Wednesday, September 14, 2011

The dangers of the face value

For almost twenty four years (discount the first five years) of my life, I have been used to conducting transactions with only the Rupee as a currency. And over these years, I have seen how things have become expensive (or the value of the Rupee has diminished). Moreover, I have been able to develop benchmarks for how much to spend on what item. And also rough benchmarks for monthly expenses and savings required.

Cut to September 2011. I am in Canada and suddenly, I have to spend in Canadian Dollars. Now, the game has completely changed. Suddenly, I have to adjust to the new currency and what can one unit of this currency buy and is buying of that amount, actually worth that value? But, the problem is that I haven't yet developed any benchmarks. One Canadian cent still has a lot of value, compared to one Indian paisa. But, then for many days, it is only the face value of the currency that registers in my mind. And with the mental framework wired to deciding the worth based on the Rupee, many a times doesn't register the gravity of the expenses incurred. E.g., a CAD 1.24 worth of coffee is far expensive than if I would have my own coffee maker. But this gravity doesn't register quickly, as for me the value 1.24 registers as a small number, because I am used to transacting in the Rupee. But, it is significant value for many Canadians. And hence, some of them might skip the coffee for a day and have it only on certain number of days.

This is the danger that the face value of the currency poses. For me to realise the gravity of the transaction, I have resorted to converting the amounts into Indian rupees. This helps me in also keeping a tab on the expenses involved. Moreover, it has led to looking for cheaper alternatives. But, the flip side is that I might not end buying something really needed or beneficial, just because its price in Rupees feels too much!
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