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How many of us actually enjoy the money we make?
How many of us are truly living the lives we love?
Ask people, “Do you earn enough?” and you are likely to get “No, I don’t!” and if they do say “Yes” then it’s more like “Yes, but I could always use more money!” Nobody seems to have enough!
Go on to ask them, “How can you earn more?” and they are likely to tell you that they will have to find a better job, take a second job, have the spouse work (hey why not kids too?) or wait for the boss to give you a raise. I have yet to come across one person who says, “The way to have more is to make my money work for me!”
It seems most of us live in a world where the only way to make more money is to work more and more … and more. What is the result of all this? It takes us away from ourselves, our families and Allah. How many of us actually enjoy the money we make? How many of us are truly living the lives we love? Most of us live the way we do because we know no better.
I propose to write a series of articles on finance for the benefit of the readers with the central theme:” “Making Your Money Work For You”. The articles, Inshallah, will demonstrate how we can take advantage of various investing opportunities that are available to individuals (and organisations) in India to make their money work (and not sit idle).
In this first article of the series, we will discuss the financial challenges that the average reader faces. In subsequent articles, I will discuss various investment options that allow one to meet these challenges. In addition, the open minded can benefit by increasing their wealth for their and society’s benefit.
If you are reading this, you are likely to be a member of the large “Indian Middle Class”, have a decent steady job or business, belong to a family where parents, grandparents and kids live together, and while there is sufficient in the bank for the everyday expenses, there may be a growing anxiety about how you will meet your financial needs in the future.
You probably have a positive outlook (don’t you?) and know (or at least hope) that in the end, things will somehow work out. The kids are sure their parents will help them along the way and the parents are hoping the kids will grow up soon and contribute to the family’s kitty. By the way, did you ever hear of the proverb: “God helps those who help themselves”?
Well, let’s find out if you are helping yourself. First the facts …
1. In 2003, a leading finance magazine calculated that the all inclusive cost (school fees, clothes, pocket money, hobbies, healthcare etc) to bring up one child from conception to graduation and marriage would cost Rs. 20-50 lakhs. Now we are in 2007, the costs now are probably between 27-70+ lakhs depending on your socio-economic group. Now if you have 2 kids, it doubles, not one and a half!
2. You may have taken a loan for your house (and your car?) and while you were happy with the low interest rates sometime back, you are now beginning to worry about the rising rates and the effect they have on your finances.
3. You are probably quite happy with income now, but have you given the following some thought … If your monthly expenses for yourself and your spouse (not including any rent, EMIs and kids expenses) are Rs. 10,000 per month, then you will need to have about Rs. 16,000 after 5 years, Rs. 26,000 after 10 years, Rs. 42,000 after 15 years and Rs. 67,000 after 20 years to have the SAME standard of living. This is assuming that the cost-of-living will increase by 10% a year every year - this is a fair expectation.
Nowadays, irrespective of whether you are in government service or the private sector, you have to take care of your own pension. Most of us haven’t given sufficient thought to the amount we will need in our old age… better start thinking now before its too late.
4. It is known that Indians have a higher risk of diabetes and heart attacks and I also know that we love our biryani, sheekh kebabs and feerni. How about your weight and your health? Since I know you will not reduce your eating even after knowing, I am hoping that you will at least prepare your bank balance for healthcare expenses - just in case.
How much should you be prepared for? Today, it costs between 1-2 lakhs for a heart bypass surgery and between one to two thousand per month for medicines if you have diabetes and/or blood pressure. In 5-10 years, it would be safe to assume that a bypass surgery will cost about 5 lakhs and medicines could cost between Rs 5000 to Rs 10, 000 per month.
I have only covered the “important” things in life and not yet reviewed many other issues like cost of living, taxes etc. The discussion so far is intended to wake up the many sleeping, to the financial realities of life.
For our parents and grand parents, life was very different, they neither worried about or spent money on TVs, fridges, cars, computers, cell phones, branded clothes, international holidays, pizzas and noodles! You and I live in a different time with different demands and aspirations - are we up to the task of meeting them or are we going to have not-such-a-rosy future? Learn, ponder and take action before it’s too late to do much.
One thing is clear, we have to take responsibility for our own future and with Allah’s guidance and help it will turn out alright. The subsequent articles will discuss how we can meet these financial challenges in life by effectively using government approved and globally accepted investment products to secure ourselves and our families future.
And by the way, when you add up all the costs (mentioned above), it’s a few crores over a lifetime, so now you know: You are a Crorepathi… congratula-tions!
(A note on Sharia and Islamic Finance: The writer is not aware of a single, government registered and approved, nationally recognised organisation that offers Shariah based investment opportunities in India. Given this fact, readers are requested to make their own decisions about the compatibility of the investment options discussed with Shariah - for opinions are many and at times have contradictory views. The writer is not an expert on Islamic Finance and is not responsible for the consequences (positive or negative) of any decisions based on these articles).
(The writer is a financial educator, investment advisor and stock broker based in Bangalore and can be reached at. ivfinance@gmail.com)
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