A couple of days ago I did a post saying ‘Earning well but poor part 1’, now here is a sequel…

6. You rely on others to take care of your money: A classmate who is a relationship manager in a bank, or a friendly uncle, or …..hardly matters who. It is nice to say ‘I trust him or her’ . You have to, must, must, must understand the logic of the investment or the saving plan. You should know why a gilt fund, why a liquid fund, why equity, why ppf – just blindly doing / allowing somebody else to do is STUPID. I know of one girl whose husband’s ego did not allow her to ask. He has invested HER money in ULIPs.

7. You try to make a quick buck: You try to get into some ‘get me rich quick’ schemes regularly and lose money. You buy ‘z’ group share and that is your idea of a good investment. Nice to know that you think you are investing. However, in clear terms what you are doing is an unplanned ‘throwing’ of money, and ‘hoping’ it will do well. Sadly, hope is not strategy.

8. You are unprepared for anything: You do not have medical insurance, term insurance, an emergency fund, …so when bad things happen, well it hurts more. Just too many of you have no clue about what to do if you fall ill, lose your job, your landlord asks for a fresh deposit and an increased rent. Why you cannot even plan your honeymoon – so a last minute ticketing takes your total cost from Rs. 65,000 to Rs. 120,000. Now you know why Hdfc bank is so damn profitable, do you not? LOL.

9. You have dreams, NO GOALS: Yes a few of you have well articulated goals, but that is an exception. Saying ‘I want a house’ or …whatever…means ‘wishful thinking’ that is all. To repeat, wishing is hoping, that is NOT strategy. Goals have to be well articulated, written down, practical and WORKED upon. Otherwise it is a wish list, and soon a lament list – NOT a goal list.

10. You have NO patience: Saw it, must have it. List the last 5 things that you bought – costing at least Rs. 5000. Then see how much have you used them. Was not each of these things ‘life changing’, ‘must have’ awesome products? what happened AFTER you bought them? Stop competing with the shop keeper – he is selling, YOU are buying, dude.

11. You care about what your pressure group thinks: Most (if not all) your assets are to impress others. So the Apple phone, the KTM, the house, the shirt, the shoes, the places you plan a vacation, the hotel you stay – goddamit – 100 years ago you would have been called a slave.

12. You are slaves: to your cook, your maid, your play station, all your screens -mobile, laptop, ipod, kindle, ipad, ….God you cannot live for 20 waking minutes without all these screens, and upgrades.

13. Eating out: for your earlier generation it was once a month, for you it is about 3 days a week. When you eat a masala dosa for Rs. 75 – remember you are paying for the material, interest cost, rent, salaries of the cook, server, etc., ย infra costs, margin of the hotel, etc. Made at home masala dosa (remember you are paying Rs. 3000 for a cook?) it costs you Rs. 12. Here again you are earning too well to think of small change, right?

http://www.subramoney.com/2008/07/living-beyond-your-means/ย 

 

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  1. Point no 6 stands absolutely true. The day I got my first salary, I was introduced to our LIC Uncle by my parents. While he showed me the different policies I should invest, I showed him the XIRR calculations of his policies. He started ranting about ” These boys of today …..”

    I told him that I want to build my wealth and not yours. ๐Ÿ™‚
    PS: My parents have started to think me as a waste since then

  2. Lol !! Subraji, Same was case as Shivam wrote above. I started working in 2006 and all i could learn from last generation was, put money in FD, NSC, Post office recurring ..LOL. I started learning and investing in equity (direct and MF) since 2006 and got much better return till date. ๐Ÿ™‚
    It was all possible because “internet (and Many like you who posted gems over there)” was there to guide me.

    And after all this, all i could hear from last generation that I gamble with my money…Lol

  3. Subra Sir,

    I went through this stage early in my earning life.The buying pangs still recur if my wife is not with me in the mall. But I started a small strategy, I decided on a small amount each month which must be spent on impulsive buying or luxuries in life. (5000/- for Me my wife & Kid togather) nothing beyond this & no carry forward, if money is saved it is invested in aggressive Equity mutual fund(earmarked for luxuries), initially i used to spend this amount withing 1st week,but now shopping enthusiasm is reduced like anything & have not spent anything out of this 5000 in last 6 months.Just thought I would share this having made above mistakes allready……

  4. @Nitin,
    You indeed gambled. You must have invested in equity without knowing bigger picture (why it is rising, why profits are rising, what are pitfalls). It is just that you made money in that gambling. If you are not making informed decision then you are gambling.
    Also, equity builds wealth over long term is meant for growing economies. And about India, the assumption is it will keep growing for next 2 decades. It is just an assumption based on low labor cost.

  5. @Sanjay,
    Appreciate your post. But please understand that you need to pay some fees to learn and acquire the skill. You can’t hope to start making profit from day one. I call it gambling when you don’t know what you are doing. I started investing / trading with Rs. 100/-, didn’t jump off suddenly to get rich quick kinda :). It took countless hours just to equip myself with how to read the financial statements. And heck, I can’t claim I still understand it fully.
    I made my trading account separate. Started with small capital. Kept it growing. Never mixed trading with investing. Countless hours spent in watching market tick by tick. Did mistakes, learnt from them, did bigger mistakes and counted them as my fees for learning. Eventually, started making decent profits.
    So yes, you are right, I would have gambled If I hoped to get my money doubled from the very first day.
    Anyway, I don’t get the logic of seeing big picture where the market is going and all that. I don’t understand what is long term. For me long term is following the big money as long as they are in market and get out as soon as they exit. If i could capture 50% of the trend they had enjoyed, well I am happy and much better than most of the people makes in MF and Long term investing.

    I don’t get all those growing economies funda too. It is not that easy.
    So for me, its all what i see at present and I act at the present scenarios. No hope and no future prediction please !!

    So I am an equity guy but hey I am all in debts fund right now. ๐Ÿ™‚ 14% and 12% in year (2012) was enough for me (Net 26% ).

  6. Again a good one subra sir.

    Lot of my friends opted for insurance policy just because some one told them it is good or some one else in his/her friends circle is doing that. Having a goal and only going for schemes that match that goal is something I learnt from reading your blogs.

    Thank you.

  7. Good Advice. Unfortunately the people who needs these advises do not read these columns. The folks that read your column already have some financial education and generally they do save. They may have made silly mistakes in their life, I bought Teak Plantation schemes from Sterling Group and thought it was an excellent decision. Similarly I invested in penny stocks thinking they will all recover. Even some of my Blue Chips did not turn out as useful as I thought they would. After more than 10 years in the investment market I finally realized that I should give my money to professionals and I started investing in Equity Mutual Funds. Here again I made all sorts of mistakes , I bought countless Thematic funds, I switched funds based on their rating and saw the ‘bad fund’ turn around and the one I chose went from good to bad. However, in all these the only thing that saved is that I constantly put a high percent of my earning into investment and over a period of 20 years the compounding effect had made me wealthy. I say wealthy and not rich as I have enough for my consumption level. So anyone who is young and feel that your situation is out of control, do not lose hope, you can change things. But start as early as you can. Do save every month even if it is only Rs 500. It will be a large sum after 30 years.

  8. Subra!

    What do you have against KTM-Bajaj?! You are so mean, you always use KTM as your favourite whipping toy. Because of you I have put away my dream of buying a KTM and paying an EMI. All that money – about 70k now & growing – I have parked in shares & MFs! LOL!

    But I suggest you use other bike names to abuse once in a while the Kawasaki Ninja (expensive), Honda CBR (good bike – only true contender for the KTM), Hyosung (maintenance & spares will drain your bank balance) and Harley Davidson! How can you not blame Harley Davidson? So, stop being so mean to KTM. Especially, now that I am on my way to buying it in full cash in a year or so without paying a single paisa interest! All thanks to your meanness and sarcasm! ??

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