Why do we not manage our personal finances well?
We all know, that we should:
a) start young
b) save / invest regularly
c) use the power of compounding… etc.
BUT we do not do it…surely not in our 20s, and maybe 30s…
WHY, like your answers please!
do not want to give options and ‘direct’ your thoughts…just asking an open ended question…thanks
Mira D
I guess I was one of the lucky ones– I’ve seen how a house can be run on dividend income… in the initial years I remember not wanting to start PPF because I didn’t want to “commit”… now I keep extending 5 year blocks… 🙂
And yes, value investing learnt the hard way– gujarat telephone cables, purity flexpack– where are those companies now? So for some years stayed MF-oriented.
Even now find it vv difficult to sell duds. Yep, stupid of me, know that. 🙂
mani
1. There is no education regarding saving/investment given to those who are coming out of school/college. Due to this, initial decade of life after school/college is spent in learning through errors like investing in LIC, ULIPS etc.
2. Often there are commitments in earlier part of life which also results in not saving enough.
3. Ability to not say ‘NO’ when it is needed. In my earliest years, I used to give to friends and relatives despite I know they are NPAs. After that learnt to say NO.
4. For lazy persons like me, availability of services in the internet. Before that, you have to go to bank for everything. Now life is easier because of the web based services provided by banks and other financial institutions.
Srinivas
From personal experince and view, the issue boils down to education.
There are two aspects to this issue and many pointed out one aspect only. It is quality financial education in school/college, which is absent. True. Our education system is not equipping our students with the facts of life, there is a clear disconnect. But, I feel thta this is a minor part of the story.
Major part is what a student is being imparted outside the school, more importantly, in the home. The lesson of proper spending and long term goals should start from home. But, as the parents thmselves are not in the know of things, this info is not reaching children at an early age, when it makes a lot of impact. This i feel is the main reason.
Other significant changes which lead to this are as follows.
Actively seeking information, from which ever source, is also not encouraged. We follow the advise of our father/mother, without even checking it. Initially, when i am a child, my father knows what’s best for me. However, as the time passes, the knowledge of parent(s) in some issues become slowly outdated/constrained. This can be seen in many of the comments. Many invested in LIC as per their parent’s advice. As a parent, i feel it my duty to know my limitation and tell my son(or whom i am giving an advice) that my knowledge may be limited, go to a more appropriate person for a better advise.
Then comes the rapid growth in the financial status, of society and individuals. If one gets rich gradually, he adjeusts himself at every level and grows with it. But if the growth is fast, adjustment becomes an issue. (Third wave of alvin toffler). This is the problem with many of our parents. Many still live in the cosy security of FD’s and LIc’s wiithout actually knowing the impact of their activities. For their generation, a bank cannot go bust. But it is not reality anymore.
One way of insuring ourselves and our subsequent generations is to become financially literate and pass on the information to the needy.
nikhil
i think we people lack role models at home front…..we grow up observing our parents going about money….plus earlier there were less avenues to spend money than now…eg branded stuff…plus we are not prepared to handle money.
Deepak
Same story as mangoman – lost my dad when I was 18 – only earning member at 23 – paid off education loans, home loans for parents place, home improvement loans, supported brother’s education and then funded marriage – was addicted to paying EMI’s 🙂 sad but true – ended up buying a house – so while through all this moved my family’s wealth from a 100% FD oriented savings to 50% FD and Equity MF, my personal savings mostly in MF’s SIP from 2003 have stayed very small every month – so while the habit has been there, no meaningful corpus has been built over a decade of working – the next decade hopefully will be the accumulation phase.
P.V.R. Somanadha Sarma
Lack of awareness, negligence
Hima
Lack of discipline in tracking money (expenses). Impulsive purchases and regretting on later.
mani
Also, there were no subramoney or jagoinvestor when I started decade ago. Now they are to guide. 🙂
subra
mani – by God, you need help.
Shankar
The reasons are:
1. When a student gets a job, he transitions from 0 pay to high pay. He cannot handle the sudden prosperity.
2. The new economy presents temptations that are beyond the imagination of elders. Some of these expenses are recurring (gym
membership, cell phones, etc) and convenient (EMIs)
3. Credit loosening has been done to increase pressure on spending.
4. Anybody who purports to provide financial advice has a vested interest and the buyer intuitively feels repulsed.
5. State sponsored financial safety nets have become unavailable. (Low interest on PPF, no pension, etc).
Surabhi Rajan
Following are my personal Opinions
1. Lack of self decipline- Keep pushing things for next month/year
2. Pear pressure – When friends or collegues spends on gadgets, travel, accessaries cant stay away.
3. Soacial Outing – Eating out, snacks, soft drinks which wud feel as nominal expense, but turns out as 50% expense of youngsters.
🙁
mani
@subra
While I have not taken any investment decisions from your websites, I am able to learn a lot from you people which has been helpful for me in understanding financial products.
vikrant
By the time we become aware that we need to do the given mentioned above we become 30 or in late 20’s, there is no financial education in our society and that’s why. i started reading about finance when i completed 5 years of my job i am 31 and already feel that i started very late but i am coping quite well and doing good now.
nkanani
Some times, people do realize that they need to save (though, the power of investing early / compounding, etc. is not fully understood). But, we think, we can postpone the decision until some future date (when i will have all my plans in place). This future date keeps slipping, before we realize we have lost lot of opportunities of saving and investing. Then, we have loads of information and knowledge at hand, but, do not still give up the procrastination, indulgence.
Lack of awareness, due to whatever reason, is one aspect.
Another thing, i remember, i felt really hard to believe was: I will also, like everyone else, grow old or need an emergency fund or may not be capable to earn any more – retire, etc. and will have to rely on my investments to sustain my lifestyle. I thought, I can always rely on my strength and ability to earn. Eventually, time goes on, procrastination is a bad habit – cannot be easily given up.
trupti
comments part is interesting and worth reading on your blog!
Dhivya
Hello Subra sir,
Am in my late twenties, and started reading your blogs six months back,
and the truth is I realised how i was behind in the subject of financial management only after reading ur articles.
Why the young dont invest is
1. The start of the carrer, the parents tell dem to save for der marriage especially if its a girl or to pay off ur educational loan or ur dads loan.
2. The assumed thumb rule of settling in life is having a house and a car.
3. LIC policies!!!- If you dont have one- ur losing ur premium status in the society.
Ultimately with these ideas, the younsters are running in between EMIs to pay off their loans and these EMIS take the lion’s share of the income.
In india savings are done jus to save tax under 80C.
May be our community didnt worry about pension as most of the people were in govt jobs in the previous generations, was this the real reason for this state of mind??
Dominic
I am in my early 40s and I started investing in middle of my 30s. I agree I was late in this. Now I have about 50 engineering grads reporting to me. Their salary range is 20K to 1.5lac/month and age range 23 to 35. Currently many of them are not investing in equity but definitely have some endowment policy from LIC.
When I took this position I called an IFA and took a class/QA session for about 1/2 day. I started the session by saying if I had such opportunity when I was at your age I should have couple of corers in my corpus. Later the IFA explained everything from early investing, compounding, equity, debt, Term insurance, Gold investing, PF, PPF, NPS etc etc. It has been 6 months now and none of them even resisted for KYC. I dont understand whome to blame. Recently I heard one opened a PPF account.
Dr M Chandrashekhar
The Stock Market scenario is not at all convincing– when an youngster sees the may-hem happening on a daily basis, he is not going to be convinced that his money is going to be safe for a long term investment.
I guess we need to give catchy advts –like iForex in this Blog–where every one seems to be making easy money !! GOK what is the exact truth !