While making $m in the US is not that difficult, making some money in India isn't that much of a hassle either.
It's just the question of the attitude. If you have it, you can make it. If you are like the most, well, you end up like the most. We are not talking about those who already have plenty to take care of in their later years. The lower and the middle class are the ones who are most affected, and therefore, need to make arrangements for themselves. Someone said aptly, parents aren't emergency funds, and children aren't pension funds. You got to keep your individualism.
In the absence of any social security system in India, it becomes all the more imperative that a person shows some wisdom in dealing with the finance. It is strange that bonded labor for life in employment is preferred to making slight changes to the behavior. Well done consumerism.
Let's deal with the finances of an average person in an average employment; yeah, it comes with an average salary.
In January 2000, Nifty was at 1592.20, with a PE lurking at 25.91; dangerous tread for a rational stock picker. By now, it appears that it isn't so for a rational equity buyer. If the index was bought as of January 2000 and held through December 2016, the annual returns would be 10%; not bad. If the investor had bought the index on a monthly basis instead, the annual returns would be over 12%. It would be slightly more, if we include dividends.
In January 2000, Nifty was at 1592.20, with a PE lurking at 25.91; dangerous tread for a rational stock picker. By now, it appears that it isn't so for a rational equity buyer. If the index was bought as of January 2000 and held through December 2016, the annual returns would be 10%; not bad. If the investor had bought the index on a monthly basis instead, the annual returns would be over 12%. It would be slightly more, if we include dividends.
So how can an average employee in India enrich oneself? Let's pick someone earning a salary of Rs.25,000 per month, with a spouse matching that sum. Not too unusual in these times; in fact, quite modest. Left to themselves, they would be swayed by the waves of consumerism, and would be bonded for life. Throwing caution to the winds comes natural to them. If only we could tame them, and teach them to behave, it would be a different life. Alas, we can't.
If the average couple can spend one salary for living costs, and invest the other salary, the value of their financial assets would be over Rs.16 m. Assuming they started at age 25, they would be quite fine compared to their own lifestyle by the time they are 42. At 6% average inflation, the present value of their assets is more than Rs.6 m. If the couple increased their investment by about 7.40% annually reaching Rs.84,000 per month in the last year, the value of their assets would be approximately Rs.27 m, and the present value of which would be Rs.10 m. Even when the growth in investment is matched to the inflation rate, the assets would be worth some decent money in today's terms.
Yeah, Rs.10 m is the number that is illusive to the lower middle class in India. Yet we found out that it is very much achievable. With that much of cash, the couple who worked only for about 17 years, can move on with their life. Chase their passion. One way that can be possible is to move to a place where housing and living costs are much cheaper. Life then is only fun. They can even continue to work, but on their own terms; choose the location, employer, work hours. The lower middle class too has the power to make life more purposeful.
Imagine what people who are better than the lower middle class could do. We see them everywhere earning decent salaries; yet, they are in the rat race, not able cope. When in fact they can be financially independent within 15 years of their work time, they choose not to. Getting pleasure out of self-torture?
If the couple, who are better off than the one discussed earlier, are able to invest Rs.600,000 annually, they would have more than Rs.12.50 m in today's value; this is made possible in 15 years, if the annual increase in investment is 5%. We are talking about someone earning Rs.50,000 per month, which is matched by the spouse. Such salaries galore in these times. Their investment in the 15th year would Rs.1.25 m. The formula is the same: save one salary, and invest the other.
I hear a lot of excuses. Instead of focusing on what they can do, they spend time on things that are not in their control such as the government, employer, and the workplace. They have no problems in spending on the status car, large TV, expensive cell phone, fancy gadget, and regular fine dining. Cash for investment purposes, heck, life is too short and momentous to dwell on uncertainties such as the long term; for them it is preferred gratification.
It is a simple trade off: A maximum of 15 years of deferred gratification, or work under someone else for life. Guess, what they pick. Like I said earlier, human behavior has reasons that reason cannot understand.
If the couple, who are better off than the one discussed earlier, are able to invest Rs.600,000 annually, they would have more than Rs.12.50 m in today's value; this is made possible in 15 years, if the annual increase in investment is 5%. We are talking about someone earning Rs.50,000 per month, which is matched by the spouse. Such salaries galore in these times. Their investment in the 15th year would Rs.1.25 m. The formula is the same: save one salary, and invest the other.
I hear a lot of excuses. Instead of focusing on what they can do, they spend time on things that are not in their control such as the government, employer, and the workplace. They have no problems in spending on the status car, large TV, expensive cell phone, fancy gadget, and regular fine dining. Cash for investment purposes, heck, life is too short and momentous to dwell on uncertainties such as the long term; for them it is preferred gratification.
It is a simple trade off: A maximum of 15 years of deferred gratification, or work under someone else for life. Guess, what they pick. Like I said earlier, human behavior has reasons that reason cannot understand.
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