 I am a crorepati, are you?
Not many realise that after calculating our cost of living most of us turn out to be a crorepati. Read and you will know how.
WHERE ARE WE heading?
Ask people “Do you earn enough?” and you are likely to get “No, I don’t!” and if they do say “Yes” then it’s more like “Yes, but I could always use more money!” Nobody seems to have enough!
Go on to ask them “How can you earn more?” and they are likely to tell you that they will have to find a better job, take a second job, have the spouse work (hey why not kids too?) or wait for the boss to give you a raise. I have yet to come across one person who says, “The way to have more is to make my money work for me!”
It seems most of us live in a world where the only way to make more money is to work more and more … and more. How many of us actually enjoy the money we make? How many of us are truly living the lives we love? Most of us live the way we do because we know no better.
The Challenge...
In this first article of the series, we will discuss the financial challenges that the average urban middle class Indian faces. If you are a member of the large “Indian Middle Class”, then you probably have a decent steady job or business, belong to a family where parents, grandparents and kids live together, and while there is sufficient in the bank for the everyday expenses, there may be a growing anxiety about how you will meet your financial needs in the future. You probably have a positive outlook and know that in the end, things will somehow work out. The kids are sure their parents will help them along the way and the parents are hoping the kids will grow up soon and contribute to the family’s kitty. By the way, did you ever hear of the proverb: God helps those who help themselves?
The facts …
Kids ... In 2003, a leading finance magazine calculated that the all-inclusive cost (school fees, clothes, pocket money, hobbies, healthcare etc) to bring up one child from conception to graduation and marriage would cost INR 20-50 lacs. Now we are in 2007, the costs now are now probably between 27-70+ lacs depending on your socio-economic group. Now if you have 2 kids, it doubles, not one and a half!
Loans ... You may have taken a loan for your house (and your car?) and while you were happy with the low interest rates sometime back, you are now beginning to worry about the rising rates and the effect they have on your finances.
Old Age ... You are probably quite happy with income now but have you given the following some thought. If your monthly expenses for yourself and your spouse (not including any rent, EMIs and kids expenses) are INR 10,000 per month, then you will need to have about INR 16,000 after 5 years, INR 26,000 after 10 years, INR 42,000 after 15 years and INR 67,000 after 20 years to have the same standard of living. This is assuming that the cost-of-living will increase by 10 per cent a year every year– this is a fair expectation for India.
Nowadays, irrespective of whether you are in government service or the private sector, you have to take care of your own pension. Most of us haven’t given sufficient thought to the amount we will need in our old age … better start thinking now before its too late.
Health ... It is known that Indians have a higher risk of diabetes and heart attacks. How about your weight and your health? Since I know you will not reduce your eating and start exercising even after knowing all this, I am hoping that you will at least prepare your bank balance for healthcare expenses – just in case.
How much should you be prepared for? Today, it costs between 1-2 lacs for a heart bypass surgery and between one to two thousand per month for medicines if you have diabetes and/or blood pressure. In 5-10 years, it would be safe to assume that a bypass surgery will cost about 5 lacs and medicines could cost between five to ten thousand rupees per month.
I have only covered the “important” things in life and not yet reviewed many other issues like cost of living, taxes etc. The discussion so far is intended to wake up the many sleeping to the financial realities of life.
For our parents and grand parents, life was very different, they neither worried about or spent money on TVs, fridges, cars, computers, branded clothes, international holidays, pizzas and noodles! You and I live in a different time with different demands and aspirations– are we up to the task of meeting them or are we going to have not-such-a-rosy future? Learn, ponder and take action before it’s too late to do much.
What next?
One thing is clear, we have to take responsibility for our own future and with God’s help it will turn out all right. In subsequent articles we will discuss how we can meet these financial challenges by effectively using government approved and globally accepted investment products to secure our families and our future. In addition, the open minded can benefit by increasing their wealth for their and society’s benefit.
And by the way, when you add up all the costs (mentioned above), it’s a few crores over a lifetime, so now you know: You are a Crorepati– Congratulations!
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