The Hindu Business Line : Results — unaudited, unread and un-understood

STORY so far: It is after paying the bill and collecting the provisions from the department store that I realise the pinch in my purse. Am I spending too much, I wondered, or is price the culprit?

Episode 75

Do you think our outflows for domestic requirements are swelling? For that question, there have been enthusiastic responses. "Hello Swati," writes in Priya, also a CA. "What's basic is self-control. Next, maintain a small book or diary wherein we can categorise expenses as productive and non-productive. For example, going to hotel, ordering a pizza, or buying a top where the need is absolutely not there. These can be wasteful."

Oh, my pizza! "The practice of writing down expenses in the diary once they have been incurred and calculating the total at the end of the month will give the needed info. Also, a probing could be done after the calculation. Wasteful expenditure can be marked in `red'; add a small note as to where to control for the next month, this will work wonders."

Sounds as simple as Sorcar's magic. "Budgeting the expenses will ensure a control. About the lure of cosmetics (culprit being the `thrusty' and feel-so-good ads) any person (woman) would or can know that it definitely will not do magic. Simple home remedies are far more better and safe."

Let me budget Rs 100 for May, to buy a book of home remedies. "Believe me, the above-mentioned maintenance of accounts is done by me for our monthly expenses. And it has made us realise the worth of money and curb unnecessary expenses. Nowadays when we go for our weekly purchases we jot down what is needed and we buy only that and nothing more. Especially here in the US where the temptation to buy is higher, seeing the variety and beautiful display of provisions and cosmetics (God knows what some are for!)"

Thanks, Priya, for the ready-to-implement suggestions.

"Fault lies in us," chides Thangavelu. "When you purchase on credit (by swiping card at the counter) you tend to purchase by impulse more items than required. Because we spend more time in office, there is less time for shopping, so we become lazy and purchase more items in bulk to avoid frequent visit to markets." That's a useful insight.

"When our lifestyle improves we gradually go for more expensive items. For example, from Rasna to fresh juice, simple dress to designer-wear, ordinary car to sedan, and so on. We are too lazy to conserve energy by switching off fan, AC when not required, and also we use more lights than necessary. We buy peace from children by providing costly eatables, since we are impatient to look into their small grievances." How true!

"It is always better to prepare budget every month and try to stick to that to the maximum possible and invest the surplus. Check the cost factor of each item, see if it is cheap elsewhere, so we switch over to another shop? Also, swelling of expenses can be arrested if we are conscious about the money we earn, how much sacrifice we made for that. Good luck."

Perhaps that explains why the marginal money goes off faster from us: because its utility is not perceived in the same way we valued the first rupee we earned.

Karthik Narayan, a CA Final student, has misconstrued my question: "I guess u mean the ever increasing imports. We consume imports by the dozen saying better quality. I'm not any expert and I don't know if I made any sense at all. But that's all I can think of as of now." Aaarrrh. "Apart from all this, I'd like to get to know u better like, I'm 22. Are u a Telugu by any chance? ur name sounds that way. do tell me abt u and id again thank u and wish u well in ur life ahead. lotsa love and luck." No comments.

"Swati, outflow for domestic requirements could be swelling either because of volume/variety increase or increase in prices," writes Radhakrishnan. "Our economists would not agree if I say that the prices have gone up. The reason being inflation at 4.4 per cent and we do feel good. Considering that, I think the number of items must have increased in your shopping list, not the prices. The more you have the more u want." Good logic.

"This is the first time I've read your column and found it to be pretty interesting. It definitely provides ample space to the readers to think and, more importantly, to express their opinion," writes Shalat Jain, a student from Delhi. "To start with, I must say that I am a little confused about the question that you have raised. When you say `our outflows', you didn't clarify the scope of `our'. Does it refer to just the upper class or middle class people living in the cities or does it include the lower classes as well?" I never thought about that Shalat.

"Today, economic disparities between the classes are so high that I don't think we can generalise anything, particularly in a contentious issue like consumer spending. I would like to take the issue of classes one by one. For the upper and the upper middle classes, I surely agree with your statement. That is mainly because there are so many opportunities today for the educated men and women, thanks to the ever-growing private sector. The income level of a household, today, is much higher precisely because earlier, when there used to be just one earning member, today there are at least 3-4 members who earn in a family of five.

"The burgeoning purse of a family assisted by moderate inflation and fierce competition in consumer durables and non-durables which has seen prices of many household items, such as TVs, refrigerators, and so on, falling, has led to this trend. Today, working in a restaurant is no longer considered taboo and an average graduate has much more opportunities in call centres, as marketing executives, or in fast-food joints and they start earning at a very early stage. They don't mind spending `their' money in high-priced cosmetics, mobiles or even in the things of daily use.

"Then there are so many things that you can obtain on credit with finance companies that run after you for every other thing. An AC, computer, mobike or a car can be obtained today on an EMI which does not interfere, and in fact which gives a much larger disposable income in the hands of the consumer.

"However, on the flip side, we have a large lower income group, in the cities as well, totally disconcerted by such a phenomenon. While the prices of TVs, ACs, and so on, have been falling, those of essential commodities such as bread, pulses and LPG cylinders, to name a few, have been rising continuously. For these people, even surviving has become a major cause of concern. The number of jobs in the private sector for the well-educated urban youth is growing but government jobs are shrinking. For them, day-by-day, it's becoming difficult to even afford the basic necessities; let alone the thought of a swelling budget.

"Today, the gap between the rich and the poor, though it sounds clichéd now, is perhaps at its worst. That's why I think rather than being obsessed with economic growth rates, we should make an effort towards human development."

An essay in sensitivity, I'd say. Shalat, I wish you draw a plan for such development.

"Dear Swati, we need to define what constitute `domestic outflows'," writes Mahadevan, a CA. "My outflow includes house-rent, groceries, tuition fees of children for music, dance, computer, Internet surfing, telephone, weekly visits to restaurant, two films a month, visiting temples, buying clothes, remitting housing loan, vehicle loan, contribution or gifts for marriages and other social functions. The list goes on and on.

Anything non-essential from my view will be the most essential from my wife. Similarly, with children too. Harry Potter books and CDs are a must for my son and whenever inside the car, my daughter wants the AC on. How to control? Who will control? Only experience can guide you by god's grace." Isn't it a miracle that we still continue to control our expenses?

*********

A few days ago, I went to attend a study circle meeting and the topic was something current: Understanding unaudited financial results for the quarter ended March 31, 2004. The speaker showed us on the screen some of the published advertisements, sourced from newspapers over the past few weeks, and asked us a simple question: "How do you study these ads?" Well, send in your thoughts by Friday.

(To be continued)

Swati_CA@hotmail.com

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