Then Why do we Earn So Much ??

“This is the limit Mom, I can’t take this anymore” said Shikha, a 31 year old lady to her mother, Arundhati. Earlier, Shikha was working with a private sector bank, after which she gave birth to a beautiful daughter. Shikha had quit her job to be able to take care of the child. Now her daughter is around 16 months old and her mother, Arundhati has come over to her place to help her.

“Sumit (Shikha’s Husband) doesn’t have a taste. You won’t believe, he bought a small Maruti, when we had decided to buy a big luxury car. We can easily afford an EMI of the luxury car. All he needs is to stop his nonsense SIP. But he doesn’t listen to me. I mean, how stupid is that? Do you remember my friend, Deepika ? Her Husband has a similar pay as Sumit. He recently bought a luxury car. That’s what I call classy.” Said Shikha to Arundhati.

Arundhati Smiled, “How big a Car do you need for a 3 of you, Shikha ? Don’t you realise that the Luxury car that you are talking about would increase the EMI by almost 4 times of what Sumit is paying right now? Why to take that unnecessary financial burden on yourself when you don’t really ‘Need’ it? Just because Deepika or her husband bought a bigger car? And you want to show-off that even you have no less than her?”

Shikha said, “You don’t understand Mom!! If we can’t spend, why do we earn so much?”

Arundhati said, “I would definitely like to answer this question of yours, Shikha. A person earns so much so that he can give a happy and comfortable life, not only to himself, but also to his family; And not only for today, but also for the years to come; even if few things go against expectations like a death or a job loss. He doesn’t earn so that, he and his family blows off everything that he is earning and also burden themselves with so much debt, that tomorrow, if one things goes against expectation, the entire family is affected adversely.

It is a not only a sensible thing, but also a prudent responsibility of the bread-earner to save for future. Having said that, it is also responsibility of the family to help him do that, by keeping their own demands in check.”

Shikha Said, “But Mom, we used to spend like crazy when I was working. Now, all of a sudden these restrictions in spending are making me sick. Why do we have to do this?”

Arundhati Said, “Things have changed, dear. Earlier, you both were working. Also, you both didn’t have expenses for the childcare which you are incurring right now. So for Sumit, its a double whammy; Drastic drop in income support (which was coming from you, even after you spent 40-45% of it); And also, the non-discretionary expenses have gone up where we cannot compromise, like healthcare, baby-related essentials etc. So the only option remains is to cut down on discretionary expenses which aren’t too necessary.”

Shikha said, “That’s what I am saying Mom. He can easily stop making his investments. That is a discretionary and unnecessary expense we are incurring. Rather, that Rs. 10000 p.m. could be used to pay a higher EMI for a luxury car or for any other household expenses.”

Arundhati Said, “That would be the most unwise thing to do. Ok, tell me. Is Sumit having a government job ?”

Shikha said, “No he’s not!!”

Arundhati Said, “Then imagine, who’s going to fund his retirement. When he retires, and the income stops coming, how will you guys fund your household expenses at that time?”

Shikha Said, “May be some money will be accumulated by that time.” Her tone wasn’t too confident this time.

Arundhati said, “That ‘some money’ actually needs to be a Substantial amount. Looking at your current lifestyle, you would require a corpus of around Rs. 3-3.5 Crores at the time of your retirement so that, at that time you could keep getting an income of around Rs. 1.5 Lakh p.m. to fund your household expenses; And how do you think these Rs. 3 Crores will be accumulated if Sumit keeps skipping and stopping his investments every now and then? Since he has started his SIP of Rs. 10,000 when he was 29, he can easily accumulate that kind of wealth. If he acts undisciplined, his and your retirement could be a nightmare.”

Shikha Said, “But Mom, then how did Papa manage all these issues. He never stopped me from spending ever!!”

Arundhati said, “2 things I would like to mention here:

  1. When your Papa was Sumit’s age, he too was a great saver. He saved and accumulated so much, so that he does not have to stop you from spending when you grow up.
  2. He didn’t stop YOU from spending, but he always kept telling me to keep a check on MY spending habits when we were your age.

The point is, when you plan and save in your early years, you do not have to worry too much when your kids grow up or when you are about to retire. If you keep splurging everything that you have right now, maybe your daughter won’t have the same thoughts about Sumit, which you are having about your Papa.”

Shikha Said, “You have explained me all these things in such a beautiful manner Mom. All these days, I was just thinking that when we are earning, we should spend more and show-off a better lifestyle to others. But now I realise that, just to show-off and impress others, we cannot risk the future of our kids and our own too. Also, I would want my daughter to be proud of Sumit, the same way I am proud of my Papa. Thanks for clearing my mind. Love you Mom.”

We look forward to your feedback and comments on the above article. Please feel free to contact us on saurabh@nidhiinvestments.com if you have any questions.

(The views mentioned in the article are personal opinion of the author. The characters used in the article are hypothetical).

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Published by professorbajaj

Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner. He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management). After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years. Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO. Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert. He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com . He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013. He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc. He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc. He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation. Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills. Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills. He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years. He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc. He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff. Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla. He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai. He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.

5 thoughts on “Then Why do we Earn So Much ??

  1. This a good lesson for all those who spend more than expectations. Spending as per our need can improve our financial condition during retirement. Save 20 % of income every month will have happy moment during retirement.

    Thanks for sharing this article.

    1. Thanks for the compliments Sir.

      I fully agree with your stand on saving at least 20% of income every month. This is indeed the starting point before anything else could be planned.

      Thanks again for your visit and feedback. Looking forward to more in future.

  2. I Need to show this to my wife. Coz I dont think my mother-in-law would be in a position to explain all this to her. Lolzzz

    Great Article !! Broadly I am following similar fundas but would be more focused now, thanks to your articles.

    Keep writing !!

    1. Thanks for the Compliments Karan !!

      I will be glad to know if your wife also likes and it helps you in your financial decision making.

      Thanks again for your visit and feedback. Looking forward to more in future.

  3. Hi, my friend, are you able to give more post like this !! As I was very pleased to find this post on this site. I wanted to thank you for this great read. I definitely enjoying every little bit of it and I have bookmarked you to check out new stuff you post. It sounds, like to share in your more post now and in future.

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