I meet people in the ‘well-off’ cadre. I mean people earning not less than Rs. 3L per month cannot be called ‘not doing well’ correct?

Some of the things that I tell them, is impossible to believe. Not sure HOW many of you will even believe this (Subra do not think you know everything and we are all dumbos is a reader comment, …). So let me enumerate:

1. You need to spend LESS than you earn: if people do not understand cash flow, borrowing, etc. MANY a time do not even realise that they are spending MORE than they are earning.

2. However HIGH your current income and your life-style, the day you RETIRE you will need to provide for all this at your own cost.

3. YOU BORROW only and only if you need the cash OR you know the IRR of your portfolio – and you are borrowing because the interest rate at the marginal rate does not matter. You borrow because the assets that you wished to liquidate are now not doing well. You live within your means, simple.

4. Better to earn interest rather than pay interest.

5. If you have a friend who is in a bank / life insurance company, he is first a salesman, and then a friend.

6. Borrowing against gold, house, shares, life insurance policies are ALL SUB-OPTIMAL unless the loan is for 2-3 months ONLY.

7. Creating wealth by borrowing is a brilliant path, and has huge perils. If you do not understand this, ask Vijay Mallaya.

8. Equities may not do well for 5, 10, or 15 years – so if your next EMI has to come by withdrawing from an equity fund, God bless you.

9. All asset classes make money, all asset classes lose money. What makes money is USING your brain. Sorry, no other solutions.

10. It is not so difficult to get a 2% real return even for long periods of time. However if you need to get or think you can get 12% REAL return, go for a medical check up. Hallucination can be cured, I guess. 

Related Articles:

Post Footer automatically generated by Add Post Footer Plugin for wordpress.

  1. #5 is excellent. i got a call during the month of march from a ‘friend’ who managed to track down my phone number thru someone & we established contact after about 6-7 years. after 5 mins of small talk, he asked me whether i need help with tax planning, as he had targets to meet since he joined an insurance company recently. i don’t think i saved that number though 🙂

  2. I feel society creates lot of pressure on high earners. While we may argue in several dimensions but bottom line is different. The higher earners are supposed to own a better car and phone than your subords. Furthermore luxury home in posh area, branded clothes, suites, fancy jewellary for the wife, best school for the kids, foreign vacation, expensive restaurents and the list is endless.

    As expenses catch up with life style, it is little wonder even high income earners could end up with little money to save or invest. As matter of fact, your Rule # 1 makes lot sense for any category of people.

  3. ‘MANY a time do not even realise that they are spending MORE than they are earning.’
    i think, one should consider the finance cost and depreciation of the capital items e.g. family car, home appliances etc. as expenses in the current year.

  4. Interestingly, during a school reunion after 25 years, i found that beyond the beautiful facade lies bottomless abyss! Some of the guys who came in flashy cars,sported expensive watches and mobiles,fancy living addresses were also neck deep in debt despite high level of income, while some of the average joes, seemed to have planned real well despite average income and were virtually debt free! The problem is when the money roles in the brain shuts down, ego and whims take over!

  5. I always say we should practice
    Income-investments = expenses
    but generally people follow
    income-expenses= investments

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes:

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>