It’s been 5 years since Rajesh started his full time job. In the past, he has done many part time jobs to support his education. Apparently, Rajesh comes from a very well to do family. But it’s his father’s wish to have Rajesh finance his own education and take care of his life ahead. It may sound hard but this has actually worked in his favor. There have been times in the past when Rajesh may have complained to his father innumerable times but his father didn’t seem to give it a second thought. As a result, today Rajesh is living a dream life just when his other peers are trying to get hold of their careers. But there is one problem. Despite of making a lot of money, Rajesh seems to be running out of money all the time. As usual, just like his peers, every month end he would look at his bills and say, ‘Mumbai – A City of Dreams’ and accept his fate that he will never be able to save anything. Just like what every son does, when faced with a problem the very first person to turn to is – father.
His father listened to the whole story with great patience. After a brief moment of silence, father said, ‘Rajesh just do 5 things that I say henceforth and money will never trouble you.’ Let’s look at those golden nuggets which changed Rajesh’s life forever.
It’s not that people with the best careers or high income earning professionals have the most comfortable financial future post retirement. However, during the course of a career, everyone seems to think that way. The next job switch, promotion, bonus, commissions, etc. will lead to a better financial future, yet the reality is far from truth.
Rajesh was driven about creating a better career because of which he never gave enough thought to his money habits. His father gave him a small formula : Income – Saving = Spending
Budgeting for savings is equally important. Every month, a person is exposed to installments to be paid for home / office, car / bike, fees for children’s education and other adhoc expenses. Most of these expenses are directly debited from the bank. Hence, it’s wise to first decide how much to save and then spend.
Rajesh’s father asked him, if he ever considered his job being lost? Answer was obviously No. However, Rajesh thought a lot of his colleagues stood the chance of losing their jobs. It’s a classic case of underestimating bad events that happen to a person and overestimating the same bad event happening to some one else. As a result, his father asked him if there was enough money in the bank to keep the house floating for 6 months if Rajesh ever lost his job. Again, the answer was No.
As a result, Rajesh now considered keeping an emergency fund which would sustain the expenses of his house for at least 6 months.
To add a small note, emergency fund should not be created for purchase of a gadget, downpayment for a car, or a vacation.
Everyone takes insurance when they start working. Usually, at start of career the cover seems to be adequate. But as life progresses, not many bother to look at whether their insurance cover would still be enough? Even the omega question of whether it’s a plain insurance policy or an insurance policy which has an investment option is never thought about.
On hearing this, Rajesh took a note of this and called up his insurance advisor to review his policy the very next day.
Doctors always suggest every person to have a regular health check up done atleast once a year. However, it’s common to see very few follows such an advise. Most others visit a doctor only when something serious happens to them. When Rajesh’s father asked him to keep a wealth manager, the first sentence which he said, ‘I can’t afford a wealth manager, I don’t have enough money.’
More often than not, people miss out on keeping a wealth manager under a common notion that they don’t have enough money, just like they won’t visit a doctor because their health is not bad. In this notion, a person misses out on the fact that it’s important to start from somewhere. Starting small builds a solid foundation of future wealth. Also, it provides enough flexibility in terms of asset allocation.
Rajesh never thought about making investments in different asset classes. He always had invested his money in shares of a company suggested by his friends. A small fixed deposit was created just because bank managers had asked him to. Yet, he wasn’t aware about the return on investment in both his investments. When his father took a note of it, Rajesh replied with a stern voice ‘it’s not my job.’ To a large extent, he is right. It’s not his job to select a good company to invest or check out for any further options available. That’s where his father suggested on having a wealth manager look at it.
A plethora of investment options are available to every investor, such as mutual funds (equity and debt), commodities (gold / silver), portfolio management services, liquid funds, etc. Since, it’s not the job of every person, they don’t have enough exposure to the same. Even creating different allocation strategy with these investment options are not taken as seriously as they should be.
For more please read the asset allocation series we published some time back – Series 1, Series 2 and Series 3.
The real use of money is the very problems it helps to solve. Rajesh could never believe that in the very rat race of his career he had forgotten that it was his father’s birthday. Rather than celebrating a birthday, they were worried about his finances. To which his father asked, when was the last time he took his wife out for a long drive. Rajesh could barely remember, when he looked at his calendar it was already 6 months and they had not even taken a day off from work. Weekends were spent either sleeping or working.
If we are working so hard for money, does money work hard for us? Think about it for a while. If money is not working hard for us, then are we not missing out on the true golden nuggets of our life such as family, friends, life partner, children and our close confidants. When was the last time, you had a cup of tea with your friends without an inch of stress of work or when was the last time you played some sport with your children? That’s where it’s best to have an expert wealth manager who makes our money work hard for us, while we steal these little moments of life.
– Jinay Savla