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    What is Dissaving?

    Dissaving refers to the behaviour where an individual spends money beyond the available income. This may be done by drawing money from a savings account, taking cash advances from credit card, or borrowing from the future income, i.e. a payday loan.

    Negative savings is another way of referring to dissaving. The popular example of dissavers is the government. Since India is still a developing country, the government borrows funds from the World Bank to finance its developmental programmes and schemes for the public.

    Understanding Dissaving

    If the individual continues with dissaving, it may lead to a downward spiral until his savings are all used up, and available credit is completely exhausted. However, not all dissaving practices affect negatively.

    Consider the case of a retired person who has saved up all his life to lead a comfortable life by dissaving after retirement. He might have a certain fixed income. He may use up his savings to manage the excess expenses. This can be called planned dissaving.

    Reasons for Dissaving

    The reasons for developing the practice of dissaving can be many. It can range from poor judgement to unavoidable response to an unexpected crisis as in the case of COVID-19 lockdown. There can be events that are out of human control, leading to a scenario where the savings are exhausted, causing a cash crunch.

    In other cases, dissaving can begin with digging out savings to repay credit card bills. With time, the practice grows up to a huge credit card bill making most of the income go towards the card payments with a high-interest rate. The monthly savings will eventually reduce and gets nullified so as to make debt payments leading to a financial disaster.

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