Is Instagram emptying your wallet?
Wednesday, December 25th, 2019
I have started writing about personal finance at the daily publication Broadsheet. This second piece, reposted here with their permission, discusses how Instagram affects your financial health:
Credit card business in India is booming thanks to Generation Z and Millennial shoppers. People under 25 accounted for less than 2% of credit card transactions back in 2016. That number has shot up 5x to 10% now. Indians under the age of 30 account for a whopping 35% of plastic users in India—compared to 27% for those over 40. And the inevitable consequence of that bingeing is ballooning credit card debt. The reason: Our constant need to buy, buy, buy everything—be it a product or an experience—we see on our social media feeds.
Here’s a guide on how to say no to debt, improve your credit rating, and resist the wasteful allure of Instagram.
First, check your CIBIL score: That’s the three-digit numeric summary of your credit history issued by the Credit Information Bureau of India Limited. It helps a potential lender—for e.g. banks—determine your credit-worthiness based on your financial history. So the first step is to diagnose the state of your financial health over at the CIBIL website—which gives you one free report a year.
A score between 750-900 means you are in decent shape. The higher your score, the more likely you are to qualify for a loan. There are also added benefits such as lower interest rates and better credit card benefits. OTOH, a low score can make life very difficult, especially when you start adulting and need to make big-ticket purchases for a car or a home.
Next, make a plan to up that score: If you don’t have a good score, it will take a couple of years to improve it. So you better start doing the following:
- Pay your credit card bills before their due date. Sooner the better. Also: make sure you pay the full amount, and not just the minimum payment.
- Learn to love your debit card—which deducts the amount directly from your bank account, and minimises the risk of excess debt.
- Use a digital wallet to shop because it allows you to set daily as well as monthly limits. For example, my Paytm account has a daily limit of Rs 5,000, and a monthly limit of Rs 20,000.
- Don’t continually apply for new credit cards because that can damage your score—especially if you are rejected.
- Do not stretch your credit limit on any given card to the max. Never spend more than 50% of your available credit unless you are sitting pretty with a CIBIL score of 750-plus.
Say no to Insta gratification: which is easier said than done. So here is a list of totally doable tips:
- Move the money out: Set up an auto-payment that will re-route a big chunk of your salary to an investment or another bank account with a higher interest rate. Make sure it is triggered soon after your salary hits the account, i.e. very early in the month. Next, pay off all your monthly bills. Again, many of these can be automated, and make sure they are paid within three days of your salary date. This will leave only a small surplus for you to potentially splurge.
- Delay gratification: You just saw the latest pair of Needledust ballet slippers that you totally must have for the wedding season. Dump it in the shopping cart, but do not hit ‘buy’! Give yourself 72 hours to decide if you really, really want them. Chances are the slippers will stay exactly where they are—in the cart.
- Time your expenses: set aside assigned shopping days and time them for the end of the month—exactly when you are feeling the most broke. Also: Shop when you are feeling good, not when you are having a bad day. Stress shopping is as bad for your health as stress eating.
- Delete those shopping apps: Uninstall Shein, Amazon, Flipkart, Snapdeal etc. from your phone. Switch off the shopping feature on smart speakers like Alexa, Google and Siri. It reduces impulse buying—especially when you are bored. Also useful: an occasional social media cleanse. Deleting Insta and Facebook for a few days is great for both your mental and financial wellbeing.
- Budget for the unexpected: Yes, we all know we need to make a budget and stick to it. But we usually only list known and regular expenses, and treat everything else as pocket money. One of the biggest triggers for debt are unexpected or unusual expenses like medical bills, family crisis or wedding-related travel. So always put aside Rs 10,000 for out-of-ordinary spends so you never cross the red line.
- Ask yourself why: Make a list of the big-ticket dreams in your bucket list. For example: that holiday in Spain, a new car etc. And each time you are tempted to splurge on a new dress or expensive meal or weekend in Goa, take a hard look at that list. A passing pleasure can often cost you your life goals.
FOMO is a natural human instinct. We are wired to want to fit in with the tribe, and worry about being left out. And that’s why we compare our lives with those of others on Facebook or Insta. But don’t let photos of fancy holidays, clothes and meals eat into your hard-earned money and undermine life ambitions that really matter.
Disclaimer: Please note that all the information mentioned above is for informational purposes only. Please consult a qualified financial advisor prior to making any investment and financial decisions.
About the author
Rishad is the founder of Kairos Capital. He started his career with Standard Chartered Wealth Management and has extensive experience in markets, particularly in terms of mutual funds and stocks.
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