Why do many salaried people in India have great salaries, but not great net worth after working for many years?
This question and one answer by Mr Subramanian was brought to my notice by a friend, searching for the source of it , thanks to Google, I found out where it came from and also another answer by Sravani Ramayanam, which serves as her personal example to provide backdrop to discuss the relevant issues . Its from “Quora”. Let us have a look at these two answers reproduced below for ease of reference.
“Following or any combination of them could be the reasons:
1. Expenditure way beyond their means on daughter’s marriage, son's sacred thread ceremony etc.
2. Taking a large home mortgage in early career that leaves almost nothing to save for future
3. Due to lack of knowledge on financial matters (including finance people), investments made in bank FD, LIC and ULIPS that gave a post tax returns barely matched inflation or even lower
4. High investments in gold
5. Almost no Investment in equity / equity mutual funds
6. For some, a lifestyle that mimicked their more well off neighbors and relatives
7. Little or no budgeting skills
8. Medical emergencies, especially on dependent elders, who are not covered by employer provided insurance policies
9. Educational expenses'0 inflation that is way beyond increase in income
10. Additional tuition expenses which, at times, exceed even the school fee
11. Too many long distance travels to attend family weddings. “If I don't attend, they won't attend my children's wedding” syndrome!”
“The question seemed interesting ,i wanted to answer with mix of my experience and observations.
First thing first,
We are week on financial education.(most young engineering graduates)
The basic financial instrument like Recording deposits,fixed deposits and some Policies were introduce to me once i became financially independent. .
No clue of future investments,i kept on investing in gold(rather purchasing)
One good thing was i started PPF and some ULIP plans on my first increment.
I was not spendthrift and not frugal either.
But lack of guidance made me save very little.
After 10 years of earning and married for 7 years with kid of 1 year.
I have not been bale to have enough savings to cover basics for 6 months.we bought a car of 5.5 lakhs
We purchased a house in 2011 and other in 2016.the loans of both still exists.(95%on first and 80%on second remaining).
The rents we get from them are 38% of what we pay emi.
We stay in a rental those rent is same as what we get on both together.
We have a reasonable lifestyle.
We have good memories on vacation.(which we take at least once in an year)
We could not build wealth in past years,on a serious note,we are looking at it.
Most of the decisions were impulsive on money matter.Due to which though we both earn reasonably well,not much wealth or assets or liquid funds present.”
While I could not find any empirical evidence to support above statement I believe it to be true from my general observation and knowledge of cases.
While I agree with the causes well summarized by Mr Subramanian I feel it may be worth while to identify the ones that have been covered in some details in my earlier blogs and those which I plan to cover in some details in the future blogs to follow.I hope that helps those interested in learning how to overcome the reasons which lead to this undesirable and surely undeserved situation for many. If you act now surely you will not fall in this category.
1. Planning and preparations required before you invest in equity -Blog 23 refers
2. Home buying - Blog 15 refers
3. Real estate as an investment- Blog 21 refers
4. Financial Knowledge- Fixed deposits and Banking - Blog11refers
5. Budgeting skill- Blog 5 refers
6. Savings- Blog 7,8 as also 10 refers
7. Insurance and how to get out of endowment policies- Blog-2 and 3 refers
8. Mutual funds- Blog16 refers
9. Behavioral aspects - Blog 14 refers
10. PPF - Blog 20 refers
11. Finance basics- Blog 12 refers
The following subjects merit some detailed thought and blogs on these subjects are planned and will be published in the following weeks.
1. Asset Allocation
2. Appreciating and depreciating assets
3. Investing in gold and silver
4. Marriages and expenditure
5. Expenditure on higher education of children
6. How to start investing in equity after you are ready for it
Those interested may like to follow my blogs and DIY or enroll on my web site www.moneymonk.me for one on one learning and though I am doing it as public service its not free because I believe that anything offered free is not valued.Unique aspect is you get to decide what you pay per audio video on line session after initial introductory session and the money so collected goes to charity.All the money so far collected has been already donated to Kerala floods affected people and some other needy ones.
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