Planning for Retirement - Too Early?

Ok! Let's do some computation.
Assume you earn around Rs. 30,000 per month. In about 5-10 years time you should be earning much more, but let us settle at Rs. 70,000. By the time you retire you should be earning many times this, but perhaps, you are ok with the living standard you have with Rs 70,000 and would like to maintain this even after you retire.

But now, you are just 30. Why worry about retirement now? Here's why ...

In the next 30 years, when you are 60, to be able to maintain the living standard @70,000, you need to earn upward of 3,00,000 per month. I have considered 5% inflation. The inflation makes your money's purchasing power weaker.

Perhaps, 70,000 is too big a figure. Let us stick to Rs. 30,000. After all by the time you retire, your children would have settled. You would have a nice, comfortable house and your needs would have reduced.

30,000 at 5% for 30 years Rs. 1,29,000+

Reduce it further ... 15,000 at 5% for 30 years is Rs. 64,000+ per month

Will your savings / investments today yield even Rs 64,000 per month (after taxes) when you retire? If not, what are going to do about it?

Budget your way to prosperity

Have you ever, I repeat, ever, sat down at the beginning of the month and budgeted your income? Something like I will save at least X, and I will spend no more than Y on books, and I will spend no more than Z on a date, and I will spend no more than P on movies this month, and I will spend no more than Q eating outside.
Once you do are done with your planning, at the end of the day note down your expenses. At the end of the month tally your planned versus actual.
You will be surprised.

Definite path to riches

There is one definite way of becoming rich. Unfortunately, this aspect is not as highlighted by get-rich-quick authors. Perhaps, it is taken as given.

Let us get some facts in place first.

1) I am assuming you do not have an infinite source of income.
2) I am assuming you have a profession other than being a Stock Broker.

If these two conditions are met, then there is only one guaranteed way to riches.

Excel in your profession. Become real good at what you do. Reach a position where the the income is much more than your and your family's need for a more-than-a-comfortable life. Invest the excess money so that you can maintain your standard of living even after retirement.

This may take about 20 years of hard work. Meanwhile keep saving and investing wisely so that you do not sink your hard earned money.

You find this piece amusing. I assure you that is not the intend.
Check out the richest people in the world. Let me know if you find any one - apart from royalties - who has not excelled in his/her chosen domain.
Check out the people who live in your neighborhood. The families that are well off would have at least one person doing very well in his profession (CEO / General manager / Whatever).

The path to riches can summarized as follows:

Save & Invest Wisely - Excel in your profession - Use excess money to invest aggressively

This goes totally against the conventional advise of investing aggressively when you are young and invest safely when you are old. The old advise is for people who are average. Not for people who are capable.

How can medical insurance make me rich?

Do you have a medical insurance? Oh! you are covered by your company. Is that adequate? And does that cover your parents, for instance? What will happen if they are hospitalized? The money that you wanted to invest will go to the hospital, won't it?

Wouldn't it make sense if you cover such contingencies with a good medical insurance? I learned this very recently and fortunately, not the hard way.

I was hospitalized for an appendectomy that cost me (or could have cost me) Rs. 80,000. (Rs. 80,000 for an appendectomy? Well what can you do?) And, I took out a medical insurance three months before that. Just 3 months ago. At Rs 5000+ premium, this is perhaps the best investment I ever made :-)

The premium for such medical insurance goes up with age. Someone who is 20-25 will have to pay less than half my premium. And in 4 years time, the insurance starts covering pre-existing diseases too.

You work day and night. Then you get to earn money. This you would like to save / invest / spend on yourself and your family. I do not see the logic in spending huge sums on money on health when small amount of premium will do.

You will meet people who will tell you that insurance is a worst kind of investment, poorest ROI. They don't know what they are talking about. Insurance is not an investment. It frees you to invest as you desire.

The truth about share markets

1. The movement in share prices are not random.
2. Herd mentality is as much evident in the share market as in any other human endeavor.
3. Share prices reflect the true value of a company. Wrong. They never reflect the true value of the company. It reflects what the stock brokers think it should reflect.
4. The share prices can go down or go up due to any reason whatsoever.
5. The share values will go down. Only then will the price come up and some one will make money.
6. All market rallies are driven by lay people who think that they can make quick money when the market is bullish.
7. You can never time the market. So, if you think you can sell when the share price will hit the peak, forget it.
8. How many people do you know who play in share market and are rich?
9. You do not make profit or loss in share market unless you sell the shares. Seeing your shares climbing sharply just after you have purchased the shares could give you immense pleasure, but it will not give you money unless you sell the shares.
10. The stock broker will always make money whenever you sell. It doesn't matter if you make or not.
11. Not opting for 'Stop Loss' is foolishness.
12. Tracking share market will always require more effort than you think.
13. You think the stock brokers know more about the share market than you do? Think again.
14. Ask a financial expert to predict if tomorrow the shares will go up or down. If the general trend is going down, she will say it will go down further. If the general trend is going up, she will say it will go up further. No rocket science here.

Investing in shares should be part of your investment plan. Not the complete investment plan.

How do you define rich?

We have been talking about getting rich. This is the 18th post on this subject. I think it is now time to define what 'being rich' actually means. In one of the earlier post I have quoted Buckminster Fuller that links wealth and the duration that the wealth can sustain you if you quit working today. In my mind, that definiteion is a recipe for post-retirement. And makes lot of sense.

However, the definition of 'being rich' has a social angle to it too. You need to appear rich too. How much you wish to appear rich depends on the people you work and socialize with. It is an entirely an external factor and very few can totally resist it. It is all very well to say that you should not succumb to peer pressure. Most do. To a small or large extent.

And then there is this personal desire. My personal desire to is to have two one-week holidays every year and that these holidays should be spent in comfort. That would mean staying in a 5 star hotel / resort. If I manage to pull this off year after year then I am doing fine.

So, what is this becoming rich thing. Let's sum it up ...

a) Enough money to fulfil your (and your family's) desires.
b) Enough money to conform to your peer group
c) Enough money to ensure that when you retire your standard of living does not drop off.

Now, you may say that there is no limit to desires or that conforming to your neighbour's expectation could spiral your expenses.
Exactly!
The word 'enough' is to be determined by you.
The limits too areto be defined by you.
Once you decide your limits you know how rich you need to be.

Everyone does not have to be as rich as Bill Gates. It is sufficient if you become as rich as you want to be.
Work towards your definition of becoming rich.

Public Provident Fund of India

The most interesting instrument of growing money with the least effort - at least in India - is the Public Provident Fund (PPF) route. Other countries will have its equivalent.

This is how it works. You open a PPF in a bank (I have one in State Bank of India). You can also open a PPF account in the Post Office. It is a 15 year scheme. You need to deposit at least Rs. 500 every year. The maximum you can deposit every year is Rs. 70,000. The scheme has other facilities like loan and partial withdrawal. I would advise against it. Keep the money in the PPF scheme for 15 years.

If you deposit Rs. 5000 a month (Rs. 60,000 a year) for 15 years, then at the end of the 15th year you should have - assuming 8% interest - about Rs. 17,59,457 in your account (i.e., 1.95 times the amount you actually save). In addition, you get a tax exemption on the money you save. Assuming you are in the 33% tax bracket, if you take the tax saving into account, the effective increase in your money is 2.91 times)

Some more details are available here.

Doesn't actually make you a multi-millionaire (what do you expect from a no-effort scheme?), now, does it? But every bit helps.

Achievable financial goals

We have so far established that there is a definite effort that we need to put in order to achieve the riches that we desire. But mindless effort will achieve you nothing. Directionless effort, unfocused thrashing of hands and feet seldom gets you what you desire. Now, if only you could focus your energies and push.

You therefore need to set a goal. Quantitative goals are better. But qualitative goals also helps. And the reason you need to do this is so that the universe responds. Oh! Ok, I was just poking a bit of fun at The Secret. (Come on! Be serious). And the reason you need to do this is so that you are motivated. If you have a goal in your mind and you see you initial efforts getting you towards that, you are motivated. That's what helps.

Understanding quantitative goals are easy. You can look to get a return of, say, 15%, over a period of 6 months. Or something similar. You could also set a goal to pay off your home loan in 6 years instead of 15 years (this by the way worked for me, though not by means of huge returns from investment; rather from savings). I would advise setting goals that are achievable but slightly beyond your zone of comfort. You need to strive towards it, right? Once you are on a roll, you can go for stretch targets.

Ok, what about qualitative goals? This could be fuzzy but needs to motivate you. I can share my qualitative goals with you ... and it is as follows:

All the purchases I make on Internet shall be from the money I earn from my Internet activities.

Now, this may seem foolish and easily circumvented. But it works for me. Choose whatever works for you - whatever motivates you to become rich.

Becoming rich overnight

How many years of practice do you think you need to become a real good violin player?

Oh! You don't play violin!

What do you do?

And how long did you take to become a master of what you do?

Then how do you expect to become rich overnight?

You need to work towards it. Like everything else.

Velocity of circulation

It can only be called a pipe dream. It has always been my desire to invest a sum of money and once I get sufficient returns, and take out the initial investment before it is too late. The returns will continue to earn money while I invest that amount in another fund. And then when the second fund starts giving good returns, I again take out my initial investment and allow the returns to continue earning for me, while I invest the original sum in yet another fund ... you get the idea; the faster I circulate my original money from one fund to another, the quicker I become rich.

This would be ideal. But I have never been able to do so. Perhaps I lack the discipline to follow it up.

God does not make you rich

If you want to get rich, you have to reduce your dependence on God. Note that I am not asking you to become an atheist. You may still keep your faith in God, spirituality and miracles. You can still pray thatyour day goes well. But the sooner you understand that god does not drive the complex economic system that is entirely man-made, the better off you will be.

Every action taken by you to become rich is entirely - entirely - your and only your responsibility. Random events or a black swan event may drive markets up and down; you may cash before it crashes; or you may sunk all your money - God has no role to play.

You can become rich. And the first step is to understand that it YOU who is responsible.

Actually that is true in all walks of life, isn't it?

Escape from the clutches of credit card

In my last post I talked about impulsive purchases and breaking barriers of reluctance. Credit cards are instruments that help you spend unnecessarily and spend more. Since you do not see your net worth reducing, you get psychologically inured to overspending.

One way to escape this is to avoid the temptation to increase the credit limit of your credit card. I deliberately ignore mails from my bank to increase the credit limit. In one case, the bank increased the credit limit on their own because I am their valued customer. Yeah sure! I also carry just one credit card. I have surrendered all others I had.

I just read something called the ice glass method for reducing credit card spending. The following extract is from Predictably Irrational by Dan Ariely.

[The Ice Glass Method] is a home remedy for impulsive spending. You put your credit card into a glass of water and put the glass in the freezer. Then, when you impulsively decide to make a purchase, you must first wait for the ice to thaw before extracting the card. By then, your compulsion to purchase has subsided. (You can't just put the card in the microwave, of course, because then you'd destroy the magnetic strip.)

Go figure.

The danger of impulsive buying

I keep telling all my colleagues, friends, and acquaintances: it is not how much your earn that makes you rich. It is how much you save.

Money might come pouring in from all your investments or from the high-paying job that you do, but you will not become wealthy unless you stop spending on that thing of desire that catches your fancy every once in a while. The road to riches has many diversions taking you away from it - and all those diversions are rooted in impulsive buying.

You have been thinking of jogging in the morning. You seem to be possessed by it. You read up all the health magazines. You end up buying running shoes (even though you already have a pair of sports shoes; but they are not running shoes, are they?) a pair of track pants, a head band and wrist bands, some weights (the magazines say that weights are essential to give you maximum benefit of jogging) and ... this list goes on and on. A year down the line you have stopped jogging. And the junk lies in your garage.

That is money down the drain.

There is another aspect of spending that you need to be very careful about. And this is my personal experience. Coming from the background I come from, I was very reluctant to purchase big ticket items. But you know what. You just have to break the first barrier and buy an object of desire that is slightly beyond what you have purchased till now. Suddenly you are free. You start purchasing more items of similar price range. Let's say I was reluctant to buy anything beyond Rs. 10,000. Then one day, I go ahead and buy something - let's say a bicycle - worth Rs. 13000 (I really, really needed that object). It took me a great effort to buy that. But once I have done that, I suddenly find myself window-shopping for objects of that price range. It took me a while to realize that I had crossed the threshold and that the reluctance had disappeared.

This to my mind is more pernicious than impulsive purchases.

I am not advocating a non-materialistic live - where is the fun then? Once in a while it is ok to give in to impulses. Sometimes. Just be careful of breaking the upper limit of spending barriers. If you are feeling uneasy about buying something, perhaps there is something you should feel uneasy about.

Systematic Investment Plan

An important ground rule in your path to becoming rich is to understand that high returns are always associated with high risks. Always. So, if someone is promising you high returns but telling you that there is no risk, then that person is making a quick money - from you. So, please venture into high risk-high return schemes only if you have excess money and/or if you are young.

And then there is always the Black Swan.

A relatively safe instrument of making money from stock markets is what in India is called the Mutual Fund Systematic Investment Plan (SIP). This is particularly affective when the share market is in an upheaval. The most important think to remember in an SIP is that you need patience.

The way it works is similar to a recurring deposit schemes. You put in a fixed amount of money to the scheme every month. When the share market is down your money will buy more units. When the share market is up your fixed money will buy you less units. This averages out the fluctuations.

I actually did an experiment. I invested in a mutual fund where I paid a lump sum outright at the beginning and at the same time started investing in an SIP. After a year, the outright payment has given me a return of -14.3% (a loss) and the SIP actually gave me a return of +13.5%.

You will get more information on SIP here and here.

I see SIP as a long term investment plan. I intend to keep it up for about 5 years to see how well it works.

I also see SIP as having better Return on Investment, if you consider the effort and time required to follow the share market directly. Direct investment will most definitely fetch you much better returns, but you need to invest lot more time to understand the share market.

As long as you do not put all your money in SIP, you should be fine.

Wisdom from Babylon

Of all the books that I have read on becoming rich, only one - just one - makes any sense. All others books in the market draw heavily from this one book and add their own ridiculous modus operandi (not all, but many).

Ridiculous because, these books assume that the personal examples they quote works out of context too. Since most of these books are written by America-based authors, most do not even apply to other countries, in any case.

But this book is different. It is like one of the classics that transcends time and space.

It goes by the name The Richest Man in Babylon by Richard S. Clason.

Buy this book. It is a thin book and contains all the wisdom you will even need to become rich.

How well you apply the wisdom is up to the readers, of course.

The least the wisdom will do is ensure that you will never become poor.

The magic of interest compounded

There is just one golden rule when it comes to becoming rich. And that is ...

You should earn money even when you are not present.

So that rules out jobs.
Or even business where you need to be present all times.

Building a business where you employ clever employees is definitely a very big yes.
Investments in property, shares, mutual funds are a yes.
And surprise, surprise, monetized blogs (such as this one) are also a yes. At least for some (No! Not me! Not yet!)

The trick is to start early.
Reason: You have sufficient time to recover from setbacks - there will be setbacks, guaranteed. Youth is not risk averse. So that helps.

More importantly, the real benefit of compound interest kicks in.

How much do you think you get if you invest merely Rs. 2000 per year for 25 years that returns you 10% compounded annually. It is Rs. 2,16,363 ( more than 4 times)

You are risk averse?
You would like to put the money in a recurring deposit bank scheme that gives you just 5% returns compounded. In 25 years your money will become Rs. 1,00,227 (a shade over double)

But you should have 25 years with you. So don't start at 40. Start when you are 25 years old.

Definition of wealth

You say you are rich. You are wealthy.
You may be well off, but are you really wealthy?
There is a distinction, you know?

Wealth is a person's ability to survive so many number of days forward ... or if I stopped working today, how long could I survive?

The above extract is from Rich Dad, Poor Dad and attributed to Buckminster Fuller.

When I read this line for the first time, it scared me. I can just imagine how long I will be able to survive without a job. And more importantly, how well will I be able to survive? So today I may be better off that I was 10 years ago. But I am definitely not wealthy.

Are you?

Insure you way to wealth

To become rich, get insured. 'You must be joking," you say.
Insurance has the lowest Return On Investment.
So I must be out of my mind when I propose that one of the ways to become rich, you need to get insured.
Hear me out please.

Contrary to popular belief, insurance is not just for your future. Yes, you pay a premium to offset any future eventuality.

So, for instance, if you are hospitalized and you have a medical insurance, the insurance will cover your expenses.
If you are disabled and you are covered by insurance, you get an amount that will take care of your loss of capability to earn.

If you die, your family will get a sum of money that will hopefully take the place of the earning member - you - who is no longer there.

But this is only part of the story.
Insurance allows you to take risks in the present.
This is not recognised easily.
If you are insured for the future for a small premium, you do not have to bother to save a huge amount of money for any eventuality.

You can take a part of your present income and start investing without fear of a failure.
And investing, though fraught with risks, is the only game in town that can make you rich.

Lesson: Cover yourself adequately for the future. Get insured. And then invest boldly in the present.

The rich are not bad

Flip through up any language text book.
You will notice that the rich are
(i) cunning
(ii) cruel
(iii) exploitative

Most of my childhood, teens and early adult life, we can visualize only one path to become rich. You need to exploit the poor farmer or the trader mercilessly and grab opportunities with scant regards to humanity to become rich. The rich has his vault full of pawned goods that the poor farmer deposits in lieu of money to buy seeds. The rains fail. The rich insists on his money., Where would the farmer get the money from. His land is usurped by the rich. You get the idea!

So who are the heroes of Indian tales - the educated man who impresses the king with his wisdom, the poor brahmin who earns name and fame because he is learned, and the cunning housewife who saves the day by fooling the cruel carnivore. Yes there are benevolent kings and kind moneylenders. Yes, the good always triumph in the end, but you come away with a bitter taste in your mind for the rich.

It did not help that early independent India plunged headlong into socialism. Since the rich exploit, the state would step in to save the day. Thank goodness for the givernment otherwise the profiteers would have sucked India dry.

The divide between the haves and the have-nots in India is accentuated by another factor: the varna (incorrectly translated as caste) system. You could either be a learned brahmin or others. The educated could not be rich; the rich could not be a learned brahmin. Indian mythology supports this to the core. The two sisters, Saraswati - the godess of learning - and Lakshmi - the godess of wealth - cannot see eye to eye. Any one of them will stay in your house. You got to choose between Saraswati or Lakshmi. 'Running after money' is as great an insult as any. The only honorable means of earning money is to get educated and go about earning money honestly.

It was not until early adulthood that I realized that the businessman is the driver of any economy and the resultant prosperity. They create jobs. They create opportunities. They create wealth. But this knowledge came in a bit too late for me. Even today, and I am 44, my initial reaction is that of shock when I read that high court and the supreme court judges - nor all of them fortunately - are involved in scams. It takes me a while to recover from news of corruption in India's defence forces. I have to hello-anybody-home? myself before I can proceed.

So what is the lesson?
The rich are not bad people. Seeking and exploiting opportunities is not the same as exploiting people. Stories are just that, stories.

Beaten by the newspaper

This was the mid nineties (I think, or early nineties).
India was truly on the way to reforms.
The share market had recovered from the Harshad Mehta scandal.
Things were looking up.
It was possible to trade online on National Stock Exchange (NSE).

I was lucky to be working at a place where colleagues were friends too.
We decided to become rich by investing in share market.
Though I had burnt myself badly in my tryst with the share market, I was drawn into this venture.
Basically, I derived strength from numbers.

We started reading economic times.
We decided that Initial Public Offerings are too risky.
It is better to trade direct.

One day, this friend of mine brought in an analysis on Kishko Cutlery.
The recommendation was buy.
We rushed to the nearest online trading centre - this was a good 20km away.
I purchased 100 shares.
The shares plunged soon after.
All my fears about the share markets came back to haunt me.

Later, much later I learnt the dynamics of market movement and newspaper reports.

Lesson: If it is in the newspaper, you are already very late.

First steps

Late eighties.
My cousin is a year elder to me and he had then just moved to Bangalore.
I went to see him.
I saw some share applications in his room.
I knew people become rich by investing in shares.
I picked up one - Usha Rectifier.
My cousin said he was not going to apply for this company and that I could apply if I wanted to.
I should have asked him why he doesn't want to apply.
The share whose face value was Rs. 10 was in the market for Rs. 50.
Another colleague of mine who understood this a little better that I asked me to find out more about this company.
I looked it up in a finance newspaper.
It was being traded at Rs 170.
That was the only information I needed.
Wow! At Rs 50 this was a bargain!
I started dreaming how much I will earn in a few days.
The day I applied, the share value fell to Rs 110.
With a few months it fell below Rs 50.
And then it disappeared.
This share - renamed Usha India - is no longer traded.

My first attempt to become rich was a miserable failure. I went back to my shell. This way is not for me.
That was a serious mistake.
Instead of learning from my mistake and instead of learning the way share market works, I stopped at the first sign of failure.

And what was my chance of succeeding?
Nil.
I had no knowledge of the share market.
It was entirely an instinctive decision driven by dreams of becoming rich the easy way.
Doesn't work.

In all other endeavours I have always pushed hard against failure., If I slip, I push back harder.
My humble growth in my job could be attributed to my determination to do better.
But I did not transfer my resilience from one domain to another.

Making wealth was a new domain for me. I started by diving into the deep end. That was fine.
But I failed to learn from my failure.
That was a huge mistake.

Lessons:
1. It is natural to get excited when you take your first steps. Do not have high expectation. The first steps are likely to fail.

2. Be mentally prepared for the first failures. You are likely to succeed subsequently.

Years later I dabbled in shares again. But that is another story.

Your environment and your mindset

At school all my friends came from the same background - middle class. My neighbourhood group was from the same ecosystem. We discussed all things under the sky but never about wealth. As I churn my mind, I do not recollect a single instance where we discussed wealth and the wealthy. I remember discussing sports, sportsmen, Sunil Gavasakar and Kapil Dev, movies, actors and actresses (obviously), government, polictical parties, Indira Gandhi, USA and USSR, Pakistan and the 1971 war, books - lots of books, nieghbours, girls, teachers, some more girls, in other words everything except wealth. Who does? Who is bothered about the rich when you are in school?

As we moved into college, future became a subject of discussion -sometimes. For some like me who managed to get into professional colleges (Engineering and Medicine) the path was clear; so no second thoughts there. Some did not make it to these colleges and though they were excellent at studies they had to settle for fundamental sciences. Those days, for a typical middle class family, Engineering and Medicine were the only two known good options for a bright future. (The outlook has changed a little since, I hope)

Then a handsome boy moved into the neighbourhood. Soon we became friends. I remember 4 of us (3 old friends and this new one) were sitting in my friend's house. It was summer holidays. His mother had served us something to drink and something to munch. For some reason, we started talking about ambitions. This new chap said, "I want to be a model." Model? Who wants to be a model? We looked at each other. A middle class child is brought up to be polite. So we didn't say anything but once he left how we laughed and laughed. Slowly this new friend drifted away from our gang. Many years after I heard that he was featured in some magazine cover and that he was actually pursuing his ambitions.

And the rest of us? We settled into various ambitionless, riskless jobs. Even in my job, I was surrounded by people of similar background: Middle-class families who had pushed their children through engineering college.

Looking back I now wish I had some friends who were from an entirely different background. What if we had friends whose fathers were businessmen? What if my friends talked about wealth? What if we visited their houses and were dazzled by their wealth? What if their fathers took time to talk to us about what we did? What if we had asked our friends from business families what they would like to become when they grew up? What if they had painted a future driven by ambition and passion and totally different from ours? What if we were exposed to an entirely different mind set? What if...?

Lesson:
A different future requires different mindset. Having friends from different background is a great way to get started.

There is saying, "birds of same feather flock together." Notice carefully. They do not have the same feather because they flock together. A big part of our future is limited by what we see around. Unless we are Jonathan Livingston Seagull. Need to break free.

Impact of upbrining

I am an anti-thesis of Robert Kiyosaki, the author of Rich Dad, Poor Dad.

Reading Rich Dad, Poor Dad is thrilling. It is so well written that you start believing that you also can become rich. So what of me?

I have serialized the mistakes I made that perhaps has prevented me from becoming rich.

Some of you will identify with me: to them I would advise not to follow me.
Others will take a lesson from my shortcomings.
And by bringing myfear out in the open, I will change, ahem!

Basically, what I trying to do is introspecting into why I could not break out.

My father came from a huge family. He had 11 brothers and 3 sisters (Big family! What fun! In contrast I am single child.)

I grandfather was a lawyer in the town of Dhanbad.
I am told that he detested telling lies. So, one fine day, he decided he will stop practising law.
By then his eldest son started working (as a lawyer!!) but the overall income fell.
So the living standard suffered. This was pre-independent India.

My father left home at 16 to join the Indian Air Force (IAF). He was 6 ft and had - others have told me - a V-shaped body.

Someone once challenged him to a boxing bout and beat the hell out of him.
He resolved to take up boxing.
He went on to become the Air Force Boxing champions in various weight category.
He became known as 'Boxer Mukherjee'.

His boxing career ended after he married. My mother says that my father had near zero bank balance when she got married to my father.

In other words, he enjoyed his life as a bachelor. Boxing and enjoying life!
Mother then took charge of the household. She started saving pennies. This was early sixties. There was not much scope of investments in India.

Savings was all that was possible. She saved enough. Insured father's life. The insurance matured before father's death and with that money we purchased 'colour' TV and refrigerator.

This was when I reached college.
My parents managed to build a house from the savings and loan.
They managed to get me through school and college education.
And when father died in 1986 she did not have to ask money from anybody.
I am very proud of my parents.

My childhood has been a happy childhood. I was never denied any request.
But at the same time we never splurged. And we never went beyond budget.
People in Airforce cannot be called poor. But they are not rich either.
And we always saved. Banking was something that I learned fairly early.

So saving money is embedded somewhere in my brain.
Investment is risky, losing money is no fun.
Future is uncertain, so save money.

Over the years I have found it very difficult to tear myself away from the fear that arises from losing money.
Today, perhaps, I can afford risky investments.
However, most of my investments go into relatively safe instruments.

So what is Lesson #1.

To become rich you need to reformat your memory.
My parents did what they could do best according to their circumstances.
I should have done / should do what I can do best according to my circumstances.

Therefore, DO NOT LET YOUR PAST DICTATE YOUR FUTURE.

Wait for my next post for Lesson #2.