Every Hindi movie buff has heard the dialog ” tum koi karodpati ho kya” – like the word ‘millionaire’ in the US. Lets face it once you have a house in a city like Mumbai, and your loan paid off, the chances are that you are a ‘Crorepati’ as we call it. I guess that does cover a lot of the people reading this post.

So let us make the target a little higher..how to be a US $ Millionaire without taking your own house (self occupied). This means…how do you accumulate about Rs. 7 crores. Well one book you should read is ‘The Millionaire next door’. Shows how the millionaire is perhaps staying in a middle class to upper class kinda locality, driving an old car, taking local vacations, educating his children in local schools and colleges…I AM ASSUMING YOU ARE EARNING AT YOUR OPTIMUM level – the single biggest and smartest thing to do is to earn to your HIGHEST CAPACITY and invest smartly..this post does nothing for you to increase your professional income!!

According to statistics from the book, “more than 80% [of U.S. millionaires] are ordinary people who have accumulated their wealth in one generation.”

What really stops you in this journey or puts you in the ‘Not a good wealth accumulator’ category?

Did you buy a house far beyond your ability to buy or need to buy? (choice of location and size). Beware: you easily fit into the house your mind thinks you ‘deserve’. So both your children ‘deserve’ separate rooms, you and your spouse need space so the bedroom has to be extra large with that sit out and television, your parents need a room, you need a study so that you can work on days that you do not go to office, you need an extra big drawing room in case you entertain, and of course you need the guest house. So your mind can easily justify a 5 bedroom, 4 bath, 3500 sqft house in a reasonably well located suburb!! Sadly, this comes at a steep price of Rs. 6 crores. Alas it also has a monthly maintenance bill of Rs. 23,000. Ask yourself did you make AT-LEAST a 50% down payment for your house (forget the fact that the lending institution expects you to pay only 20, it is 50 which is prudent).

Do you drive the big car? I do see some of the kids I meet who buy a car which is 3x their CTC. A bigger car uses more fuel and obviously takes a bigger EMI and maintenance costs. This has another problem – when you upgrade every 4 years instead of 11 like some seriously rich fund managers do. No, not sensible at all. Another impediment.

Sadly all these material stuff – a big house, a huge range of dresses, a big car, nice vacations….do NOTHING towards making you rich or help you retire early. They carry a huge EMI, stress, catching up with the Joneses syndrome, and not enough money for retirement.

Do you invest safely? Apart from consumption, the next big problem is keeping all the money safe in places like PPF, EPF, NSC, bank fixed deposits, ..  no assets like equities or real estate. This comes from lack of understanding – and because we lack the clearness of mind, the opportunity or the capability to make timely decisions, we opt for simple, low-volatility investments. If you do not invest in volatile asset classes (short term Real estate), long and very long term (equities) – your money will sleep and you will not reach the $ million mark very easily.

Do you pay too much taxes? The greatest change I have made in people’s investing style is shifting them from taxable bank fixed deposits to Income funds with growth option. This dramatically changes their total taxable income. One more sensible shift is from an equity fund, and an income fund to a balanced fund. This means the debt portion of the balance fund is also coming tax free because of the 65% equity rule.

Largely in my head these are the main reasons why you re an ‘Under Accumulator of Wealth’ – apart from late start, interrupting compounding, etc. These days i meet kids who have done all of this…AND WILL END UP worse than their parents.

Hopefully Subramoney readers will be alert to these pitfalls…



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  1. I am sure that many of the Subramoney readers will not fall for these value traps, you can count me in. But due to compulsions from the paternal families I see many people are forced to buy RE which is the biggest factor for the surveillance of the RE industry… 🙂

  2. Brilliant Raj learn to own your decisions. Stop blaming your parents. If you parents asked you to have 4 children AND you have them..the question I am going to ask is why the f….did you? and do not hide under surveillance reports.

    Your life, you s….d up by buying a big house. Who asked you to buy is YOUR problem, not mine.

  3. Hi Subra,

    Thanks for one more awesome article.

    I have been reading your blogs for about 6 months now and as a result, have started a SIP in a multi cap fund to begin with, paying 45% down payment for RE that I’ve bought and foreclosing personal loan and credit card usage has come down to almost nil.

    Was wondering why I did not start reading earlier, would have been better off now.

    Thanks a ton once again. 🙂

  4. I’ve read the book. Although dated (published in 1998), the principles are sound and still applicable.

    With all the internet and startups book, I would love to read an updated edition to see if and how things have changed.

  5. Tax free or even deferred income is becoming a rarity with the Govt discovering novel measures to extract maximum from salaried and tax compliant lot, while incapacitated to touch the evaders. But yes one has to find whatever has been left over in the laws of the land.

  6. What is someone is already at the higher mark you suggested? Does it mean he/she can retire early and do what one pleases. This of course violates the principle of maximising the “highest earning period” but then what is life if one doesnt pursue one’s passions or do what he/she pleases (provided the nest egg is taken care of by meeting the high-mark number). Your thoughts and if possible a blog post on this!

    ps: really enjoy reading your blog and your kickass views..

  7. Sir,
    I am very happy to read this article as personally I am justified. For a long time, there was a lot of peer pressure on international vacations, swanky localities while I stayed put in my own home, vacation money was invested in Real Estate (plots) and ensured that I upgraded my car after 10 years due to solid reasons while completely being within my budget.

    I feel your article should be read by each and everyone who is just starting their career. Wealth accumulation should be carefully thought-through and I always believe in the age-old adage “Stretch your legs till the mat ends and not beyond it”.

    Thank you sir for your wisdom.

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