Why should Gen Y rethink about their spending habits

Amit Bhor

Who exactly are the Baby Boomers, Generation X, and Generation Y?

If the end of World War II saw the birth of the “Baby Boomers” and the decade from the ’60s to the early ’80s gave rise to “Generation X”, those born after that till the late ’90s are “Generation Y” or “millennials” as they’re more commonly referred to.

The early years

In India, the post World War II scenario also coincided with post-Independence. For the Baby Boomers and Generation X, this was initially a period of rebuilding, and the focus was on simple aspects like having a roof over your head, a stable and secure job, and spending strictly within means. The ’70s and ’80s saw the aspirational aspect taken a notch higher, with status symbols gaining traction, like buying a house and car, sending children abroad for higher studies, owning a colour TV, VCR and so on.

The ’90s and rise of millennials

1991 saw a watershed moment as liberalisation was ushered in, opening up the Indian economy. Suddenly, things that were not easily accessible earlier or had to be imported were now available in India.

A few years later, private banks arrived on the scene with a variety of financial products to tickle the consumer palate, right from quick access to money via ATM cards, loans for home, vehicles or consumer goods, to credit cards — something that was still largely a taboo for the debt-averse Indian mindset.

Living for the present

For millennials, status symbols of the earlier generations don’t mean much, and they believe in living more for the present than the future — the focus being more on easy access and instant gratification, current experiences, and pursuing their passions.

Millennials are social media + tech-savvy, brand-conscious and also more aware of current trends and options available when making a decision regarding purchase or investments, and tend to have a more open mindset than earlier generations. They’re also likely to rely more on online reviews, articles and peer suggestions instead of advertisements/articles in newspapers or on TV.

Millennials think differently 

• They book a cab v/s buying a car
• They rent a house (or living with parents) v/s buying a home
• They travel abroad, soaking in new places and cultures
• They take up a new hobby or skill just because they want to
• They are comfortable using credit cards or EMIs to fulfil an immediate requirement
• They are keen to turn entrepreneur or change jobs often for greater “rewards”
• They are open to sharing personal information if it means access to special offers
• They take longer to get married and/or have kids (or even DINKS — Double Income, No Kids)

A few financial adjustments will ensure they can continue to maintain the lifestyle they’re used to.

Save a part of salary 

While some millennials may like to live from one salary to the next on a “have it, spend it” basis, it is a good idea to set aside some money each month from the salary — can be as little as 5-10% initially. The money can be invested in a good equity fund, debt fund, or even a fixed deposit —depending on risk profile.

Keep an eye on spends 

Use money management app to track expenses and set a budget to keep spends in check. Get timely alerts for bill payment reminders for credit cards, insurance premium and other utilities to avoid defaults which can impact the credit score.

Get life, health insurance cover

While it’s nice to enjoy and live “for the moment”, an accident or medical emergency can suddenly lead to financial troubles if there is no health insurance cover. Additionally, if there are dependents, a life insurance cover is a must.

Keep emergency fund

Life is unpredictable — a lost job, starting a new venture, an accident/illness, a family emergency — all these can cause a drain on finances. While size of the emergency fund depends on lifestyle, it should take care of 6-8 months worth of living expenses and upcoming commitments, and be easily accessible.

The writer is CEO and co-founder, Walnut App. The views expressed in this article are his own