THE MIDDLE CLASS AND THEIR FINANCIAL STRUGGLES

I have experienced that many of us do not like reading about finance & unfortunately this topic does not attract many readers globally especially in the age when you have many other interesting avenues to entertain yourself like the ever so happening social media, whats-app groups, the Netflix and the Amazon primes,  the virtual gaming zones,  the daily television soaps, the fiction & non-fiction reads other than finance and accounting, and of course the tik-tok saga, and the list goes on and on. The subject FINANCE itself makes a person nervous & makes him/her think that he/she has to read and understand something which is very difficult to understand & is very boring. However it is not that difficult to understand if you do not go deep into financial jargon like accounting, cash flow statements, the EBITA and the PBT etc & believe me it is the only subject which is connected to all of us, from a tea vendor to the richest man on this earth, from musicians, engineers, entrepreneurs, businessmen, designers, doctors, sportsperson & to all possible professions, it is important to manage one's own finances to survive and prosper in this challenging environment. 

Well friends, what we are really missing out on is the most important aspects of our lives, our own financial health, which makes or breaks our desires to become rich. I would have loved to gain this knowledge some twenty five years back when I was still in my high school, things would have been different. Since last couple of years, have been reading and understanding lot of things related to finance and investments, so the purpose why I am writing is to pass on this knowledge & help the people who are really struggling in current scenarios of global recessions, uncertainty, the layoffs & the effects of global pandemic which is not going to go anywhere any soon. 

Having said that, please note the great human race has always prevailed in past during various disasters, pandemics & world wars & will prevail once again & another civilization will evolve. 

The point is how do we as an individual survive when there is so much at stake & that is where the money management and your financial health will make you weather the storm. However to do that you need to open your mind & unlearn lot of things which our parents & generations before them have taught us. Like most of middle class families, parents work very hard day & night to earn just enough to make sure their children get good education and a well settled jobs which is socially accepted approach towards life. Unfortunately we do the same thing to our children and the tradition goes on and on. We also unintentionally teach our children that clinging on to our jobs like the only love of life, day in and day out is the most important investment of time & also cribbing about the high taxes which we pay to the government is a normal frustration of every working class citizen. 

Power Of Compounding, building your wealth

We must learn to inculcate good habits of investment & developing assets to our child right from a very early phase of their life. The biggest problem with us is that all through our working lives we accumulate liabilities & do no create any asset. We run a rat race, day in and day out just to maintain a socially acceptable lifestyle and forget our important goals of creating assets and end up creating more liabilities. 

1. Start early -

Investing in assets from a young age gives your money a compounding effect which multiplies your asset column multi folds if you have chosen the asset carefully. If I had invested just Rs 1000 during dot.com boom in 90's or in first decade of 21st century in companies like, TCS or Infosys, my Rs 1000 would have become Rs lack in just 10 years. However the learning we have got since childhood is that the banks are safest bet & the fixed deposited are safest, we tend to forget that even the banks fail, the interest they give is again taxable, so the actual return is much lesser if you also add inflation to it, as the Rs 100 invested last year is valued only Rs 98 after a year, so do you really think it is a wise investment ? May be if you hedge your portfolio, and divide your hard earned money in terms of risks, then yes, some part of investment should be band deposits but not all. Please note that neither FD, nor mutual funds, nor equities are safe investment but then you need to be prudent enough to diversify your risk profile & give time for your investments to blossom. You can not become rich in a fortnight unless you find a gold mine or win a lottery. 

2. Build Assets - Invest in good companies, the products which you use on daily basis, like toothpaste, have you ever seen who is manufacturing it for you since ages & is the product going to be stopped ever ? Ofcorse not, no one is going to stop brushing their teeth from one fine morning, so invest in such companies, this is just an eg, you can relate it to any product you use in your daily life, from a pen, to a ear bud, to the gold ornaments you have, someone is making them for you, and someone is also making money from it. Another example is Pidilite, day in day out you use fevicol, feviquick, m-seal & so all, what they do, they make only adhesives but they are world leaders in adhesive sector, and they cater to almost all industries be it educational institutes, arts and crafts, real estate, cement, carpenters etc etc.  Invest in businesses which have enthusiasm to develop new products to serve their customers better. There is a reason why companies like Hindustan Unilever, Dabur, P&G, ITC, MRF, Maruti and many more have grown multi-folds & have given multi-fold returns to their stake holders, You just need to be attentive & be a good observer, ideas of good investment may come out from your day to day life. 

3. Jobs - yes having a job and progressing in it is a very good thing but then it should not distract you from your own personal goals of money management. You are so engrossed in your jobs that you forget to learn new skills, to invest your hard earned money to build assets, instead you are busy in acquiring lifestyle liabilities, like expensive cars, phones, i pods, and so many gadgets. Do you know the middle class is the biggest consumer of such luxuries which normally they cannot afford and so they use credit cards to add further liabilities. People often tell me that they do not have any extra money to invest and they live like hand to mouth every month after paying for everything, what they fail to understand is that there is something wrong in their spending habits, You know the rich people do not buy luxury instead they acquire the services or companies which provide them. One fine day when a disaster strikes like a carona pandemic now, then your job which you loved the most & invested most of your time into may betray you and you are left with nothing, no assets, no new skills & sometimes the confidence too. It is important to love your job but not to the extent that you are totally dependent on it as disasters does not give you time, they just shock you. Your one of the biggest asset is Learning, never say no to Learning. 

I have seen people who earn handsome salaries but they still struggle with their financial health & hence could never make the money work for them. 

4. First House - Buying a dream house, your first visible to world asset, is a good investment but buying a second house may not be a good idea as it not only adds to liabilities in terms of maintenance, house tax, stress related to theft, but also makes your money stuck in it unless you really find a buyer to sell at a good price to gain profit. Rather invest in commercial spaces if you have money, it will generate rentals and you are building an asset. Buying real estate was a good idea a couple of decades back till last 5 or 7 years, but the same may not work now, so you need to also understand where the economy is going to boom. Economic scenarios may change with time & so does your investment patterns. 

5. Gifting your loved ones - Every body likes to get pampered & to gift your loved ones is good way to show love and support, however, choosing a gift for your spouse, child, family is also an art. Gifting a  Rs 5000/- Gold earring is asset where as gifting Rs 5000 Burberry perfume is a liability. The Gold can always glitter but the perfume cant. :-) 

6. Learn to give money - Try to give some part of money from your profits to the needy, giving away money to people or organisation who are using it in teaching or schooling is best way to give back to society, always do that. Sometimes money cant help you, but blessings can, just like the richest of people have lost lives due to carona virus, even their money could not save them. 

Spread learning and educate people around you, every day you learn something if you keep your mind open for it.  

Work to learn & not for money. Money will find its way if you learn to make it work for you. 

Lastly, there is a quote by Robert Kiosaki, in his famous book, "Rich Dad, Poor Dad" 

RICH PEOPLE DO NOT WORK FOR MONEY, MONEY WORK FOR THEM. 

Make your money work for you, 24 x 7, every day with every penny you earn, you decide to be rich, poor or middle class. If you have likes reading this, please teach your children the money management & not how to become a good employee. 

You can also invest some of your free time in reading below books - 

1. Rich Dad Poor Dad

2. An Intelligent Investor 

3. One up on Wall Street 

4. Men Of Steel 

Disclaimer : The above views are my personal views & opinion, people may have different and better ways to manage their wealth. I am just a writer & not a wealth advisor & above examples are only for educational purpose and not investment ideas. Please invest wisely doing your own research.