Arjuna (Fictional Character): Krishna, It is said that Money cannot buy you happiness but on the contrary it is also said that Money can buy you a lot of things that will make you happy. What are your thoughts on the concept of wealth in today's world?
Krishna (Fictional Character): Arjuna, Today Social Media, has created a wide impact on the generation. The Content Creators on the platform often showcase their better lifestyle and living and their viewers often get stuck with this idea of ideal lifestyle. Many from the youth have got this impression that they need to have certain belongings and shall mandatorily do some expensive activities to maintain status among their friends and family. They get struck into the daldal of "Sabse bada rog, kya kahenge log".
Arjuna (Fictional Character): Krishna, What are the misconceptions people have regarding money, explain it with some example?
Krishna (Fictional Character): Arjuna, People often utilize all of their savings in buying depreciating assets to enhance their status among their friends and families. However, truth is one need not spend all his money on depreciating asset and can still enjoy the perks of luxury life. Suppose you have saved 50 Lakh Rupees and you plan to buy a car worth 45 Lakh Rupees. One might take pride in buying the car through his own money and not using financing options. However if you buy the car using external financing and invest similar amount in return bearing assets, you will still enjoy the benefit of compounding and your return bearing asset could yield you more money than you spent on car loan repayment and still enjoy your purchased car.
However, in a contrary situation where you merely have 5 lakhs in your account, you may not be advised to loan out 45 lakhs and buy a car as in the case of emergency the funds available with you may not be sufficient and you will have to sell you most prized possession.
Arjuna (Fictional Character): Krishna, What are the other misconceptions people carry about financial planning?
Krishna (Fictional Character): Arjuna, Some of common misconceptions are-
- I cannot invest because I am not rich. One shall remember that there is no rule for minimum investment. One shall always look to maximize what they have and investment at an early age or early stage of career could develop as a great habit which will bear fruits in future. One should keep a thumb rule of saving 20% of their income and keep investing from the savings.
- Wealth will always grow over time and I need not plan my finances. However, the key component in life is its unpredictability. The Covid-19 Pandemic acted as a reality check for a lot of people, from which we can learn that a lot of things are outside our control and things could pretty fast turn upside down. One shall always plan their finances keeping these contingencies in mind.
- Financial planning is tough exercise and required a lot of time. However, the truth is these people have never even attempted to plan their finances. Once you sit and start planning your money, you find this exercise very enjoyable and fruitful.
- Planning for their retirement after their 40's will be enough which is again a big misconception. By the time one reaches 40's he is already overburden with responsibilities and he may find it difficult to pump money for investment through his earnings, instead he can start savings early his career and enjoy the benefit of compounding on investment.
- Ignorance in consulting financial advisers and think they can figure out the best for their investment. However, the truth is, just as a doctor can tell you better about your health, in the same way a financial adviser can tell you better about how to manage your wealth and minimize the risk.
Arjuna (Fictional Character): Krishna, what should one learn from this?
Krishna (Fictional Character): Arjuna, According, to Acharya Chanakya, many want to be friends with people who have a lot of money and wealth. This means a person attracts company when he has money, but if he loses his wealth, the same people will distance themselves from him. Unfortunately, this has become the harsh reality of today and thus everyone is running blindly behind earning money. Ultimate reality of life is - You can have a lot of money…. But that money is of no use if you do not have time to spend it with your friends and family.
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