Most of us have only a vague idea of our OWN balance sheet…but we have a reasonably good idea of our friend’s balance sheet!
The shiny new car in our friends house looks so alluring. We need to buy it, after all he is like us. Or is he?
Is he really like you? Do you really know him that well? Do you know HIS balance sheet or are you trying to guess?
I know a 38 year old who has a dividend income almost equal to his salary income (including bonuses, net of tax). Not too many people know that – NOT EVEN HIS WIFE. So if a colleague of his tries to match this man’s occasional splurges (his expenses are about 30% of his salary!!, and has no borrowings, so no EMI). So if he does take an European vacation or gets a new car – the world does not know that he is paying for it outright and has ZERO interest expenses.
Most people do not know :
1. How much they earn and how much they spend
2. How much they can save, how much they are saving, and how much they can invest.
3. How much they are insured for and how much is the premium paid (whether they have Endowment plans, they do not know)
However most of them will want to buy things far beyond their ability. They have no clue about their OWN financial position, so how will they know the financial position of their friends?
Do they know whether the ‘gorgeous’ things were a gift from their parents? Or that they had some equity shares which turned a mutli bagger?
I have friends who spent upwards of a Crore on their daughter’s weddings…hey these are guys with multi crore portfolios. If guys with portfolios in lakhs try to emulate the really rich guys, it will HURT and hurt really bad.
the IMAGE, in most cases, is not the REALITY that we assume about others. I know of a couple (in debt for their house) who have 2 daughters – one in a job and one studying. They take expensive vacations, buy insanely expensive things and have no savings or investments (except for some gold jewellery!!). I have never inventorised their investments, but I have a fair inkling of what they have. I am not saying that I want to influence their lifestyles, but just wondering whether they understand their priorities.
Sigh. life is not so simple. Mathematically or Accounting wise.
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