There is a famous saying on shopping by Bo Derek that "whoever said money can't buy happiness simply didn't know where to go shopping". This pretty much sums up the change in the shopping mindset in the last decade or so. Most of us have seen a dramatic change in the spending behaviour and today most of us are buying a lot on impulse and desire rather than a rational, planned shopping. Well, this article takes about smart shopping and better still, on how to control the urge to spend. We are sure that you would enjoy reading this article (though not as much as you love shopping) and try to adopt some of the ideas shared here the next time you shop...

How have our spending habits changed?
The young earning generation today would easily remember that shopping for clothes & accessories was limited and often carried only at times of festivals when they were children. The things we bought were also limited in variety as compared to what we are buying today. Add to this the growing number of branded retail shops and shopping malls lined up at every few kilometers. Armed with the Credit Cards in our hands, it is now really out of fashion to think about bank balances and pre-plan shopping in advance. Even those in their 40s and 50s have been shopping much more for themselves and their children than what their parents shopped. The mantra today is that if you feel it, get it ! There are also many of of us who believe that they will feel better if they shop! This is what we can call as impulse or emotional buying which forms a major part of our spending today. On the extreme side, this has given rise to a new type of addiction and disease called as "compulsive shopping" where people suffer from 'shopoholism'” and they literally shop till they drop or run out of Credit Card balances.

Techniques to control spendings:
Well, no rewards for guessing why we need to control our spendings. There is a popular saying that 'A money saved is a money earned'.

Many times we get excited looking at new products and offers and make instant buying decisions only to later find that the purchase was really useless. Controlling emotions may be tough but you can easily do it if you genuinely desire to control your spending. There are many techniques which can help curb emotional spendings by you. I am listing a few here...

• Avoid spending time, get-together, meetings or dining at shopping malls. Stay away & stay rich!
• Make it a rule to pay for all impulse buying using cash and by debit card, if you are buying online.
• Avoid going shopping with people who are wealthier than you. You might often end up buying more stuffs which are expensive and not needed by you as the tendency to compete / show off comes into picture.
• Be strict with kids and make planned list of items that you feel are important for them and also mention the purchase month /week & budget. Communicate this to your kids and make sure that your kids understand & agree to it.
• Prepare a list of items that you feel are required & desired and decide a budget for same. Avoid going beyond this list in any of your shopping trips.
• Before buying things that others (like relatives, neighbours, friends) have and you don't, think of all the things that they don't have and you currently have or will have once you save for future.
• Keep a limited monthly budget for impulse spending only as shopping can be a stress reliever. Decide the limits as a fraction, say 1/3rd, of the estimated impulse spendings done in last 6-12 months.

Steps for smart buying:

Step 1: Check need: Before buying anything, define what you looking for and amount you are willing to spend. In case of any unplanned spending, think or consult others, like relatives, friends, etc. if you really need the item before you make the purchase decision. In case you are sure, you may move to the next step.

Step 2: Delay a while: Don't buy on same day when you have finalised the items in any store. Postpone the action for at least couple of days or a week, depending on what you intend to buy. In case of sale offers, it is better to go shopping at least 2/3 days before the offer ends.

Step 3: Research online: Always do an online search for the desired item in case you have just finalised but not yet purchased the item. There are many sites today that offer information & reviews for products/offers from insurance policies to shoes to laptops and holiday packages. Look for additional information or negative feedbacks / reviews to really make up your final decision to purchase. You may also better check out similar products or offers and compare that best suits your needs.

Step 4: Best deals: Check for offers / discounts from retail stores or online shops before buying. Ask for upcoming sales offers from your local stores and wait for same, if possible. You may also check for any interest free payment options through instalments.

Step 5: Bills & Warranty: Always ensure that you have the proper bill and warranty card dated & stamped. Keep these documents safe as you are like to need it some day. Try to get extended warranties for items, if on offer.

Step 6: Return/Replace Policy: Try to always buy with shops offering return &/or replace policy, even if they are a bit costly. Do not remove / destroy the packaging/ labels, etc. after you bring the items home. That way if you do not like the product, you always have the chance to return same and request refund or replace the item.

Strictly Not for Impulse Buying:
There are some things that must 'never' be bought on impulse or emotions. Decisions in such cases must only be made after careful thought and study. Decisions on home, property, car, insurance or health policy, home renovations, etc. made on impulse can cost you dearly in long run.

Not Spending = Savings = Greater Wealth:
You can easily save 5-15% of one's total monthly / yearly expenses if you stop spending on impulses and follow the tips given above. Thus, you can invest such savings for future. You will be surely guaranteed greater wealth & better financial health. A spending cut of just Rs.500 monthly when put in mutual fund SIP can potentially give you Rs.1.31 lacs in 10 years @ 15% returns. Savings made from foregone impulse purchases can also be directed to more fruitful / required spendings like better food habits, children study, quality holidays, etc.

Spending on impulse is very common in modern age, especially among the younger generation, including young parents. Controlling this urge to spend can help you save quality money which could be put to better use.

Spending on impulse is very common in modern age, especially among the younger generation, including young parents. Controlling this urge to spend can help you save quality money which could be put to better use.

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Investing for children's education, marriage, etc. occupy a prominent position in most people's list of life goals. You have been saving and investing for these goals in order to ensure that your kid is not compromising because of lack of money and is getting prepared to lead a good quality of life. At the same time, you are also concerned about how your child will manage his finances, spend and save wisely, plan & work towards his financial goals independently.

Our children have not yet had any financial responsibility like paying for insurance, or managing family expenses, or paying for their own education, etc. Some parents try to inculcate the habit of savings in their children from early childhood but this is mostly limited to saving a rupee from their pocket money so that they can splurge their savings on crackers during Diwali, or because they will get a treat from their parents after they meet a goal of accumulating a certain sum of money.

Making your kids familiar with savings is important but the tricky part is introducing your growing children to reality, explaining investments and instilling the interest in them to learn about financial planning. Before explaining the concept of investing to your kids, you must brush up your basics so that you are able to communicate vital information clearly.

Following are a few key points which can help you in teaching your child the basics of investing and the importance of financial independence.

Start at the right age: Don’t talk about investment jargons with your kid while he’s struggling with his nursery rhymes. Wait until he is able to think relatively and comprehend the implications of simple and compound interest, percentages, profit and loss, etc. Talking too early will result in nothing but overhead transmission and create confusion in the mind of your child. Generally, a child is able to attain the maturity of thinking mathematically when he enters adolescent stage, yet it varies from one child to another.

Introduce the basics: Start with explaining the basic concepts, viz assets and liabilities. You can narrate the meaning and importance with the help of real examples like the house you live in is your asset and the loan on the house for which you pay monthly EMIs is your liability. Tell the meaning and importance of investing and various types of investments like stocks, bonds, mutual funds, etc., and how these investments can help in building assets and can enable you lead a happy and comfortable life.

Involve your kids: Discuss your family finances with your kids. They should have an idea about your income, assets, the debt you owe to others, how you manage your monthly expenses, budget, etc. Live events can help him understand investing better, like how the car got financed, how a medical emergency was met with the insurance policy you have, or how the vacation you went for was met with the Mutual Fund SIP. He/she should understand that happiness can be achieved by investing. You can also gain your child's attention by playing money games like business, risk, etc., as well as through mobile apps. Once he gets excited & involved in the games, he'll be able to relate it better when it comes to reality.

Meeting with your financial advisor: When you meet your financial advisor, you can ask your kids to sit with you in the meeting. They would get to know about goals and portfolio allocation, financial planning, etc. Even if they do not understand the details, it would give them a fair idea about investing. Further, you are there to guide them and answer their queries.

Invest their savings: Another way to expose your kids to investing is investing their small savings. Invest their money in a good investment product, and help them track its growth over time. You can also build a mock portfolio for them and let them track the profits and losses. Let them gauge the losses that can occur due to quick decisions and the benefits of patience & long term investing. They may not be gaining or loosing big money, but the excitement of profits and losses will help them comprehend investing.

Remember, there should not be information overload at any given point of time. You must break the information into smaller and simpler parts. Try to explain with the help of examples and the impact that investments have on our lives. Try to inculcate the habit of saving in your kids from the very beginning. They should know about the gains that they can achieve through investing as well as the basic, “investing for the long term will help in achieving the gains”.

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Inflation in simple terms means general price rise of goods & services in a country. Inflation monster reduces purchasing power of money, rupee loses value with inflation as the same amount of money buys lesser goods/services with time or to buy same quantity of goods/services you need more money due to inflation. In India inflation trend is broadly measured by Wholesale Price Index popularly known as WPI, tracking wholesale prices of basket of goods. This tracks prices at wholesale level and not the prices at which consumers buy goods. RBI mainly tracks WPI to take decisions regarding interest rates & money supply. In recent times too much fuzz is created around inflation numbers as it remains at elevated level of around 9 – 10% range which is not desirable for a growing economy like India. But why so much attention is given to WPI numbers and what is their significance in context of Indian economy?

WPI in India has very wide implications as many nodal agencies use WPI number to arrive at many important policy decisions. RBI uses this number to decide on interest rate & money supply measures, movement in WPI indicates price trend of essential commodities.

What causes inflation in a country ?
As said earlier, inflation is nothing but general trend of price rise in a country. There can be multiple factors responsible for this trend of price rise:

Excess Money Supply: If money supply is increased due to loose monetary policy & low interest rates, prices go up as too much money chase too few goods. That is the reason why central banks increase interest rates in inflationary environment to reduce money supply.

High Level of Economic Growth With Low Investment: If economy is growing at healthy rate then income level of working population goes up and people start buying more goods and services which result in higher demand. To match this higher demand country needs to invest heavily in manufacturing sector to increase supply to match increased demand. If country fails to increase supply of goods & services against rising demand then it results in inflationary trend. Classic example is India where economy grew at a healthy pace of 9% in 2006-08 but manufacturing growth failed to keep pace with economy growth, and this resulted in higher inflation during the period between 2008 to 2012.

Deficit Financing : Emerging economies like India always remain in need of capital to finance various growth projects. As their imports remain higher than exports many a times governments of these countries lean towards deficit financing as a tool to fill the gap and narrow down the deficits. Deficit Financing means printing more currency to fill the deficit. This results in increase in money supply.

Impact of Inflationary Trend on You & Me (As Consumer - As Investor)
With rising prices from food to vegetables to petrol, common man like you and me always remain at the receiving end during high inflation environment. As discussed earlier in high inflationary environment on one end RBI keeps raising interest rates in an attempt to control inflation & on other end rising prices pinch common man's household budget. CPI (Consumer Price Inflation), the inflation number that impacts common man more than WPI as it is the measure of price rise at end user level has remained at around 9 to 10% level in last few months.

Higher inflation, rising interest rates, higher input cost & lowering demand affects corporate profitability and results in lower production, eventually affecting the economic growth of the country. If inflation remains at the elevated levels for longer period of time it affects investors as investment in fixed income instruments end up generating negative real return. With CPI hovering around 9 to 10% and your investment in Bank F.D., PPF or any other Postal instruments generate 8 to 9% return, as an investor you end up generating negative return.

The logical alternative for investor is to explore investment avenue with possible inflation beating returns like equity & gold. Investing systematically & in a staggered manner help investors in yielding inflation beating returns.

Financial Planning & Inflation:
Inflation is the single most important factor to be considered while planning for all your future goals. Considering an appropriate inflation number while estimating future cost of your financial goal determine your asset allocation & return expectation.

e.g. If higher education costs Rs.5 lacs today with inflation expectation of 7% this can grow to Rs.9.8 lacs in 10 years time if your kid is of 7 years of age and higher education age assuming at 17 years.

With ever rising cost of living due to inflation it is very important for investors to look at investment class which can consistently generate inflation beating returns. Time & again it is proved that equity can consistently beat inflation over a long period of time and so it is imperative to have equity allocation in your portfolio to keep your investment portfolio floating above inflation level.

Because of the negative cascading effect that high inflation can have on overall economy, high rate of inflation is not favorable specially for a growing economy like India. High growth rate with reasonable inflation of between 4 to 6% could be an ideal scenario for the economy and that is the reason why RBI is desperately trying to bring inflation level down to around 5 – 6% range.

Due to widespread implications of high inflation, it is mandatory for any emerging market economy to keep inflation under tight control. Controlling inflation is of course beyond control of you & me, but we can definitely add equity flavor in our portfolio and follow asset allocation to keep our investment floating above inflation.

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There is now a lot of communication seen on the importance of saving for retirement and what you need to do. This is fully justified and much needed as there is a large population of adults who are yet to plan for their retirement. However, there is not much being written about the decisions that you need to take the after and during your retirement. The time is finally approaching, you are 59.5 years old, and have a big corpus expected to arrive soon. All your goals must have been achieved by now, and the only major goal left would be to maintain your lifestyle after retirement. You have been dreaming throughout your life about how this golden period would be, and how you'll travel all the places which are left unchecked on your list with your spouse. Along with these questions, there are more pressing ones like ... what will I do with the money? How should I start deploying my funds? that keeps ringing in your mind. In this article, we shall talk about a few of these important decisions that you need to make post retirement but before that let us do a reality check on the retirement scenario present in India...

Reality Check

As per the WHO’s World Statistics Report 2016, the life expectancy at birth was 68.3 years in India which breaks down to 66.9 years for men and 69.9 for women in year 2015. The life expectancy at various ages

has been continuously increasing owing to better medical facilities. Life expectancy at 60 was 17.9 years between 2009 and 2013 compared to 16.2 years between 1991 and 1995. Life expectancy at 60 was always more for female and male with the difference being of nearly 2.5 years.

However this is a global figure for all Indians, urban and educated population in India have significantly higher life expectancies. some advanced states like Kerala have life expectancy over 75 years. Another eye opening stats shared by HSBC recently is that data nearly 47% of 'working' people in India have either not

started saving for their retirement or have stopped or faced difficulties while saving. Clearly, we are expected to live longer than the figures presented here which means that we would likely have over 20 years of post retirement life.

Asset Allocation

An important decision before investing is the amount of kitty you have and the asset allocation needed which will sustain your kitty till you need it during your retirement. Most people prefer not to risk their money

at all and divert their entire retirement corpus to traditional debt products, such as fixed deposits or bonds or insurance policies. These schemes do offer protection of principal but yield low returns. Since the returns will not be able to catch up with inflation, you might fall short of funds in future. Instead, debt mutual fund schemes do offer better post tax returns at acceptable levels of risks for you.

In a falling interest rate scenario like India, debt funds are considered as good investment option even for long term. Further, if your retirement kitty itself is small which may not last long, then there must be some planning on growing that kitty. This can be possible with a small portion of your kitty, say up to 20% being invested in equities for long term (over 5 years at least) where 80% of the kitty is for risk-free consumption during that time. You may further reduce this risk by investing slowly through Systematic Transfer Plan (STP)

from a debt to equity scheme.

Regular flow of Income

Since there would be no new money coming in, you should go for lump sum investments with regular return options like Systematic Withdrawal Plan (SWP) or dividend option schemes of mutual funds for meeting for your monthly expenses. You may also be receiving rental incomes or you you may deposit a lump sum in

fixed deposits or bonds to yield interest income. Those who do not have adequate kitty or regular flow of money may be forced to pursue some commercial activities post retirement, which is not a bad choice even if you have a adequate kitty with you. Working, for money or otherwise, after retirement can help you be more active and alert and this will help you socially, economically and physically too...

Health Coverage

Medical expenses will shoot up like never before in your retirement period and you may never anticipate what will hit you and when. The best idea is to get adequate health insurance coverage as soon as possible. Ask your children to cover you and your spouse in their personal family floater health policies. Most big organisations also provide parents health coverage at nominal costs - ask your children to enrol for the same at earliest. It can be a big relief for you and your children when any need arises. An important point to note is never to discontinue any running health policy you have, unless required. Buying a new policy at this age can be costly and you will have limited choices to choose from.Other important decisions...

Contingency funds

Apart from your regular expenses, emergencies can pop up from anywhere and anytime. You must be able to meet those contingencies and be prepared for them with the help of an emergency fund. This fund should be liquid enough to be able to serve the purpose and in such arrangement, if possible, that it can be accessible by your family too.

Estate Planning

If you have not done it yet, you must do it at the earliest. It is better to hire a professional or a reputed service provider to make your will. However, will is only one instrument of estate planning and you may like to set up private trusts, have business succession planning done, make gift arrangements, etc. Appointing of appropriate nominees and joint holders for your assets is also important at this stage. As far as a will document is concerned, it is the basic need to ensure that your assets are transferred in the manner you like instead of the law taking its course. Ensure that you have done all necessary pre-planning and discussions

for same to avoid any family disputes that may arise later.

Managing investments

Keep it simple:

Don't try to complicate your portfolio by including products which you do not understand. Invest in something only after you have acquired adequate knowledge about its functioning, return generating capabilities, risks involved, etc. If it is difficult to comprehend, you might as well omit it than keeping the possibility of facing difficult circumstances later. Don't lock in: Retirees often put a huge lump sum in annuity schemes offered by insurance companies or some other pension / small savings schemes in lieu of regular cash flow throughout your life or for certain number of years. It offers certain benefits like regular income, it covers longevity risk, and reinvestment risk. On the flip side, these investments are illiquid, offer lower returns and the returns are taxable. So you should consider these pros and cons before investing in such pension plans, and allocate a appropriate portion of your portfolio to the same.

Tax Awareness:

The returns of most investments are taxable and tax may be deducted at source. If you are not falling

under a tax bracket, you should take care that you are not paying taxes. For e.g. interest on bank deposits is taxable if it exceeds R10,000 in a particular year. So you should make sure that you submit form 15H in time, so that your interest is tax free. You should also consider the tax impact of various investment products before investing.

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