- For most people, their job is not going to be with them forever. Even if it does, chances are that their current specialties/expertise will commoditize soon. Consider below points -
- The rate of "skills becoming obsolete" is much faster today than it used to be a few decades back.
- The tech industry which at one point enjoyed double-digit yearly salary hikes, has now come down to single-digit hikes and large companies like Infosys are being forced to even change their business model.
- Tech industry is just an example. Every industry matures over time resulting in lower salary hikes, so one must use the peak of his career wisely for wealth building.
- Leaving your money unattended will only lead to its erosion.
- It's a well-known fact that saving accounts/fixed deposits are poor tools for hedging against inflation, let alone building wealth. Over time, your unattended money gets eroded.
- Even if you spend well within your means, a nice car, dream vacation will continue to hijack your extra funds unless they are routed in certain productive long-term assets. Some luxuries are necessary but it's wise to consider the "opportunity cost" before falling for them.
- Your expenses are only going to grow.
- Marriage, children, their education, better lifestyle, old age... all of them will call for higher expenses. If you are still earning, your best time to start investing is now.
- You have to balance between immediate gratification and long-term wealth.
- A car bought today at Rs 10,00,000 will be worthless after 10 years whereas an investment of same amount today will be worth Rs 31,00,000 at a nominal return of 12% per annum (Nifty has a CAGR of 11.7% in last 20 years). Overseeing the opportunity cost of a new liability (like car, house, travel) should not be taken lightly.
- Cutting voluntary expenses are easier early on e.g. a bachelor has the option to use shared accommodation, use a two wheeler for a commute.
- India is in a sweet spot now, but we should not take the current situation for granted.
- India, being a developing country is expected to have a much higher inflation than developed economies at least for next few decades, putting further pressure on your earnings.
- The existing benefits related to low commodity prices, low oil prices which have been keeping the inflation and household expenses low are due to external factors and may change anytime.
- At times of low growth, growing your money becomes even more difficult.
- Lastly, being financially free is not that difficult and feels great!
- Compounding is a great tool to build wealth over the long run. It's available to everyone but many people don't use it due to lack of financial education or pure laziness.
- Once you are financially free, you don't have to work for supporting your household. You can still work though, and it will be fun!
