I generally don’t like offering advice on this platform – Safal Niveshak is all about sharing my experiences and learning as an investor and manager of my own money. So the headline of this post seems a bit awkward to me.
But then, what follows is my response to some common claims that I’ve heard from a lot of well-educated and confident (yet broke) young people…and I was one of them a few year back. (I’m still educated and confident, but have taken care of that ‘broke’ part :-))
Here are some things I’ve been hearing all around from the young with respect to their careers and finances, and my thoughts on their thoughts…
“I am educated, talented, and confident, so…”
Well, it’s great that you are educated, talented, and confident…but know that these things are often highly overrated in today’s society.
Albert Einstein has been quoted as saying – “The only thing that interferes with my learning is my education.”
Take for instance the hype surrounding an MBA in Finance (and I have one) or a CA. People believe that you need such financial degrees to make money in investing. In fact, I had this very belief while starting out in my career.
Nothing can be far from truth, because if financial education was what was required to make money from investing, the experts would’ve become rich by investing their own money and not selling worthless advice to you.
Education and talent are good…but only till they keep you rooted to the ground. These qualities appear to increase our confidence without improving our abilities, thus leading to worse decision in our lives (including financial lives).
“Job is my birthright!”
In my 8 year career working as a stock market analyst, I’ve seen a lot of my ex-colleagues changing 5-6 jobs in as many years…all for the sake of a few thousand rupees in salary hikes…and without giving any due thought to the profile offered by the new job.
The thinking these days is – “Job is my birthright, and nobody can snatch it from me! If I lose job here, I can easily get it there.”
Clearly this is a by-product of the last 20 great years that the Indian economy has seen. The youngsters (and I would count me amongst them as well!) have not really seen ‘bad times’, like our fathers and grandfathers did.
But believe me, the stories I’ve heard from some old people, things can sometimes get really bad (look no further than the US, where the unemployment rate is creeping up, and people have lost hopes of getting jobs soon).
“Dad’s there for me…”
This is ridiculous! Your parents will bestow all their love (and money) upon you. That’s what parents are for, right?
Wrong! It’s important for today’s generation (X, Y, or Z) to know and appreciate that you don’t have any claim on your parents’ wealth.
Yes, you have a legal claim on their cash, property and all other assets that they’ve created for ‘you’. But know that you are not ‘entitled’ to the fruits of their long years of hard work…in the same way as your children are not entitled to your wealth (pass on this message to them as soon as possible!)
In a world where saving for your own retirement is getting to be a tough ask, saving for your children must be secondary. Of course, you must save for them like your parents did for you, but know that they can get education and marriage loans…you won’t get retirement loans.
“I have no cash…but five credit cards”
A cousin recently showed me his latest possession – a fifth credit card – that offered him great deals on shopping and eating out.
“That’s great news for all the reward points you might be accumulating by spending through your credit cards!” he expected to hear from me as his expression showed.
But I scolded him instead. I knew he was earning a meagre salary working in a BPO, so using credit cards was like digging his own grave – of the habit of overspending and getting into a high cost debt spiral (that’s what credit cards lead you into!).
I’ve seen people with no intention of spending cash on something buying the stuff just because they could use their credit cards!
This is absurd, and can lead anyone into a big financial problem…especially one who is over-confident about his ability to ‘pay off’ in the future and who believes that a ‘continuous salary’ is his birthright.
“I already earn enough”
This is the most common excuse youngsters give me when I ask them whether they’ve started saving and investing for their future.
They must know that they can’t be working and earning throughout their lives…but they’ll need money to survive throughout their lives.
Each rupee you save is like an employee. Over the course of time, as an owner, the goal is to make your employees work hard. Eventually, they will make enough money for you to hire more workers (cash).
Subsequently, when you have become truly successful, you no longer have to sell your own labour, but can live off of the labour of your cash and the assets you’ve built up using that cash.
However, it’s hard to understand and accept this truth when you are young and confident (err…over-confident).
But then, it’s only when you understand and accept this truth early in your working life can you dramatically change your financial future for the better.
“Let’s go for a Cappuccino”
Forget the cappuccino kid! Start saving money.
Here’s a simple math. If you can save just Rs 50 per day (or Rs 1,500 per month) by stopping to pay for that cappuccino every day, and invest it for the next 25 years, you will have Rs 49 lac in your kitty (assuming an average annual return of 15%)!
Even if you assume that your money will grow at a lesser rate of 12% per year over the next 25 years, every Rs 1,500 you invest per month, will amount to Rs 28 lac then.
So choose now, when you are young – whether you want to survive on credit cards, or your dad or mom, for the rest of your life…or whether you want to take things in your control (you always wanted the steering wheel of your life in your hands, didn’t you?)?
Remember, being broke ain’t cute!
What do you say? If you are young, and NOT broke, what would you suggest those who are (broke)?
And if you were once young and broke, how did you come out of that situation? (It’s nice to be a guiding light :-))