home in Kerala. It sells pure cocoa unpolluted by sugar, and has now become a staple beverage in our home; in fact, I had it this morning. Fingers crossed. Let’s hope Looms & Weaves and other brands like them never sell out and start cutting corners in their hunt for more profits. We don’t need any more Cadburys.
Let me go on a slight tangent here. Where I took action at an individual level against Bournvita, there’s this guy, Revant Himatsingka, who decided to go public by making a video about Bournvita’s sugar fraud. His video went viral on WhatsApp.
Mondelez was used to getting away with murder. So they used all its huge resources to come down heavily on Revant. They threatened to sue him, unless he withdrew his video about Bournvita and issued an apology. The poor guy had no choice but to do as they said.
That’s when out of the blue, the National Commission for Protection of Child Rights (NCPCR) issued a notice to Mondelez, the maker of Bournvita, ordering them to withdraw all misleading advertisements, packaging and labels related to the milk supplements over complaints of high sugar content in the product.
Damn, David had brought down Goliath.
A chastened Mondelez, sheepishly changed its tagline on Bournvita to a vague sounding ‘Get ready to win’ from the misleading ‘Strength for body and mind.’ (‘Tann ki Shakti Mann ki Shakti’ became ‘Tayyari Jeet ki’).
Naturally, Mondelez stopped harassing Revant, and he’s back on his crusade to call out food makers who are trying to fool unsuspecting customers. I like this guy. You should listen to his interview below as it’s an eye-opener about how food brands in India blatantly lie about their content. The video is in Hinglish so you should be able to follow.
Price gouging happens not just with food
If something is a necessity, the company making that thing knows people will pay much more than it’s really worth. The ink cartridge for printers is a good example. If you insist on the convenience of printing something at home, you have no choice but to pay through your nose although these cartridges are actually very cheap to produce. That’s why I never had a printer at home, but always preferred to print outside.
Still, we don’t want to take a risk especially when it comes to health and hygiene. Like with sanitary pads, we order whatever brand you say you want. The only way to save is to buy economy packs.
But not everyone can afford these high-priced pads. So what do they do? Well, the govt of India has a scheme where a pad can be had for one rupee.
Sanitary Napkins are being made available in more than 6300 Pradhan Mantri Bhartiya Janaushdhi Pariyojna -PMBJP Kendras across the country at a minimum price of Rs.1/-per pad. Since inception (4 June 2018) to 10th June, 2020 over 4.61 crore sanitary napkins have been sold.
If 4.61 crores of these pads have been sold, obviously it can’t be that bad. Still, I don’t know if you want to get it and if you do, where to get it. Maybe if you do a little research online and user reviews, you may find other inexpensive brands that you may be able to order.
In a way, it reminds me of how I used to buy jeans. There was a time when I used to live in denim. But I hated paying exorbitant prices, just because it had a label like say, Levis. So what I would do is go to a place like Big Bazaar, and try out jeans whose color and cut matched my taste. After that, my only condition was that the jeans had to be priced around ₹ 500. I bought my last two just before Covid and they are still going strong.
Again, there’s a con job happening here. We have been sold by the West on jeans as being tough and comfortable. But the reality is jeans are simply unsuited for India’s hot and humid conditions. It took Covid and lockdown for me to realize this. These days, I have switched to cotton track pants which are infinitely more comfortable. Cotton is thin, light and a breathable fabric. You don’t sweat as much. If you do, it will dry in no time.
To sum up, whether it’s food or clothes, it’s all about realizing that we are stuck in a mindset or narrative that may not be true. If we look around, we will find alternatives, and we will be able to break free of those mindsets.
As the old saying goes, ‘Where there’s a will, there’s a way.’
