Why I am not willing to splurge.

I met a friend who happens to know a legendary investor having net worth of over a billion USD. With that kind of money, one would imagine that this guy would own a Rolce Royce and wear luxury watches, etc. However I was not surprised to learn that Mr. Money Bags prefers much lower brands – brands that one used to aspire for when one was in college with no money. Middle class guys would dream “Yaar, one day I will buy a new honda….”

So is he a miser? I don’t think so. It all depends on what gives you CHAI. He said that being driven around in a Rolce Royce is just not him. Once my client told me he would not feel like himself if he was in a Mercedes; his aspiration was maximum a skoda. So what is wrong in that?

It is because one who has worked hard for his buck feels the pain of spending it. This might be true to some extent. I know some rich Dads who have not provided any training to their kids and given them everything on a platter.

These kids blow away the wealth quickly- easy come, easy go. However at the same time, I know people who have lived in very dire conditions. As soon they start earning, they start living life king size.

So who is correct? Well I am not going to draw any valuable judgement. I’m just observing how people have different perspectives about money. Some people just cannot spend or rather splurge on big brands. As I said, wealth is not just science; there is a lot of psychology involved in wealth management.

Stories they tell you.

I firmly believe that your financial success depends upon the stories that you heard when you were growing up. These stories have a deep impact upon your PF (personal frame of mind). Stories that you hear at a young age, go deep into your subconscious mind and then,  these stories determine the rest of your life’s journey.

Many of us have grown up listening to stories that undermine our capabilities. Many parents tell stories that are uninspiring, that undermine the self-belief of a child -stories that make the child ultra conservative and lead him to live a life of drudgery. They believe that if they inspire children to think BIG, the government might impose a further tax on their income!

I was once listening to Sandeep Bhatnagar talking about the kind of stories our parents tell us. How life is tough, earning money is not easy, etc. etc. When Sachin retired, he acknowledged his father who gave him freedom to pursue his goal at the age of 11. His only advice was not to take shortcuts in life. Just imagine if his father had motivated him to grow up and take a government job because it guaranteed Provident Fund and pension- the dream of middle class Indian parents in the 70s and 80s. In those days, parents wanted to be middle class even in their dreams

All the stories are not from parents. You buy-in into dreams from many sources as you grow up. The first story teller in my life was my grandfather, a Pathan from Peshawar who had never gone to school. He told me stories about building your personal reputation based on ethics. I learnt about personal brand building from these stories.

When I was in college, my mentor introduced me to my favourite author, Richard Bach. I heard the story of Johnathan Livingston- the Seagull – a story that inspired me to pursue excellence as a goal. If I was a financial advisor to my client, I want to be the best advisor for my client. If I am a wealth coach, I want to be the best wealth coach for my clients. Anything that is worth doing is worth doing passionately with an eye on excellence. Baba Ranchoddas came up with this theory in “3 Idiots” much later – I was already implementing it in my life!

I keep reading stories on “success” to keep myself motivated and to recharge my batteries. Rashmi Bansal’s stories in “Stay Hungry, Stay Foolish” , “Connect the Dots” and “Poor Little Rich Slum”  have always motivated me. So has Shobha Bondre with her book “Dhanda- how Gujaratis do business”. I do not distribute “mitthai” on Diwali. I distribute books. Because I believe it is the stories that you grow up listening to that will determine the size of your dream and the quantum of energy you generate from within to pursue these dreams.

What are your stories? What are the stories that you are selling to your children? Do leave your comments and feedback below this post.

Financial Literacy for your Kids

My financial literacy started when I was very young. My father had limited means and as kids, my brother and I were given a fixed allowance. We had to manage our budget within this fixed allowance, which covered the bus fare to and from school, the snack during the recess time and the occasional treat that we could enjoy by saving from daily allowances. We learnt lessons on financial prudence very early in life.

Even when I was in school, I was involved in Bank account operations. I had to prepare the pay in slips, go and deposit the cheques into the bank, get the passbook updated. When I was in 7^th Standard, I was taught how to write the books of accounts of the family business. So I would manually prepare the Cash book, the Day book, make the postings into the ledger, manually prepare a Trial Balance and then the final accounts. I started liking the accounting process from my school days.

When I was in 8^th Standard, I had to go to the automobile wholesale market to collect the outstanding invoices from customers. So every Saturday, after school, I used to go to the shop for the weekly collection.

So very early in life, I was exposed to financial matters. This is the advantage of belonging to a business family. Counting cash is a hobby for kids belonging to a business family! It’s like lion cubs playing with their prey!

Nowadays parents are very soft or rather extra soft with their kids. Hence the kids are sheltered more than what is good for them. As a result, their financial literacy is never given due importance. Schools and educational curriculum talk about sex education. We have been able to come out of that taboo; but what about wealth education? As parents it is our duty to educate our children about financial matters.

There are many ways in which this can be done:

• Playing Monopoly with your kids can be a good beginning
• Take your child to the bank and educate him about the various functions
• If you are borrowing, tell him how you borrowed and how you will be repaying, what the interest is and how it is calculated
• Tell him about the tax (TDS) that is deducted from your salary and other income.
• Tell him how you have to file your tax return every year and pay advance tax every quarter
• Show him the bank statement or pass book and explain the entries there
• Ask him to maintain a Cash Book showing his personal receipts and payments
• Involve him in the arrangement and filing of various documents pertaining to your investments
• Educate him about various Insurance covers that you have

Do not underestimate your child’s capacity to learn. Let me caution you. Your child might ask you tough questions that you might not be able to answer. Very good; at least you will spend time on educating yourself!

So how do you involve your children in financial affairs?