It’s the same moth and candle story. For those of you who are unaware of what we are speaking of, moths have an unexplained attraction for light. Due to their nocturnal nature, most often the only light source that moths come across are candles. They die shortly afterwards; for, they are too late to rescue themselves from the searing heat. This somewhat explains Ramu’s story. He is a 38-year-old division head at my company. After passing out with a diploma in engineering, Ramu got an MBA and soon was in august company. It’s hard to be judgmental on people you know, at least professionally, is it not?

Maybe the lifestyle, societal demands or his own weakness got the better of him. “I don’t know Swati, how I landed myself in this mess…there are sixteen credit cards that have reached their credit limit, one car loan, one house loan, a stash of money that I need to payback to my relatives,” gasped Ramu as he broke down.

Like most people, I was about to leave when my boss asked me to wait for an email that he expected to contain some critical information. At around eight, I gave up my wait and was heading for the exit, when I saw Ramu sitting in the corner, with sore eyes.

“I will leave in 10 minutes, you carry on…” were Ramu’s words when I asked him if he was all right. After a friendly talk (that he later confessed he needed) and four cups of coffee (which were purely incidental), Ramu told me how he has carrying a debt of nearly Rs 1 crore.

Sure in the current stock market boom, Rs 1 crore may not be much. But it’s way too much for a salaried man even if his wife is earning. Newly married but image conscious, Ramu soon bought a car that was a bit too costly to run and maintain. A Rs 20-lakh flat was eating a major portion of his pay check and the car nibbled away at what was barely left after the customary monthly savings. Professionally he was climbing at the speed of knots, as client meetings turned productive but financial burden in terms of his MBA education loan still remained. Ramu says, “If you ask me honestly, I sent money to my parents on about seven occasions…fortunately for them they were not dependent on me!”

Credit cards, something he always hated, became rescuers overnight. Every six months, a new card, and half of them just transferred his old debt into the new one. Soon interest cost became a major worry and when his wife became pregnant, in his words, “I was more bothered about when my wife would again resume her job than about my baby.”

Debt trap does that to you! I could go on and on about what Ramu said that day but I want to discuss some major issues here. As hypocritical it can be, while we respect people for the big cars or even bigger houses they own, not even half of us actually think about where the money is coming from.

Peer pressure brings the worst out of everybody. A neighbour buying a fancy car or having a Jacuzzi should not bother you. A study states that peer pressure leads to most of the compulsive buys that an individual makes. Worse is when one competes with his or her own siblings to outrun one another.

I know of two sisters who bought a new pair of expensive shoes every week just to outdo each other, when they met. It is silent but often a defining victory. Shoes were the starting point and later it went on to assets such as house, car, wardrobe and parties held at each other’s house.

My younger cousin Shailesh is an example of what peer pressure at office can do. He has changed eight mobiles in the last five months because everyone at office seems to. Shailesh joined an MNC BPO as a technical hand but now wants to own a snazzy but extremely expensive sports bike, after one of his bosses bought one. Note: The person he is referring to as his boss is actually the Assistant Vice-President of the company who has a fancy for bikes. With a seven figure monthly salary he can but my cousin cannot. I doubt whether there is something permanently wrong with my generation. We all want it too fast and too soon!

Counselling is needed not only for people who have mental problems, but also for those who face problems created by too much or too less of money. As a democratic nation that wants to be a socialistic, India has sadly gone the other way. Every day we come across show of wealth. Be it the richest man building his own helipad on top of a custom-built mansion or business magazines dishing out stuff on the lives of the ‘rich and truly dysfunctional’ that revolves around costly yachts, vintage wines or even a robot dog — awareness is something we lack.

Sure the lenders help you on the way to pocket those ‘needful things’, but it is their money remember? “Farmers are dying of too much debt or too heavy interests, I wonder whether there will be a day when we will face the same in cities,” says Shweta Jaipuria. Debt counselling clears the path because in the absence of financial literacy and help for consumers to avoid bankruptcy, that is the only process that lends clarity to the situation. If all this seems familiar, talk with your best friend, wife or parents right now. It might not directly help you with finances, but will surely tell you whether everything is manageable or not.

This is one of the most unheard of words in an individual’s borrowing dictionary. It’s high time we actually considered it seriously. God only knows how many Ramus are there whom we seldom seem to notice. A Debt Management Plan (DMP) is what can get them back on road — a simple method used in various countries such as the UK and the US for helping individuals paying personal unsecured debts.

These are loans that have gotten out of control. Why? The payments are taking too large a portion of income, or even exceeding it, as in Ramu’s case. Till we don’t have any debt management company come up with such a scheme for all those who have run up significant loans, get ready with a pen and a sheet of paper:

Catalogue all the debts; assess your income and budget; if the debts surpass the income, try and find ways to renegotiate some of interest rates; sit down with your lenders or, for that matter, credit-card issuers; don’t take a step backward again.

Your lenders will agree to some sort of collection arrangement as a debt management plan is going to result in a far higher likelihood of money finding way back into their coffers.

Just one thing, if I may add. Have you ever thought about what goes on in the families of those who fall victims to debt traps? I am told, even children become aware of this. One lady said, first she stopped attending family functions because of the gifts that she had to dole out, then cut back on birthday celebrations that her children were so used to, and later gave away her pets, because she couldn’t afford them anymore. Her husband became quieter as days passed by.

As always, it is habitual to end with some questions that I have. But this time round, I not only want honest answers from my readers but discussions and also suggestions.

How often do you judge a buy from the need perspective?

Does debt really help you gain something in short span?

How best to tackle the debt-trap?

You have exactly 168 hours to do that!

* * * * *

Letters received in response to Episode-169 on the issue: ‘Does today’s financial system allow the small guy to survive?’ (Business Line, December 3.)

My answer is a big NO. In today’s world, most of lenders bat for the big corporates only. While wafer-thin margins, made by big outlets, will rule the world for many years, smaller players will be able to make an impact only through monopoly in certain goods or services.

Big companies try to use the services of small players, who are new to business and are prepared for higher risk, to save on cost. While the bolder players are able to get a better price for their service, the smaller players will have to be smart in handling the issue.

Krishnamorthy, Mangalore