Life is about balance

By P V Subramanyam

I just came back from a short holiday – and it was fun. I try to steer many conversations to personal finance conversations. To me all decisions have to some how complete the basic, simple requirement of helping people towards their personal goals – or the activity is not on!

One major topic of discussion was one individual’s balance of several different aspects of his life as he approached retirement age. Let us call him M. M lives in a nice 3 Bedroom apartment in a metro in India. He has a very well-paying job, but he also has a taste for expensive ‘toys’.

At any point in time he could have 20 unopened shirts, a couple of new suits, a few CD players, a few ‘000 Cds, the latest mobile phone, etc. He may not really like his job, but likes the trappings of designation, the number of stickers on his baggage, and of course the cash flow.

M occasionally feels that he should cut down on his expenditure and start building a nice retirement corpus. He is of course building a nice corpus for his retirement, but the worry is his spending pattern will have to change much faster as he approaches retirement! He argues that he would not like to do anything remote like that. That is the worry. His wife is quite worried about the example he is setting for his children. And his children think money is easy to come by.

And I wholeheartedly agreed with her.

Unfortunately there is no one-size fits all theory available! Some people feel most natural when they’re very frugal, while others find a better balance with more spending in their life. There are people who will spend a lot on eating out, clothes, ‘toys’ like digital camera, vacations, etc. While there are some who will live a frugal life, but blow big time money on foolish investment schemes!

Whatever you do, you need to spend less than you earn! If you think this is common sense, you should watch the “Can I afford it?” segment on television! Suzie Orman does it in the U.S. If you spend less than you earn over an extended period of time, you avoid that painful experience.

It’s a balancing act, in life, surely! If we simply give in to every whimsical desire we have, virtually no one would spend less than they earn.