Who Increased Your Financial Commitment?

Financial Commitment

Financial Commitment:

In our lives, with various periodical changes, our financial commitments tend to increase. Our grandparents would have told us that they survived a month peacefully without any EMI, Loans, Credit Cards, Debit cards, etc., with their monthly income of just Rs.10.

This might be sufficient to feed a family around 1940-1960. Coming back to 2020, even after earning a monthly income of Rs.1 lakh, our commitments have a to-do list that has not been touched for many years. Various factors decide the incremental growth of financial commitments.

  1. Inflation.
  2. Being Rich vs Acting as Rich.
  3. Television and its Advertisement.
  4. Flaws in Investments.


The primary factor for the increased personal financial commitment is Inflation. Inflation is the price hike of goods and services that we indulge in daily life every year. So, the value of any particular good will increase almost tenfold every twenty years. The average inflation rate in India is about 7-8%, so the value of the currency falls.

Inflation has its pros and cons depending on the individual.

·       Scenario 1: If the currency has been parked with tangible assets like stocks, lands, gold, etc., which tends to increase along with the inflation rate, this is a good sign of Inflation

·       Scenario 2: The other scenario is that when people have their currency in their hand or invested in any sort of asset, they have to lose the value of the currency, which is always a negative for people

Most of us come under the second scenario of holding money in hand or the bank, so the currency value falls, which eventually adds an increment in personal financial commitment

Please find the historical inflation rate of India from 1960 to 2019 in the below image.So, handle the inflation wisely, and don’t let your financial commitment rise above your shoulders.

Being Rich vs Acting as Rich:

This is ultimately worse because people don’t know that they are the main reason for increasing financial commitments. We can divide people into two categories.

  1. People who are rich by themselves.
  2. People tend to be rich, but they aren’t.

Being Rich

Have you ever noticed the world’s successful and richest people wear the same type and color outfits? Does it mean they don’t have enough money to get some colorful dresses, which most of us spend on a single occasion?

One of the most successful investors in the world is Warren Buffets, who holds a net worth of $580 Billion, still lives in the same home that he bought a long ago for $35,000, and still drove the first car he bought. The reasons are

·       They value their money and time because they believe both are valuable assets.

·       They spent or invested in the first.

·       They invest in the acquisition of knowledge.

·       They don’t research on updates of electronics, automobiles, etc.

·       They will be as simple as a brand, so they don’t wear branded shoes or shirts.

·       They don’t wear any ornaments to show that they are rich.

·       They know perfectly how to use inflation and economic market crashes in favor of them to grow their money

Acting as Rich:

This is the category under which most of us come. We try to show our wealth through our outfits, cars, ornaments, updating on gadgets, appliances, etc.

·       The people who come under this category are the prey of their financial commitment.

·       We spent a lot on dresses for our marriage reception, which we won’t wear again.

·       We buy a car, bike, mobile phone, appliances, etc., to portray to others that we are rich enough. We don’t think about necessity.

·       Recently, when Apple launched the iPhone 11 PRO, most people bought it for over 1 lakh rupees. If we ask them why they have bought the product, they fail to answer about the features of the product. Their only answer is the brand’s name, i.e., Apple, and its pride.

·       We wear ornaments to show that we are rich.

·       We never invest for us, rather we invest and spend completely to make the rich get richer.

·       We never develop our skills and knowledge and never think of what inflation is doing in our lives.

These are the attributes that require great financial commitment, and we work for those commitments, neither for ourselves nor for our generation.

Television and its Advertisement:

While reading this topic, most people will be frustrated. What? Television? Are you kidding? Here are the facts: Again, we all have messed up somewhere.

We have never noticed that television and its advertisements are the main source and gateway for many unwanted products in our homes. If you have noticed, well!, you will become aware and will be able to handle your financial commitment and will never let it reach your shoulder.

In the last few decades, only television has a portion of our house. In the beginning, most of us couldn’t handle our commitments and ran to buy everything we saw on television.

People use more techniques in handling advertisements to reach each and every age group through graphical and emotional connections with people who see the advertisement.

We initiate the habit of drinking BOOST and serve it to our children without knowing what it is or the side effects it provides. We just drink for Sachin and Dhoni, who promoted us as they drink the same for their fitness. They aren’t.

Flaws in Investment:

·       Over the last 20 years, many products have risen as the investment theme.

·       Taking policies without knowing T&C: Many cashback and endowment policies have landed in everyone’s home somehow. We opted for it, thinking it would yield more after 20 years, but it yields only 3-4% of return, and our inflation rate is at 8%. This will add us to our financial commitment.

·       Lack of Knowledge in Investment: Until 2008, real estate was the place that gave a multi-bagger return, but most people still invest in real estate without the knowledge that the real estate market is over-valued.

·       Thinking Mortgage as Investment: Most people think owning a house is an investment. It isn’t; rather, it’s a consumption, and we need a home to stay. Buying a home for a loan is madness, eventually raising the financial commitment.

·       Investing somewhere without knowledge about its safety, associated risk, and returns calculations will be considered a flaw. Investment done on someone’s recommendation is termed as a flaw in investment.


·       Financial commitments are increased because of our personal decisions and unawareness of the market and inflation growth.

·       Understand inflation and make inflation a tool for your financial success.

·       Understand the exact difference between being rich and acting as rich. Acting like rich will never make you rich. Don’t live to please others.

·       Don’t buy any products by seeing the advertisements or any Models forecasted on television. These Models never use the products, but they promote them. They earn.

·       Invest wisely is an important tool to keep your commitment under your shoulders and ultimately live your life peacefully.