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
Siva
I am in my twenties and regular reader of your blog. I find people at my age group want to learn their domains well as they have probably 5-6 years exp. So most people simply keep their money at salary acc and others spend on white goods. Some people buy a home loan to settle. Others give it to their parents to manage.(I am talking about guys who live on their own money).
Most important thing is their spending attitude(experiment with their new money). Very few people invest in share markets unless they have a strong advice from people like you(respect intended).
They feel their wishes to be fulfilled first then savings!
Bhushan
Lack of awareness is the main cause here. I do not think anyone who start earling after graduating knows that he ahs to save money. For him (her too) it is a huge pride moment that he has started to earn big amoutn and don’t have to ask papa anymore. his first thoughts will be to spend the money and flaunt in front of friends. He is NOT aware that he has to prepare for retirement from first day in job.
Dr M Chandrashekhar
One simple reason is that a youngster is not taught to save money– why not include it in his Bachelor’s curriculum ? He/ She is not going to listen to his/ her parents seriously. I have felt the similar way for doctors– in our curricula , there is not a word about how to start a Practice–an ethical clinical practice.
Peer Pressure, too,prevents an youngster to go the money saving way– he/she may be bracketed as Kanjoos !
G.Subramanian
Dear Subra,
I can personally recollect why we dont do that.Iam now in my early sixties.At that early age of twenties and thirties we think we will be eternal earners and at the prime of youth lured by all the white goods and luxuries which we indulge only to lament at later date about the lost opportunities.
Regards,
G.Subramanian
Saktheesh
My view is
“in 20’s and 30’s most of the time is spent as social outing with friends….. and generally spending is seen as a social activity and earning/personal finance not so social at that age.” Much of the time gets spent in making yourself more social and less personal. Probably a social network in this domain may help 😉 #justsaying
vincent
I used to save money from early twenties but, I chose the wrong instrument (Bank FD’s). There was not much awareness of stocks or mutual funds. Being in mumbai, stocks yes, but chose wrong path of following tips from friends during Harshad Mehta days. Hence, kept away from equity investing.
Insurance – Purchased a policy recommended by dad’s friend, which is a money back policy, had not heard of term insurance then.
MangoMan
Speaking only for me, currently in 30’s and waking up to my financial realities only in last few years. Initial few years(5-6 years) after getting a job, were spent in seeing my family settle. Father’s loans (both for our education and otherwise), sister’s marriage, brother education etc etc…
By the time i finished all these, having no EMI’s to pay, seemed like a big blank in life. I felt, having extra money after taking care of expenses, with nothing to do was a very uncomfortable thing. I had sort of become a habitual EMI payer. Then I acted promptly, to fill that blank by going for a housing loan EMI 🙂
Which in retrospect, i could have avoided given the cash flow problems and hellish life the loan bought with itself. 4 of 15 years tenure are gone now. I now value, having cash for investment’s but then a good part of it is already blocked in EMI’s.
I think i would have acted differently (in the last 4-5 years) if my perspective were different. None in family or circle had a good financial perspective. We were always a hand to mouth family. i.e., until i accidentally stumbled into the value investing world and Charlie Munger. He made immense sense from the very first time i heard him and i accepted him as my rich dad 🙂
The path i choose is different since then. Your blog and many other’s have played their part too.
Just want to point out, that the starting assumption of your blog is not correct “We all know, that we should:”
correction from my point of view would be
*We all DON’T know that we should…….
Regards
koguty
I started saving from my 1st salary; being an obedient child, “INVESTED” in LIC [ apparently nothing beats the safety and returns of God’s gift to Indian investors aka LIC – that their policies give returns as low as 2% annually is nothing but BS/hot air out of rear/mathematical mumbo-jumbo].
Thankfully, parents thought PPF was safe – so started it early.
MFs, stocks – they are unsafe, it is just gambling, throwing away my money – this is what I was told when I started my first SIP; then the deluge of “I told you so” since 2008 – these were the main hurdles faced by me.
I guess this is true for many people in their early 30s.
T Mariappan
Delayed start of their career may be one of the reason for not start saving in early days.
karthik
At Prime youth, people want to achieve all their desires than investing…
early commitment to huge housing car loans..
GBJ
According to me, the biggest factor for not investing in stock markets at early age is the image created in society that stock market is more or less equal to gambling. Peaple stay away from it for entire life due to this image. it is very difficult to break this image.
Jagoinvestor
No Instant Gratification … Simple !
Suhas
We are not responsible/accountable for anything during our early years of job life.It is only when you get married buy a flat and have kids in 30’s you start thinking about it..
No finacial education in school/college…our system is so bad even majority BCOM people face the problem.
bemoneyaware
How can we do something which we are not taught to do. Money is not talked about in family. We grow up with different views of money – mostly as it is evil.
Focus of parents is on getting child educated and settled. When child starts earning then focus is on mostly spending,you have your own money and are not answerable to anyone.
Then life takes over, marriage, home, kids (not necessarily in that order). Different advices – LIC, Mutual Funds, stocks, Insurance, Income tax
Where do we get time to sit and learn about money.
We do not allow people to drive a vehicle without taking a license test but allow them to enter complex financial world without much financial education
Priya
Abbhi se kya saving karna,abhi to bahot time hai!!
may be not really knowing how much corpus we need in future n not really thinking the power of compounding(in terms of amount we need to save now n later)
shiva
No Sir, not even 0.001% knows and understands the simple things you said. Only because of power of internet and constant reading of blogs like this we came to know/ understood recently these concepts.
sudhir kamble
Main reason people are not able to MANAGE is
1) Its difficult to control your emotions w r t your own finance.
and so its affecting the individual’s decision making ability, Self discipline, strategic goals
prabe
The reason is simple.
1.Don’t know importance of saving
2.Will laugh if i said about investing for retirement.
3.No knowledge on various assets
4.Don’t know the power of compounding
SSR
I have no financial knowledge at that time. Only thing I know is to save for my sister’s marriage and for buying house. I kept all the money in FD and in LIC. Luckily one of my team leader, took some time to advise me about basics of finances and thus started buying gold for my Sister and that helped me alot.
Only out of my own interest on trying different things and talking to different people on financial investments, I came across blog like yours and started thinking and acting… but obviously this route took time and hence can start invest only during my 27 age.
I know many of my friends have neck full of EMIs but still they are trying to earn more money rather than saving it… I know that race will not end, but they are not ready to even listen to me …