“Nice to meet you. Just hold on for a second. I need to send an SMS to my husband.”
My cousin and I stood there waiting. The girl, a manager with a private sector bank, busily tapped out a text message on her new iPhone.
She was pretty slow with the typing, but we knew what was going on.
She was just showing off her new Rs 30,000 iPhone – hot stuff for Alwar, a small town in Rajasthan where I grew up and which has a relatively middle class population.
We had seen her arrive to the bank with her husband who drove a shiny black and modified SUV.
She and her husband were young… probably in their early thirties. As I came to know from her, he was a real estate broker in the town. Even though their income must be down in a weak housing and job market, their spending didn’t reflect the crisis.
“What’s going on here?” I asked my cousin who was a local.
“These aren’t the only people out here sporting an iPhone and an expensive car,” he told me. “This small town has changed a lot, brother, since you left it 10 years ago.
“And by the way, who doesn’t own an iPhone or a big car these days?” he continued. “In a world of rising incomes, easy loans and EMIs, buying expensive stuff is so very easy. Don’t you think?
Me? I don’t have an iPhone…or an SUV. I’m doing well with my old mobile and an old, small car.
But I probably have one thing these habitual consumers don’t: The house I live in is fully paid for. Plus I don’t have a rupee of debt on my head.
I could buy an iPhone or a new car tomorrow. I wouldn’t need a rupee of debt to do it. But I won’t…Why?
Because these expensive things won’t add to my assets. They will only add to my liabilities. Also, those things won’t make me the slightest bit happier.
I’d be the same guy I was before…only Rs 5-6 lac poorer!
You see, I don’t try to keep up with my peers – with their swanky phones and cars, and a new higher-paying job every six months.
In fact, I’m doing the opposite. I’m downsizing.
I’m trying to go minimalist (my society’s security guards and the housemaid are happy to get something or the other from my house every day. In their already minimalist life, they need to enjoy some ‘stuff’).
Think about this – What good are all these possessions, really? You can’t take it with you when you die.
Instead, the truth about life is that after a while, you don’t own your material possessions…they own you.
I don’t need a big car to claim that ‘I have arrived’. It’s ridiculous!
Anyways, this brings me to the main idea of this post – What is the point of saving and investing?
When you get older (if you’re not already older), how is this money that you save and invest now going to serve you?
Jonathan Clements, the much respected Wall Street Journal columnist, who retired in 2008 after writing 1,008 columns for the newspaper, said that your savings can deliver 3 key benefits:
1. If you have money, you don’t have to worry about it.
Well, this isn’t something that is guaranteed.
I’ve seen a lot of rich men who are always worried about their finances.
However, the real idea is that if you save and invest diligently, you should reach the point where money worries are relatively rare.
2. Money can give you the freedom to pursue your passions.
When you picture your financial independence, what do you see?
Enjoying your life to the fullest given that you’ve ensured that your family’s needs have been taken care of?
Seeing around the world?
Working on a cause you are passionate about?
Saving and investing can help you achieve complete mukti (freedom) from all your financial worries, so that you can attain complete peace of mind and pursue your passions.
3. Money can buy you time with friends and family.
What are we all living for? When I used to work at a job, the best part of my waking hours was when I came home at night…to my family.
Now I stay with them 24×7 while also taking care of them financially.
Research has found that regularly being with your friends and family can provide a huge boost to your happiness. And money can help you in this regard.
If you don’t need to work or you only work part time, it helps you spend more time with your family and friends, go on regular vacations with them, and spend other quality time in their company.
Anyways, as Clements also said, you don’t usually need millions of rupees in your bank account to spend time with friends and family or pursue your passions.
But in order to get there, the girl I met in that private bank in Alwar needs to skip out on her flashy mobile and glitzy car.
The quicker she grasps this about saving versus spending, the quicker she’ll be able to start living like a free bird… even if she doesn’t have many millions of rupees in her bank.
So if you are disgruntled with how your financial life is going, here’s my advice…
Forget spending more money at the mall – and instead spend more time with friends while saving and investing money regularly.
At the end of it, your bank account may still seem inadequate, but your life will be far, far richer.
That’s the entire point of saving and investing.
Vishal, wasn’t this the subject of a much earlier post?
Yes Nishanth. Am travelling a lot these days, so reposting a few of old and less-read posts. BTW, these topics also need reiteration 🙂
Completely agree Vishal !!! You should repost some of these gems time and again.. it definitely helps !
Excellent point .. However, i doubt she got the iphone on loan but rather “Black Money” .. if her spouse is in real estate business.
Maybe you should write on Real estate a bit – We plan to buy a house to stay and find the prices in Bangalore really illogical. The rentals and cost of purchase have a huge difference, sometimes to the tune of 400-600 times . i had heard, a logical Rent:Purchase price shud be around 200 times maximum !
Your thoughts ?
Just curious. They say avg rental yields in India are 3% per annum., so 0.25% a month. So is 400times rental isn’t normal?
Repeating common sense here again, but surprise, common sense does not seem so common anymore. So repetition helps, at-least for those who understand but have gone temporarily astray.
I met someone yesterday who was telling me about a financial planning course he attended. From that he told me about how money can be made investing in plots. Apparently, he invested Rs1lac in a plot in 1985, and got Rs10lac for it in 1995. He was lamenting that if he had held it until 2012, he would have received Rs1.5cr! The next example was the clincher. His friend apparently had held onto a plot through to 2012, and made so much money that he bought an expensive BMW for it! And that BMW was designed for German roads, rather than the ones in Chennai. So before he knew it, a lot was spent to repair the under-chassis at each servicing. And each encounter with a Chennai pothole leaves his friend increasingly frustrated with Chennai and India! A case of selling an asset to buy a liability? I don’t know, it depends. If his friend is doing a job, and depends on that income for his living, then this is definitely a case of selling an asset to buy a liability.
And about your note on making good investments, and making good friends, my experience is most people want to be with other people who are like them. So if you are not having a “respectable” high paying job, and leaving a “minimalistic” life, that is not exactly a visiting card that will gain to entry into the door to many “friendships”. Who would want to associate with a monk who sold his Ferrari, or a “non-competing minimalist”? 😉 This seems so regressive, rather than progressive. So its important to look at the right friends, who understand your choices and the reasoning behind them. As for the rest, they may not find you inspiring, but you still love them and wish them well.
And to conclude, just returned from a Vipassana course (my 2nd one). Key message – attachment to mind and matter leads to suffering. To know true happiness, rise above craving or aversion to phenomenon of mind and matter – which are impermanent and transient. So perform the action of investment wisely with the volition/intention of well being for yourself, your family and for others, then leave the outcome to nature (markets?).
Vishal –
No problem for me (or the readers) if posts are repeated but Google might not like it. As per SEO practices, it will treat as duplication and the site will not be rated high with Google spiders.
Awesome post Vishal! I say this to my friends and relatives very often what you have just said in the beginning of the article!
Nice write-up Vishal! Good saving as well as investing advise; young aspirational Indian are increasingly open to debt funded spending trend; good for consumer, mortgage & banking companies 🙂
I love your newsletter! It is my favorite to read every week, so much insight and wisdom. I am in the US though, so I sometimes have to look up a few terms lol.
I think more than iPhone or the Car, its about your passion. You need to save enough to fulfill your passion and at the same thing make sure that you keep earning enough to fulfill those and newer passions in future. (along with basic responsibilities)
e.g. You had just been to Kerala on a vacation. Now you must like travelling, explore new places and even spending some quality time with your family away form daily hustle bustle. So that sort of becomes your responsibility / passion and you would allocate / budget for it and once you’ve achieved your goals – you’d spent it.
Now a third person who is not keen a traveler might just point out. What so unique about Kerala which is not in Mahabaleshwar / Panchgani / Goa – Nice weather / water bodies / food etc. So why go all the way there and spend so much. (Assuming you’re in Mumbai, even if not you get the point)
What I am trying to say is, that lady from Alwar might be loving high-end phones / her husband might be a huge car enthusiast (or enough to own a car) – They must have done their own planning and even if not they must have decided their priorities.
It is not necessary that you first save and save and save then spend it (Although that’s the preferable option) but yeah you might want to enjoy luxuries of life now (I’ll come to this in a minute) and then you want to focus on life, invest, build, retirement planning, children’s educations and so on.
In my opinion, we only live once. Time flies very fast – You’d love best of video games during your school days but you either didn’t have time / it was too costly for your parents purse / your were too focused on studies / your parents didn’t allow it. So you didn’t have enough of it. But now when you can afford to spending on it, you wouldn’t want to because that time is gone. It was fun only then. Hence if I have realized anything in my 27 years or my parents life is that – Things are interesting / fun only when done during right time.
Everything in our life generally has its own time / period / fad / trend – when it is fun after that its pointless. So if you’re passionate about something at this point of time in life, I think you should do it even if that means you have moderately sacrifice on future (Totally my opinion) because who knows what will be your passion in future. Imagine having truck load of cash but all the regret about either not having played lots of video games, not going out for movies often, not travelling the world in your youth, not experience adventure sports while you can. etc. Life in the end is all about experiences, wouldn’t you say.
Anyways I heard someone say –
In life don’t think too much about cutting down on your expenses, instead focus your efforts & energy on increasing your income.
Please ignore my rant.. I had been following your blog since some time and I had found quite a few posts on avoid this, avoid that, save now, be cautious.
So I almost ignored after reading this post but then I thought in these difficult economy I need to reaffirm what I believe in and writing this down has been helpful. 🙂
Keep up the good work with your posts. I’d love your see your Stock Analysis – Analysis part is really informative for me as I am new to investing.
Cheers,