Wise Wealth Advisors

D.Muthukrishnan (Muthu), Certified Financial Planner- Personal Financial Advisor

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You can never become Rich

Posted by Muthu on July 27, 2010

As I did couple of weeks ago, I’m planning to share with you occasionally random thoughts on issues relating to my personal domain, which would at the same time applicable to most us because many a times the human behaviour and experiences are not unique, and is same for all of us. We as human beings also have our own fair share of folly.
 
Many people wrote to me when I shared ‘random thoughts on myself, my profession and social compulsion’. They shared their most personal issues with me. 

All of us have our own vulnerability and there is nothing to be ashamed about the same.

You may be puzzled by the title of the message, coming from a Wealth Advisor.
 
Life is very fragile. We are all mortals.
 
I’m not going to write a spiritual article, though I would love to, but this is not the forum for that. We all often forget the above statements.
 
Before the end of this century, the 7 billion of us inhibiting this planet would be replaced by a different set of people.
 
Many of us pursue wealth at the expense of other aspects of life. As you’re aware, our organization is named as ‘Wise Wealth Advisors’ because we believe that wealth without wisdom is not only useless but also may be dangerous. Also Wealth should be attained through Wise means. That’s why our tag line is ‘Wealth through Wisdom’.
 
Let us go back to 1995.
 
I was working in a stock broking firm for Rs.2500/- a month. My father and I lived in a 150 sq.ft. house and had zero savings. Meeting our monthly expenses itself was a big challenge. Despite that we’ve to help my elder brother who was not doing well in life.

I can vouch from my personal experience, no relative likes to be in touch with you once you are poor. They see you as a burden. Good friends and genuine wellwishers are an exception to the above rule. We had only one of our relatives to look upon then for help.
 
I honestly feel that they could have saved my elder brother easily from the chronic ailment he is suffering, which has crippled him for life, had they taken initiative when they identified the problem. They were reasonably well placed to provide him treatment and cure him, given their financial strength at that time, especially given by brother’s closeness to them then.

When I got a seat in IFMR for MBA-Finance (thank you Rakesh for nudging me to join this course), with my meagre earning of Rs.2500/- per month, I literally begged the woman of the house of the above relative for loaning me the annual fee of Rs.5000/- (today the fee is running into lakhs of Rupees). Though they had money, they said it is up to me to take care of my educational expenses if I want to study further. They knew that we were leading a poor life and was living in a  tiny house, barely able to even survive in the world, also helping my elder brother in the process. They were also not dumb enough to realise that doing this course would be a way for us to come out of the poverty. We had no one else to ask to.
 
There are always unknown angels in life. There was a stock trader in Madras Stock Exchange then by name Srinivas, who was my colleague in the stock broking firm I worked. During 1995 itself he has run into loss of few million rupees (which was huge at that time) and was in great financial distress. Seeing me very upset, he enquired for the reason, when with great hesitation I explained my plight, he further borrowed Rs.5000/- and gave it me. But for him, I would have never gone for my MBA. I still remember him with gratitude and pray for his welfare, wherever he is now. 
 
Subsequently, my boss, Mr. Jayesh A.Shah came to know about my poverty, to make you visualize- I just had 2 old pants and 3 worn out shirts and used to walk 8 kms every day unable to bear the bus ticket cost of Rs.1.25/- and was not in a position even to have a wrist watch and used to keep asking people on the road for time -he spoke to his father and sponsored my second and third year of MBA education from the social welfare trust run by his family. He also gifted me his books purchased while he was studying MBA (he is from IIM-A). I understand that Mr.Jayesh Shah is now somewhere in the gulf region and is associated with stock market. I’m grateful to him too.  
 
I was the most poorly dressed, without shoes or even watch, when I did my MBA. This relative family did not even feel fit in helping me having couple of set of good dress, a pair of shoes and a wrist watch. Beggars are not choosers, right?

I’m grateful to the then Program Incharge of the course, Prof. Dr.Narasimhan (whom I understand is now in IIM-B), other professors and good friends, who constantly encouraged me.
 
I want to stop writing about this relative family and move further because I can even write an exclusive blog about their meanness and greed, which may be of no use to you. The woman of that house has only further worsened in her pettiness and greed and is grooming the next generation also to slip into her shoes.
 
Most of the people who come to me for advice want to become rich. You can never become Rich.
 
‘Rich’ is a relative term. It is always in reference to someone or something.
 
For many of you, who saw the Jaya TV breakfast show recently, wherein I had the privilege of being the guest of the day, I told one should aspire to be ‘Financially Independent’ and not ‘Rich’.
 
If you believe, being rich means owning lot of money, there are many more people in the world with much more money than you. Two decades ago, Warren Buffett and  Bill Gates were not the richest people on the earth. Today they are, replacing the earlier ones from their positions. In a decade or two, Warren Buffett and Bill Gates may be replaced by some others.
 
If this is going to be the plight of Warren Buffett and Bill Gates, what to say about rest of us?
 
For argument sake, if we assume that some one is rich, if his financial assets is atleast Rs.1 crore or above, it is not so.
 
I came across a gentleman recently whose networth is Rs.3 crores but needs Rs.5 Lakhs every month out of it, to meet his life style. Understandably, he is miserable and cannot have his requirement met out of the corpus. He needs another Rs.3 crores to fulfil his expectations. Obviously, he feels inadequate.

On the other hand we have 800 million people living in our country with less than $2 a day.
 
40% of the world population lives less than $ 2 a day and go to bed with empty stomach.

So arrive at your own life style needs, preferably avoid envy and comparison and do not try to create a life style because someone else wants it but only because you want it.

If your life style demands that you need Rs.50,000/- every month, then if you have Rs.60 Lakhs, you can be termed as financially independent. Though you’ve lesser money (only 1/5 th ) than the above mentioned gentleman, you are richer than him.

When I had the guts to quit at the peak of my career and chose to be on my own in a totally different line, started doing what I’m passionate about, not everyone was amused. Everyone in the relative circle thought that I’m crazy to ‘retire’ from well paying career early and start something ‘foolishly’ on my own.

Also as my profession involve more of reading and thinking and talking and less of doing, (as Buffett says ‘We don’t get paid for activity, just for being right’) everyone concluded that I’ve become lazy. My failing health which restricted my physical activity added to their conviction. They thought that I’ve become a parasite and become dependent on my wife’s earning and wealth.
 
To establish oneself in a totally new profession from employment in a different field requires tremendous amount of inner conviction. Also something just takes time. To quote Buffett ‘No matter how great the talent or effort, some things just take time. You can’t produce a baby in one month by getting nine women pregnant.’ A true professional builds his profession purely through referrals and it needs atleast  5 years for him to establish himself.

It’s just 3 ½ years, we’ve been in profession and is being recognized by informed and quality clientele (to appreciate what value we bring in needs certain amount of knowledge and understanding, that’s why we’ll be professional for classes and not masses. By classes, I do not mean someone’s wealth but their mental attributes.), media houses – both print and visual and by wellwishers and friends. But our relatives continue to look down on me. Many of them are multi-crorepathis, they measure people only by their ‘activities’ (remember I’ve written earlier about a busy suburban GP Doctor) that are visible to their ignorant eyes. Also most of them either envy or dislike me because I’m refusing to be part of their rat race and refuse to  measure my value in terms of wealth.

Even if I loose all my wealth today, I know my value. I know what I know and there are good quality people in the society, who recognises my value.

I pity the people who cannot understand that I enjoy the ultimate luxury of doing everyday, what I passionately love to do, helping people to create and manage wealth and be their ‘Personal Financial Advisor’. I’ve time everyday to think, read and write. This luxury cannot be matched by their expensive villas or cars. If they cannot see value in what I do, so be it. Who cares?

My wife has been very supportive. Otherwise given the social pressure, for example, one lady relative of us who works in a bank, always used to look at me with disdain, when I was operating from home office with my cotton pants and T-shirts, I would have found it very difficult to carry on with my profession and may be forced to go back to employment.

 Both  my wife and I were contributing for running the family. She has a good income and decent wealth. So I’ve put significant portion of my wealth in long term (10 years) wealth building assets. This restricted my liquidity but did not affect me as I was duly supported by my wife.

But given the social (read ignorant relatives) perspective, I’ve been managing my family’s finances independently for last few months. Added to this, I’ve written earlier, how I was forced to put a separate office in an office complex, and move my office from home.

Though by God’s grace, I’m financially self sufficient, I’ve to increase my liquidity to meet both domestic and official expenses. This means I should liquidate some of my assets, which I’ve already started. For those of you who are tracking my stock portfolio, I’ve sold my holdings in SREI Infra yesterday @ Rs.88.50/- per share.

During November’08, when stocks were available at a huge bargain, I was unable to control my ‘greed’ and bought whatever stocks possible like IDFC (Rs.50/-) , Karuturi Global (Rs.6/-) etc. From a lady relative of us, who is multi-crorepathi, but prefers to keep all the money in fixed deposits, I asked for a loan of Rs.2.5 Lakhs for 2 years @ a rate of return above fixed deposits. I’ve also told her that I would sign a bond paper in this regard, duly attested.  This confirmed her suspicion that I’m useless and have been simply whiling away my time.  She refused to give money.

So I sold my Gold ETFs  and purchased stocks, knowing fully well that Gold would appreciate significantly due to the global crisis and people loosing faith in currencies. That Rs.2.5 lakhs is nothing for her and she knew that I’m not going to run away with her money. I was also willing to provide her a rate of return better than her fixed deposits. You know how much Gold has appreciated in the last 20 months. Of course people are people and it is her money and so she had the final say on this.

My random thoughts are always longer…

To conclude, decide what your life style should be, including your regular savings to keep pace with inflation. Build sufficient wealth which would help you to match ‘your’ life style and your financial goals like children’s education, daughter’s wedding etc. Cover your risks through Insurance so that your savings are not dented on the eve of any contingency. Like you have a family physician, have a personal finance advisor, who would help you to build and manage wealth, risks etc.

As long you have above, there is no need for you to compare yourself with Ambanis, Bill Gates or Warren Buffetts of the world. You can never become richer like them. Even if you become, someone or other is going to over take you soon. Aspiring to be rich keeping your relatives or someone else in the society as benchmark, would not give you good quality of life. Once you reach that position, only your benchmarks would keep changing, at the cost of your quality of life.

As far as possible, be it job or profession or business, try to do what you enjoy doing. This is a greatest asset one can have. Just have wealth goals making you to be financially independent and do not keep chasing the mirage of richness. You’ll never ever be there.

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