Saturday, December 06, 2008

Personal Finance: some observations

Recently, I was thumbing through a personal finance magazine while waiting to meet someone. I was amazed at a number of things:

1) Usually, when I visit someone's office, all I see would be general magazines or news magazines. Nowadays, more and more personal finance magazines are seen everywhere(I saw THREE magazines in just one week! And I live in a university town!). Goes to show how deeply recession has affected the US common people, aka "Joe the plumber".

2) One of the coffee shops where I drink coffee regularly is run by a smart and pleasant woman. She manages the entire shop with help from her sons. I've been in awe of her workmanship, the quickness with she serves the orders and her pleasant manner. We got to chatting the other day and she said that lesser people were buying coffee or other drinks. Most people have started asking for water with their sandwiches and meals. Even those that order drinks are switching to smaller cups and less fancy fare. Usually, if 100 grandes were sold, only 50 or less grandes are sold now. And, people are asking for regular coffee in place of the fancy and costlier lattes. She was worried about the recession. As more and more people tighten their belts and start cost cutting, one of the first things to go are drinks like coke, coffee, etc. So, what is going to happen to the coffee shop I so love?

3) I got the chance to read an article about credit card debt and what can be done to reduce/remove them. That got me thinking. Not many friends of mine have huge credit card debts. Most people I know make full payments every month and do not let the credit card debt in any one month go over 50% of their credit card limit. But this could also be due to the fact that most people I knew were Indians. Even among my non-Indian friends, not many had huge credit card debts. But they tend to make minimum payments to the card balances rather than the full amount. There were a few who did the math and knew that letting balances grow would lead to them paying more than they expected. They paid the balances in full but most didn't.

4) Most students had student loan debt. Indian friends usually came here with a loan from banks and plan to repay it once they get a job. Non-Indian friends have a similar structure. I know of American friends who were paying down their student loans even when in college because they knew that letting the balances sit would definitely harm them later on. But most Indian friends I know wait till they get a full time job to start paying their student loans.

5) Most Indians do not feel comfortable discussing finances but most Americans are happy to discuss them and show where they are exactly with their goals. This might be due to the fact that most Indian families do not discuss finance with the children when they are growing up. I did know much about money and how it is handled as long as I stayed with my parents. But I know, from my friends in US, that a growing number of American families are very open and honest about the finances with the kids. It makes such a difference when you get to understand these things when you are young. The kids are more confident because they learn how a key part of the adult world works.

One of the jokes I heard at a party went like this:
If you give $10 to a Japanese guy, he'll save $9 and spend $1
If you give $10 to a Chinese guy, he'll save $7 and spend $3
If you give $10 to an Indian guy, he'll save $5 and spend $5
If you give $10 to a European, he'll spend $10
If you give $10 to an American, he'll borrow $5 and spend $15.

Are these differences in spending structure and loan repayment due to differences in their culture? These are just my observations based on the people I see around me. I'm sure there are all kinds of people all over the world and I personally know of Americans who are very good at managing their finances and a Japanese guy who is neck-deep in credit card debt. This post is not for or against any country. I'm just comparing two cultures I know and trying to make sense of it all. Have you seen any such differences in spending and saving habits of people because of their culture, region, upbringing, etc? I'd love to hear your views.


Arun said...

i think what u said as a joke is not a joke.
its international economics :)

yeah indians dont talk much abt finances with thier kids or dont give them an oppurtunity to manage thier own finances until they are on thier own and many of us indians are not on thier own for a very long time(many ppl live thier parents/inlaws even after marriage).

alpine path said...

International economics??? Wow! :D
Yeah, we should change that slowly.. Knowing these things and fostering open communications inside the family would lead to better quality of life.