Guys you know that Apple had sold more than 1 crore iPhones in 2023. When it’s about luxury and ultra-premium smartphones than our India is the fastest growing market in the world and iPhone share is around 71%. The amazing part is that according to a post on Linked in 70% iPhones in India on E.M.Is (Equated Monthly Installment.)
You know the meaning of Debt Trap?
A debt trap occurs when individuals or entities become ensnared in a cycle of borrowing to meet financial obligations, leading to worsening financial distress.
A debt trap refers to a situation where individuals or entities become trapped in a cycle of borrowing and debt repayment that they struggle to escape. This typically occurs when borrowers take on high-interest loans or credit card debt to finance their lifestyle or cover essential expenses. As interest accrues, the total amount owed grows, making it increasingly difficult for the borrower to make payments.
This can lead to a reliance on further borrowing to meet existing obligations, exacerbating the problem and creating a downward spiral of indebtedness. Debt traps can be particularly insidious because they often target vulnerable individuals who may not fully understand the terms of the loans they are taking on or the long-term consequences of their borrowing decisions.
Additionally, aggressive lending practices by financial institutions or predatory lenders can contribute to the creation of debt traps, as they may encourage borrowers to take on more debt than they can realistically afford to repay. Ultimately, escaping a debt trap often requires significant sacrifices and lifestyle changes, as well as careful financial planning and discipline.
Guys you know that Apple had sold more than 1 crore iPhones in 2023. When it’s about luxury and ultra-premium smartphones than our India is the fastest growing market in the world and iPhone share is around 71%. The amazing part is that according to a post on Linked in 70% iPhones in India on E.M.Is (Equated Monthly Installment.)
Which shows us that not many Indians are not able to buy premium smartphones but they want to maintain their social status, to gain social media fame and especially to impress girls but they getting trapped in the web of debt. The official report of R.B.I shows that Indians have a Credit Card due of 2 lakh crore. Their is case that teenage boy stole 1 lakh rupees from his family to buy an iPhone in U.P. When his father knows about it he sacrificed his life due to fear.
If you think that the desire to, purchase luxury items is only in Indians, then you are wrong. A Chinese man bedridden with organ failure after selling kidney to buy iPhone and iPad. in USA which is known as well developed and most educated country has a debt of Credit Cards of around $1Trillion and a large chunk of this debt is of luxury items. Today as we all know that if we want to buy a smartphone most of the people prefer iPhone, we had a desire of buying luxury clothes like GUCCI and ARMANI etc. Watches must be of Titan or Rolex and shoes is of Nike or Jordans.
In desire of buying of these luxury items we all are in a trap which lead to nothing but destroy our lives. As we know “Every shiny thing isn’t gold” in this modern times if we want to understand this idiom we have to lag behind in time. It is said that When the Spanish arrived in South America and tried to befriend the inhabitants of the Aztec civilization, they failed in their attempts but Spanish people gifted them hat, marbles, clothes which is very new to these tribal people.
When these Aztec Civilization people saw these shine and dazzle things then they thought these things are precious and they extending the hand of friendship to Spanish people. In result Spanish people took control on their land, they used their resources in wrong way and at the end they completely erased Aztec Civilization.
We are also trapped in these luxury goods. For some glittery things, we completely ruin our mental and financial health. For example We some times saw the ads of Jio phone that they include the images of villagers in their advertisement posters but just imagine that can iPhone or Rolex will ever use the images or make villagers as their models in their ads Never! because these luxury brands use these ads to set an image that their produces can only be purchased by Rich and Modern people who had achieve much in their lives.
As I mentioned in above example the target audience of Jio phone is middle and lower class people to give them a smartphone at a affordable price. Their is catch that we you are thinking that iPhone audience is only rich or successful people then you are completely wrong because when a Middle Class person see these attractive ads then he or she want to maintain their high social status and successful even if they haven’t done anything in their life and they become a prey to these luxury brands.
If you are a commerce student then you must heard about the “Law of Demand” this is fundamental principle of Economics that “When the price of a good or service goes down, the quantity demanded for it goes up, and when the price goes up, the quantity demanded goes down” but these luxury brands have turned this law on its head or in simple business language it is called Veblen effect.
Veblen Effect “It occurs because the higher price of the good makes it more desirable as a status symbol or luxury item, leading people to buy it as a display of wealth or prestige. In simpler terms, it’s when people want something more because it’s expensive, not despite its high price.”
Their is myth that is luxury brands means high quality which is completely wrong. The features that are available in a 1.5 lakh rupees iPhone almost will be available in a 30,000 rupees Android smartphone. There is no doubt that Rolex watches has manufacturing excellence but you have to wait for a very period long of time and spending a huge amount of money which is not affordable to a Middle Class person.
On the other hand you can easily find the names of manufacturers from whom luxury brands like Gucci or Armani source their clothes for white labeling with just one click on the internet. White labeling refers to a process where one company produces goods or services and another company puts its own branding on them and sells them as its own.
A research of counterpoint shows that iPhone 15 Pro Max which is sold for around 1.5 lakh rupees but the production cost is around Rs. 41,865 only . Another example is of RedBull how sell their can for around 120 rupees the production is whopping around not more than 10 rupees.
This shows the power of marketing which show that the competitor of RedBull in India is Sting. It makes Sting a normal brand but RedBull a luxury brand. As we all know that Shahrukh Khan’s son Aryan Khan launched his clothing brand name D’YAVOL the pricing of a Jacket is around Rs. 2,00,000 T-Shirt is around Rs.24,000 and Hoodie is around Rs. 45,000 but the interesting part is that whole stock was sold out on the launch day on 30 April 2023.
Lets talk about today’s society mentality is that everyone wants to show off and maintain a status in society and it correct is some way because if their is a luxury product then we also have a respect for that product. For example “if you have a friend and his salary is of 15,000 rupees but if he afford an iPhone of 1.5 lakh then we also want to superior then him and we want to have a desire to purchase an upper model of that product to make that friend jealous.” Then you become a prey for that luxury trap and we entangle ourselves and others as well in this trap.
HOW TO AVOIDE THIS LUXURY TRAP?
First we have to completely understand that if we have a luxury product that doesn’t mean that you are rich or successful. One of the greatest investor and a networth of around $122 Billion Warren Buffett uses iPhone 11 which was gifted by Tim Cook CEO of Apple. Before that Warren Buffett uses an old model of Samsung Flip phone and price was around $20. The interesting part is that Warren acquire 5.9% shares of Apple.
Some of other examples is of Mukesh Ambani and Ratan Tata. We don’t usually saw them with clothes of Armani or GUCCI. On the other hand a man or woman with a salary of just 15000 rupees wants to have a desire of iPhone to wear branded clothes etc. “One must be rich by his Mind Set.” At the end of the day you have to manage your financial life by your own.
Finance Experts also advise that we should use our monthly income like 50% on our Needs, 30% on Wants and 20% on Savings. To avoid this debt trap one must stable on their budget. We must focuse that the item we our buying is our need or want. If it is want then we must understand the concept of Depreciation. Depreciation is the decrease in value of an asset over time due to wear and tear, obsolescence, or other factors. In simpler terms, it’s the reduction in the worth of something as it gets older or as it is used.
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