Co-written by Mr R S Nambi
"Ignorance is the root cause of all poverty - Intellectual or otherwise."
Any person, man or woman, in this world dreams at one stage or other in their lives to become wealthy and would like to lead a comfortable life. While most of them are capable of achieving what they want, it is the lack of planning and lack of will & determination that contributes generally to their failures. It is proposed to discuss few issues relating to wealth creation, which is based on our own rich Indian heritage, family traditions, values and our saving habits.
Myths & beliefs:
Family heritage & values have no relevance: All of us have rich family heritage and values. Most of us are ignorant or fail to recognize and acknowledge the same.
Marriage brings in more happiness than responsibilities: The consciousness for wealth creation goes up with age and becomes active after each one of us enters marriage. This is primarily because of heightened responsibilities that each one of us assumes after marriage. Every one of us wants to recognize only the happiness that goes with the marriage and not to assume the additional responsibilities.
Small family is wealthier than the large ones: Thanks to the increased levels of education, the size of the families gets reduced. This could be proved by statistical data in today’s context. It is another issue that the other expenditures on cost of Medicare, children’s education and the increased costs of transportation have demanded higher percentage shares in the family budget.
Spend more and earn more rather than earn more and spend more: Even though the income levels have gone up significantly in recent times, the increased levels of expenditure bears no relationship to the income levels.
Envy the neighbour and pride thyself: The influence of the neighbours on the expenditure levels has gone up in recent times. This is primarily due to the image one would like to maintain in the society, particularly in the eyes of our neighbours to whom we would like to prove that we are richer.
Health has no bearing on wealth creation: Due to various factors such as adulterated food, environmental pollution, water pollution, poor sanitation, fast changing food & eating habits, etc, the levels of health maintained by the people at large is appalling. Ironically, the personal hygiene and sanitation levels have not improved despite the higher degrees of education obtained people in today’s world. Nor one sees any change in the attitudes for the better as habits do die-hard. The levels of health consciousness Singapore and USA id definitely higher and consequently their productivity levels are high too. Many people in India opt for health insurance cover with a view to manage their cash flows in the case of prolonged sickness or health set backs caused unexpectedly.
Ape the west & become wealthy: The lifestyles have changed drastically in recent times. The people who migrate from villages to urban areas or from one country to another adapt a different lifestyle without even analyzing whether the change is for the better or for the worse. One observes that people adapt themselves quickly and assume different lifestyles just for snobbish reasons without questioning their suitability at individual levels or the abilities to sustain the same throughout their lives.
Greater the risks you take, the more wealthy you become: The tendency to take indiscriminate risks has risen considerably with the passing of age. To illustrate, at the family level the son may like to take an aggressive posture due to ‘Get rich quick syndrome’ than his conservative father in terms of expansion of business or investment in a particular firm. The father would have created more wealth than his predecessors due to his cautious approach. The changed attitudes of the son might well destroy the accumulated wealth of the family in a single stroke.
Harmony in family relationships has no relevance to wealth creation: The lack of proper understanding and harmony between people within the family hinders wealth creation. There could be ‘n’ number of excuses such as generation gap, incompatibility and infighting between the couple, etc. The powerful impact of the proverbial saying that peace and prosperity go together has been proved time and again.
Opportunities galore: The availability of number of financial products and investment avenues have gone up considerably in the current age than ever before. Thanks to economic liberalization, the financial & insurance products available for investment planning have gone up considerably. Even then people have not seized the opportunities in wealth creation. There are not much qualified consultants in this area at present.
The more educated you are, the more independent you should be: With modern education, the youth differs widely from the family tradition thus causing more rifts within the family. The virtues of the joint family system have been given a go by without any objective analysis of the pros and cons. It is prudent to pursue any particular path after a careful evaluation.
Change in morality alone can amass wealth: The significant change in moral values in public and individual lives has also compounded the individuals’ problems. In modern times, one is exposed to more financial scams and commercial frauds than ever before. This is primarily arising out of the fact that one believes that he can amass wealth taking full advantage of the loopholes in the system even though it may be at the expense of public and national interests. E.g. Stock market scams.
Overseas employment rather than entrepreneurship builds wealth: It is generally believed that only when you take up overseas employment, particularly in USA or Gulf countries, the family wealth will improve. This may prove to be a myth with the experience of many NRIs in whose lives the individual dreams may fall like twin towers within no time. The truth is that many NRIs are not able to return and sustain the same life standards and they are haunted by the fear that they are forced to return home, they may be compelled to lead a harsh life.
In reading the above lines, one need not conclude that the life is gloomy and dark. The world offers wonderful opportunities for wealth creation commensurate with one’s education, inherited values, Common sense, risk taking abilities, tenacity of purpose, right attitudes, right planning and timely decisions. It is proposed to discuss the various possible approaches to wealth creation in the subsequent part of the article.
Approaches & plans for wealth creation:
- Create a conducive family environment – Without a supportive family, no individual can create wealth successfully however hard he works. There should be a perfect understanding within the family and a good teamwork for wealth creation. Each and every member of the family should understand their role clearly, show commitment and support openly and there should be perfect harmony amongst decision makers for achievement. Without these ingredients, no wealth creation apparatus would work. Afterall, the peace and prosperity are inseparable twins.
- Stay close to the knitting – Like in the case of companies staying successful with core competencies, the family also creates more wealth if individual members understand the full value of their heritage, common beliefs and leverage on the family assets and stewarding the resources with the help of the education and knowledge they have acquired. This would make the path of wealth creation more smooth, the process enjoyable and the tasks achievable too.
- Rome is not built in a day – The wealthy families have a rich history behind them and individual members have put in years of hard work to reap the benefits they are enjoying today. The wheeler-dealer approach or get-rich-overnight syndromes would find their waterloos sooner or later and with heavy costs and shame to the family.
- Plan your work and work your plan – If one truly understands the value of time and life, they would remain successful. If you plan your work and work out your plan, you would be creating wealth sooner or later without fail. Assuming the average life expectancy to be 62 years, age of retirement to be 58 years and age of entry into career to be 23 years, the average career span for an Indian is 35 years. During this period he has to realize his ambition of creating wealth and he has to plan out his investments. It would be worthwhile for him to accumulate life insurance products during the early stage of career when the premium rates are likely to be lower, concentrate on annuities to improve his liquidity and maintain the income levels during the middle stage of his career and plan pension products during the last stage of his career so as to maintain hassle free living.
- Health is wealth – Without enjoying robust health it is impossible to make money. In this regard Indians have to learn a lot from their western counterparts who are by and large more healthier. Because of their high fitness levels, we are outscored on manpower productivity.
- Old is Gold – According to our customary belief, investment in gold and in agricultural lands in that order is much safer than investment in capital markets. With great difficulty and at a high cost we have learnt a lesson through our experiences in various scams and frauds in capital markets. If only we have allocated our resources combining our knowledge and education with the wisdom we have inherited in the family from our predecessors, we could have insulated from all these environmental factors.
- Plan your lifestyle – It is prudent enough to change our lifestyles only when we are confident of sustaining the same throughout our lives. Otherwise it would be better to follow our conservative lifestyles and age-old savings habits.
- Borrow only when you can & that too as a last option – In our lives we come across many practical instances where families borrow beyond their means and get into debt-traps. It is always advisable to borrow only when you are confident of repaying and that too when you have long-term assets to fall back upon in case of contingencies. Otherwise you should plan your resource allocations and create assets so as to correct the mismatch.
- Learn things from your better half – Like women do in respect of their kitchen chores, allocate resources according to your needs over a time span and then execute the plan. In this way you are likely to avoid pitfalls. If you start planning after spending, you will end up in a catastrophe. Plan and do rather than do and plan. A slow and steady growth is always better.
- Moderate your ambitions – The wealth is built always with years of hard work and in this regard consultations within the family would be helpful. To illustrate, any asset enrichment plan that is discussed leisurely with your family members, inviting them to participate freely & frankly and later on executed with their full support, cooperation and support is likely to be successful.
- Caveat emptor – It is always better to be vigilant in money matters rather than curse your fate. Any association planned after due evaluation, be it the selection of your consultant or decision on any particular investment avenue or timing of your investment, is likely to pay dividend rather than any emotional approach.
- Build wealth on your strengths rather than plan on your weaknesses – Any wealth maximization plan built on the foundation of family assets and your knowledge and steered along the chartered lines is likely to materialize surely than any other approach based on your herd instincts.
- Entrepreneurship Vs Employment – Looking at the biographies of successful people, it is easy to infer that eventually entrepreneurship pays more than what employment does in wealth creation. Even top executives enjoying handsome salaries or for that matter non residents who lead an affluent life overseas could not succeed in passing on a rich legacy to their next of kith and kin than their brethren who have taken to entrepreneurship during their mid-careers whether in India or abroad. This biblical truth is yet to be fully understood even by qualified professionals knowing fully well that services sector in this country offers enough opportunities for good entrepreneurs.
- No set formula to wealth creation – Last but not the least, there is no set formula to wealth creation. Your gutsy approach, precise timings and objective decision-making are bound to reward you with rich dividends. Even though various factors confront you in decision-making, the emphasis on one variable or other during the process would vary depending upon individual circumstances.
We have traced to the best of our knowledge and beliefs, the various considerations that goes with investment planning. The success in this area largely lies with you, as all of us are captains of our own faults and masters of our own destinies. If you are successful in achieving the goals along the chartered path, surely your knowledge and wisdom have contributed to it and the purpose of the authors in writing this article could well be served.
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