There’s a quote that says, “You fall for one, they fall for another”

Similarly, if used in personal finance,

“If you fall for a wish without patience, your financial plan will fail to sustain other necessities!”

Domino effect on Personal Finance!

Well, let me explain to you a story that reflects the behavioral part of humans when it comes to dealing with personal finance.

A story that is a funny yet sad reality – 

So Ram was thinking to buy a car next year i.e 12 months from now. Being excited about what is going to happen after 12 months he thought to start inquiring about the latest cars, EMI, and downpayment offer available now in the market. He was of that thought to keep oneself aware of such things. 

Suddenly on the 7th month, he gets a call from hxxc bank informing him about the offer on his credit card. The offer was about the zero down payment for buying the car, which he can avail of by using his credit card! 

A good amount of dopamine disbursal was going in his mind! At that point, Ram thought that I have said 12 months, hence I will wait for 5 more months to get the car. But the second he finishes this thought, his impatience mind replied back by saying, No way! I can’t wait!

The car was immediately booked within the next 48 hours. 

Now let’s analyze the whole situation in pointers and see how the domino effect plays a role in managing or disturbing personal finance – 

• Ram bought the car out of excitement and impatient behavior in spending money.
• He bought the car when there was no provision or arrangement made out of his earnings for this expense, though he bought on zero down payment his EMI will start early.
• He must have thought that he already waited for 7 months, if not now after 5 months he was already planning to buy a car. Also, he must have thought that what if this offer doesn’t last till his timeframe to buy a car?

This is called the domino effect in personal finance. The more you think of something the more you want that immediately. Ram’s decision to buy the car was after 1 year due to some reasonable reasons. That 1 year was not only planned to accumulate the down payment but also was based on the next year’s increment. That could have helped him to plan the amount of EMI, which car to buy, and how much downpayment to pay.

Since the car was bought 5 months early, close to half a year, the EMI has started immediately. This also meant that there might be some effects in accumulation of house downpayment, his contribution in household expenses, and lastly retirement contribution. In short, every goal is affected due to one bad financial decision taken due to impatient financial behavior.

Now I would like to bring your attention to important statistics data, which will help you to understand the bottleneck of personal finance.

BNPL in the picture!

In the year 2021 Buy now Pay Later industry has grown over 600% in India! Boom, it’s a stat that says a lot about our spending habits. We are so habituated with this spending habit that we aren’t even realizing how it is affecting our personal finance in the end. 

If the BNPL model is used efficiently it can solve our necessities to a greater extent. But sadly, I have seen clients who are heavily dependent on all this for their materialistic wishes, which aren’t even necessities. 

I would like to conclude by saying that it is important that we look into ourselves and know our behavior when it comes to personal finance. Finance is such a topic wherein your personal traits of who you are easily seen with your habit. Be aware and not fall for every offer you receive, because offers are made for us to buy something. That does not mean we forget our timeline and initiate the purchasing process.