Money lesson for 2025: Keep faith in basics

There is little reason to panic: Stay diversified between debt and equity, instead of chasing high-risk instruments or treating the stock markets a gambling den

- Monika Halan

If you were to read the news reports about your own earning, spending and saving patterns, you would think that you are earning less due to stagnant wages, spending less due to inflation, and saving less due to repayment of loans. And this is contributing to a slowing economy and therefore, the cue is to exit markets and stay safe. After the stock market boom of the last four years, you are being told to get out of equity. The real story of your money is a bit more nuanced and needs to be understood in the context of your spending and investing decisions and their impact on the economy. Understanding this context is important for your money decisions in 2025 and beyond.

News reports tell us that we are both consuming and saving less. Let's look at consumption first. What data actually tells us is that the rate of growth of consumption has slowed, and not absolute consumption. In absolute numbers, India's household private consumption expenditure in 2023, according to World Bank data, was $2.25 trillion up from $2.04 trillion in the previous year. However, the rate of growth has dropped from 5.9% to 5.35% over this time. But compare the share of household spends to Gross Domestic Product (GDP) across a decade and you see growth in its share—from just under 58% in 2013 to over 60% in 2023—and this is on an expanding GDP number.