Spend less or Spend wise?

My company makes software for spend management. But that is not the reason for writing this article. It is a video, which was seen in YouTube a couple of days back.

In that video, people are chosen randomly and are asked what they would do if they get Rs 500. Different people gave different answers. Some wanted to party, some others wanted to use it for things like school fee and books, while a handful of others wanted to just keep it.

What do we do when we have money in hand? Does our mind tell us to keep it and not to spend much or to spend wisely?

The point is - if the people in a country chose to spend less, the income of the country is no way going to increase. One example, which was given as a comment on that video, Suppose I get Rs 500 and I choose to spend it for a hair-cut. I get the value of Rs 500 and the barber is now richer by Rs 500. Now the barber uses that money to buy vegetables. He gets the value for that money and now the shopkeeper in that vegetable shop can use that same money for his children’s education.

So, each time when money passes from one hand to other, one person gets the value of his/her earning and the other person is richer by Rs 500. Each time, country's income increases by Rs 500.

Now, consider the other scenario. I have decided not to spend my 500 rupees. Thus money doesn’t circulate through the barber and shop keeper. Their business is less at the end of the day, which results in less income for the country and poor/no education for the shop keeper’s kids.

The example cited above is the small scale version of what happens in the society. Now the question is whether the money reaches the bottom levels. If the money circulation of only among the rich, the result would be, rich becomes more rich and poor remains poor. The decision of how to spend the money plays an important role.

Another thought. If distribution of wealth is uniform in our society and if every person is as rich as the other one, do you think there would be carpenters, auto rickshaw drivers, tea-shop owners and hotel waiters? As these are low income jobs?

There can be richer or less rich people. It is poverty which needs to be wiped off. It is not the equal distribution of money which is required in this country. It is wise spending. Bear with me if I sounded like an anti communist at any point. If you can’t, feel free to shout back!!!

Disclaimer: The opinion in this article is mine and do not reflect that of my employer. J

Note: Spending Rs 500 for a hair-cut may seem a bit weird. I took it directly from the video comment. Take it for that or replace with something else. ;)