If there is no money to pay rent or to put food on the table the agony is clear and present. The urgent need would be to get a job, any job, and get some stability in life. The gut-wrenching feeling where bills are running up and with no source of income is not a pleasant place to be in. Fortunately, most of us are better off than a homeless, jobless person.
From the wealth manager’s vantage point, they counsel clients who are in the middle or at the other end of the financial spectrum.
32-year-old Saurav after struggling for over a decade got lucky. His business took off and he, suddenly and very visibly became very wealthy. Now, his problems are jealousy and taunts from his friends and family. The common bond with them, while he struggled was the pain of middle-class life and the joy of the prospect of escaping poverty.
Apart from their jibes, he is confused about his lifestyle now.
How much should he spend on a new home? Or a new car? What if he splurges and his income dwindles? He worries about becoming a laughingstock among his friends and relatives.
It is the Indian mentality to be as frugal as one can. After all, we don’t have Uncle Sam to save us from a rainy day. The wealth manager cannot predict the future of Saurav’s business so he may well advise him to save and invest the maximum possible he can.
On the other hand, if Saurav does not enjoy or cannot enjoy any earned wealth, what is the point of earning it? The wealth will be consumed by the next generation who will be left with few challenges, even less motivation, and entitled privileged lives.
Money has a lot of emotions attached to it. It can bring in a lot of comfort in life along with conflicts. The stress and the worry of losing newfound wealth is as painful as not having any. Saurav has to upgrade his life slowly and not be afraid of going back and downsizing if his income and business falter. Naturally, he should save for retirement and follow the wise counsel of his advisor.
Living forever in a financially fetal position does no good to anyone.
Das 75, has accumulated a lot of physical assets like property and jewellry but has very little cash flow to enjoy his retirement. He owns a couple of properties that he has literally built brick by brick, which he has rented out. His wife has an avid love for jewellry and had collected very fine pieces which she had happily worn over many years. Post-retirement the couple has no problem with their everyday expenses, as they planned for it and live a simple life.
Their money issue is that they do not have liquid funds for luxuries like overseas travel. It is hard to explain passions, Mr. Das loves wildlife, and Mrs. Das’s loves expensive luxury resorts. They lived a respectable righteous life and to justify their passions even to each other ends in a traumatic money fight which no one wants. The sad tragedy of life is to have it and still not have it and be unfulfilled.
It behooves them to sell some low-yielding assets and jewelry and create a cash flow to enjoy life. It seems like a no-brainer type of solution but you would be surprised by how many people live in financial stagnation when the light was just there, right in front of them. They just had to take a little unconventional route to get there.
Morgan Housel in one of his blogs mentions a story by Business Insider about 21 lottery winners who blew it all and went bankrupt. Speculation, spendthrift behavior, drug and alcohol addiction, and a decadent lifestyle may have been the cause of the downfall. Clearly, a windfall gain does not solve all financial problems. It may add to the woes of the winner and they may end up more miserable than before.
There are also stories of young football players rising out of ghettos to becoming millionaires in their 20s and back on the street in their 30s. Some may have blown up their money on vices but some lose because of social debt. Siblings, friends, uncles, granduncles, and distant uncles lay claim to their new-found wealth. They feel obligated to help everyone. Our cricketing superstars, the Sehwags and the Dhoni’s seem to be doing better.
Winners win publicly and everyone knows their net worth, but what they lose is their privacy. They don’t know if their friends are their friends or friends of their money.
Couples and families are tighter-knit when they are middle-class. There is deep enjoyment in coveting a home/ car/watch/luxury bag/diamond, saving for it, and finally owning it. When you can go into any shop and buy anything you want, one has to search for joy and fulfillment elsewhere which is hard. When there are a lot of options, individual preferences create resentment and strife. Wimbledon or Cricket World Cup final? Can’t do both so who wins? Why not a Taylor Swift Concert?
Money fixation and competitiveness with neighbors/friends/coworkers/relatives is a surefire road to despair. Once the basic needs are met and there are adequate savings for the future it’s nice to move the goalpost and continue with your career for the joy and fun of it.
Wiser souls, when they attain their financial targets, get ambitious about other goals like social equity, spirituality, philanthropy, or anything else that they feel deeply passionate about. Financially content people are happier as they don’t create new money trauma.
Sejal Goel
Nice explanation of market Index of BSE and NSE. Interesting article. Kept me glued to read till the end. Got better understanding of the subject. Thanks for writing subjects like these. Pls continue writing.