Q1. If a person is well educated he will be good at managing money.

Ans. FALSE. Completely false. Why do you expect a doctor or an engineer to be suddenly good (or bad) at managing money? No, there is no connection between education and money management skills. No co-relationship has been observed at all.

Q2. If the person is a CA or an MBA (finance), he or she will be good at understanding personal finance.

Ans. FALSE. A degree is normally obtained during your young age when you are seriously wondering what you will do in life. Most degrees including CA and MBA finance do not equip you with personal finance knowledge.

Q3. If a person works in financial services he or she will be good at understanding personal finance.

Ans. Absolutely untrue. If a person works in Marketing or Sales he/she says so many things about their own products, that they start believing it themselves. If they are in HR, Accounts, Operations they normally do not understand compounding, SIP, long term, patience, etc. so they keep their money in bank fixed deposits. So again not true at all.

Q4. If a person is a Wealth Manager he can understand markets so they can manage their own wealth.

Ans. Not at all. Being a WM in a bank means you have sales targets, NOT WEALTH targets. So he/she is used to churning, selling products with the highest margins…if they end up buying what they are pushed to sell the chances are it will be financially ruinous for himself/herself.

Clearly personal finance is no rocket science. The fact that it is simple does not mean it gets done. Many people who do it themselves also ruin themselves because of overconfidence or choosing the wrong adviser. I know people in all the categories mentioned above, but will not name them – some of them may even be reading the blog.

more to follow…………

Over the past weekend and beginning this week I have got phone calls from one media house with respect to lost (or losing) jobs. Many people have been sacked from well and high paying jobs. Now many of them are couples working in the same organisation. It gets worse when husband and wife both lose their jobs, and the wife is expecting. EMI on housing loans, cars, student loans etc. have to be paid….

What went wrong?

Well to begin with many channels sprung up (change this to life insurance companies, banks, airlines…story remains the same). They paid higher and higher salaries to attract and poach talent. Suddenly you had many more people than you required. In each location 3 reporters, cameramen, assisstants etc. were being sent. Now suddenly there is a worry on profitability. The board is pressurising. So the employee gets sacked. This is also sadder because the HR in most companies are happy recruiting when the MD says and then SAD when the MD sacks. Most of them do not hire to a plan nor fire with any sympathy.

From the employee’s point of view – he quickly adjusts to his ‘new’ salary. So what if it has gone up from 5 lakhs in 2002 to Rs. 54 lakhs in 2008? Well today they are not really too many companies willing to pay Rs. 52 lakhs to look after risk (in a bank) or even Rs. 50 lakhs to look after operations! Only peple bringing in sales revenues can hope to earn higher income than Rs. 50 lakhs – that too as a variables!

When the times get tough, the tough get going….

You are a function of what you chose to be.

If you are happy you make the choices to be happy and successful – so success follows happiness and not necessarily the other way around!

Happiness is a state of mind – money is important but the importance we give to money is just too much. It is not so important as we make it out to be. It is just like health – you need to have it, but those who have health do not jump up and down saying they are healthy. Those who do not have it know how much it means.

I met a taxi driver (If Meru had a frequent user, I could benefit)…and got talking. He said he went to a barber’s shop and paid Rs. 20 for a shave. On probing I found that he normally spent Rs. 10 for a shave and that meant Rs. 100 a month – Rs. 1200 a year. Then I asked him about his food – he said he eats out every day – that meant about Rs. 100 a day ATLEAST – Rs. 36000 a year.

If he choses to buy a Gillette shaving blade (Rs. 20?) and it lasts him 15 days – he would end up spending Rs. 40 a month or Rs. 480 a year. He could of course choose some unknown brand and save still more! If he ate food from a ‘dabba’ packed by his family he could clearly save Rs. 25000 a year and save some stomach aches too!

If you are in HR do you think it is your responsibility to tell people such basic things? No. Because HR (like most other professionals) do not ever get rewarded for avoiding trouble. If there is trouble and you sort it out you get rewarded!

The first is a fine example of why the Americans are in a financial mess. There is this guy who is 51 years of age – and believes he has 14 years of service left. I am not sure whether this will happen – he has no great qualification to boot!. He lives on a day to day basis – and now he has borrowed $ 15,000 (yes, 15 thousand) to buy a cat.

Another story is that of a 24 year old Indian American kid WHO HAS REFUSED to accept a credit card – he has seen too many tombstones perhaps of credit card holders.

One story is of a woman working as an administrative assistant in a private hospital – no great qualification to fall back either. She earns about 21k per month. Spends about 19k. Now she wants to BORROW and spend Rs. 500,000 on a trip to Europe.

One story is of a man working in a software company as an engineer. Has a take home salary of 21k, HAS EMIs of 19k. This Emi is for a house, 2-wheeler, and all his overspending. If you ask me how he lives, he borrows from colleagues, friends, company gives him sodexho passes!

When I heard all the 4 stories, I had no clue on what to say. I keep wondering how long will the HUMAN RESOURCE managers of companies keep pretending that “Personal finance is not a HR problem”

To me the alcohol problem is less – it is easily visible, the money problem has to be addressed. IT IS FAR, FAR, FAR more serious.

Prima facie there seemed to be no pattern to the 3 separate incidents. However, there was a connection!

Priyanka was going through a tough divorce – the bum she married was at last leaving her. But he was unemployed, and the house belonged to him. She had a job, a kid, and no house. Her parents were partially dependant on her. She was getting no alimony, there was no balance in the bank, and she was a financial mess.

Arjun had committed himself to some EMIs hoping for a decent raise. He was now paying of an education loan, a car loan, a vacation loan and an occasional credit card spend. Seeing the pattern of the past 2 years, he “assumed” his raise would be Rs. 4000 per month. It turned out to be Rs. 1700 per month. Arjun was devastated. His immediate reaction was he thought he should find a new job. He had no clue where, how, when the new job would happen. He had no option of going back to the nest – his parents had smartly shifted to a smaller house to avoid the boomerangs! They did not want the kids coming back and eating into their nest egg. Very un Indian thought Arjun, but that was the rule. Arjun was a financial mess.

Paresh was a very meticulous man and had nicely saved a lot of money. It was in safe avenues – post office, ppf, voluntary pf, national savings certificates etc. He had a decent house, handed down by his father, and was financially well off. Well sort of. His spouse and 3 children were a source of joy only for the first few years of their lives! They had made him an ATM and made impossible demands on him. His eldest son had flunked college, trained as a cameraman spending Paresh’s money, had got married, and was unemployable! Paresh used all his resources but his 2 sons, 1 daughter, wife and an ailing mother had sapped him. He was underinsured, severely stretched, had no medical insurance. Paresh was a financial disaster.

When Surya saw the cases in detail he asked himself a classic HR question:

When does the company step into the personal financial lives of its people? He had no clear answer.

On a Thursday evening, finding his CEO in a good mood, Surya brought up the question of the company’s role in the financial lives of its people. The CEO told Surya “Remember Gaurav Shah, our operations guy who joined a BPO? Last week he died of a heart attack. He was all of 38.”

The CEO was very clear that personal financial learning, stress busting, yoga are things that the employee needed should come from employee’s own time and cost. He went on to add “Surya we hire good, smart, aggressive guys who can bring business. If they are so smart, let them take care of themselves”. Surya felt a little defeated.

He thought to himself if 99% of my staff here is working for money, and I am willing to teach them how to talk, how to hold a fork and spoon, which hair oil to use when in US of America…how come I am not teaching them Money Management?

He had no idea.

But by now it was 9 pm. He had to head home. Another 1 hour journey. But as he hit the car he thanked himself for one good decision. He now had a driver!

He sat down in the back seat and chuckled at his designation! He was wondering whether the words “human” and “resources” had any connection to the English words he knew!

He also remembered what his CEO told him “Do not ask me whether I have a heart. I don’t know. Ask my shareholders. They are Americans, their lives and their dollars are measured by Quarters!”

The 4 quarters in an American dollar are Q1, Q2, Q3, Q4

His eyes closed.

Jagjit Singh poured out his heart on the 5 track CD player.

Tomorrow was another day.