Perception of Equality, Delusion of Social Media and Financial Captivity

Internet and Social Media have been doing just that they are supposed to do, bringing the world closer. They have given us the magical ability to take a peek into the lives of others, although we can take a peek at only the part that they want us to see. This has resulted in the perception of equality or the desire to lead equal lives in terms of material possessions and well being. Delusion of a perfectionist life portrayed on Social Media has caused many to step in the spiral of never ending wants.

And I am not saying that this is bad, it is subject to personal situation and economic context. During the post world war economic boom in America, low lending rates and manufacturing innovations had suddenly empowered the middle class to own and access everything that the rich could including cars, home appliances and college tuition. At that point in time, owing to rising wages across classes and perhaps the lowest lending rates, an average person could access and afford everything that the rich could, enlightened by the same radio and television programs and delivered by the same mail shopping company.

However, despite the increase in lending rates and income disparity over the decades, the average American consumer has had a hard time accepting and acknowledging the changing realities. Owing to the new circumstances, the percent of spending to income ratio is drastically different for the rich and the average, resulting in bizarre debt ratios. For instance, the rich may be paying only 10% of their income towards house mortgage and car lease while the average people wanting to live up to those expectations may end up contributing 50% of their income towards house rent and car lease.

With Social Media in the picture, this situation has only alleviated for the millennials living in an oblivion financed by Venture Capitalists discounts and supported by inheritance wealth. With the speed of information faster than the thoughts of an average person, the perception, or rather delusion, of millennials convinces them to act rather irrationally. Once a new iPhone is launched, it is all over Social Media stories and within weeks many own one while the most want one. And it is not only gadgets but also fancy weekends and holidays that have made their way into our minds through the glamorous path of Social Media and made a permanent place in our perceptions.

The millennial perception may be the same but the way that they finance the perception into reality is drastically different. For instance, when my millionaire friends buy a luxury car it is financed by a part of annual profits and is a fraction of their overall assets; whereas, if I buy a luxury car, it would be financed by big debt at high interest rates and be a considerable part of my assets (savings). If this financial jargon is complicated for you to understand, in simple words, your rich friend can conveniently buy latest iPhone with cash from his pocket, while you end up maxing out your credit card and paying installments over the next few months.

So whats wrong, YOLO after all! You Only Live Once and you should perhaps enjoy the most. Well agreed, but I do NOT want to get temporary happiness today at the cost of tomorrow’s long term peace. Although it is important to live and cherish the moment, it cannot be at the cost of tomorrow. And access to credit enables you to mortgage your tomorrow!

Since the last few years, consumer psychology and marketing concepts have become so refined that they can sell anyone just about anything. While the only limiting factor is the ability of the consumer to pay for the goods. And this has been solved through immediate access to loans for consumer goods, especially in developing countries. At this point, in India, I am just waiting for the day when most people could buy a car using their credit cards. With current projections of inflation, it won’t be too long.

Well, there is a counter argument that if they are allowing you access to credit, they are assured about your ability to pay back and you are correct. Just as the Zomato delivery guy can payback for his iPhone SE, I am sure that you can payback for your iPhone Pro Max! And this is not the only similarity, both are stretching their debt limits and mortgaging their future time for pay for expenses to be written off today! Not literally but figuratively for the ones too specific about financial terminologies.

But what is wrong? You will get bored with your iPhone and car in a time span shorter than your payback period, but you would still be held captive. In other words your future earnings, along with the corresponding efforts, have been committed to pay for things that would have depreciated, or lost all their value, by the time you pay back. And one you step in to this zone, it turns into a vicious spiral as today’s stretch for an iPhone will evolve to tomorrow’s stretch for a better car and later an additional bed room for your new house, so on and so forth along with the countless small stretches in your routine such as the Grande coffee!

Its easier said than done, and I have learned it the hard way. As a millennial it is hard to resist the temptations but so far I have adopted frugality quite well and prioritize saving for things that contribute to future gains or just help me sleep better. Debt stresses me while a few extra bucks in my bank helps me get a burger or avoid the regret of not having enough money to buy stocks when the market crashes, most recently during the COVID lock-down. Personally, avoiding the vicious cycle gives me peace of mind along with a sense of freedom, which we will explore in another blog.

Header Image Photo by Prateek Katyal on Unsplash