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My Reactions To (American) Articles On Budgeting - II

3. Never pay full price
Indians practically never pay sticker price. Till date I’ve not been able to convince my mom that the sales clerk in the Nike store (in India) is not going to give her a discount. She always asks and what’s more, she gets it most of the time. She would also never buy something without comparing prices. I have memories of visiting a half dozen stores before she came back to the first one to buy what she wanted.

Now that we have the Internet, it seems downright dumb to buy something without prior research.  If I'm going to pay $100 for a new microwave, I'm damn well going to make sure that it is the best microwave that my money can buy. It amazes me that somebody has to write down this advice “know the actual value of your purchase before paying the price”. Not just that but many people have made entire careers based on dispensing such tidbits!

4. Interest should be earned, not paid
Most people realize that there's a difference between saving and investing, at least I hope they do because this is just common sense. The money you save should be earning you interest, not just sitting idle. Keeping cash in a pillow under your head is useless once you consider rising inflation. So if saving money is worse than investing, then actually paying interest (other than student loans or a mortgage) is surely something that everybody should avoid. Again this is just common sense.

But time and again, the human race surprises me with its capacity to show a lack of common sense. I'm continually amazed at the number of Americans who carry massive credit card debt. There is nothing wrong with using credit as long as you do it properly of course. Swipe your card wherever you want but make sure you pay it off in full, every month. Sounds simple but I've actually met people who think that paying the minimum balance is enough! I wonder if they think they can just keep paying the minimum balance forever...

Add to that the number of people who don't contribute to their 401(k) or even worse, actually withdraw money from their retirement savings in order to buy a new car and it's no wonder that many Americans are drowning in debt, just like the country. And of course, once you're in a situation like this you practically need an expert or well, Oprah to bail you out. To tell you that you need to cut up your credit cards and implement a repayment plan.

To sum up budgeting, like dieting, is actually pretty simple: income - savings = expenses. Not the other way around. I wonder if I can make some money by selling this formula to people ;)


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