11/06/2017
Reality
One of the questions in personal finance often asked is, “When should I start saving for my retirement?” The answer to this is pretty depressing — as soon as you start earning. The answer is ironic and counterintuitive. It is ironic because once you start earning, you always want to buy stuff that you dreamt about. That cool car, the latest gizmo, and so on. Often, these are bought on credit.
It is natural to get cynical when someone tells you that you should start saving and planning for your retirement at the age of 20 or 21. But there is no escape from reality. The financial plight of the retrenched IT services workers can be used as a case study to learn how we should plan our personal finances.
Unlike developed countries, India does not offer a social security for its citizens. This means that essentially, we have to fend for ourselves after we retire. In the good old days, having a large number of children was the retirement strategy for most. However, this strategy has lost its effectiveness and households are increasingly having just one or two kids. Secondly, thanks to modern medicine, we are living longer; but this comes with two downsides. We are living longer and our post-retirement healthcare costs are going up. Whichever way you look at it, the scenario is bleak for the unprepared. On top of this, your generation does not have the luxury of retiring with a gold watch at 65 years. In the private sector at least, it is a real challenge to hold on to a well paying job beyond the age of 50 years.
I live in OMR, Chennai’s IT corridor. In the last couple of months, there are people I know who have sold their sedans (bought on EMIs) and bought hatchbacks, shifted their children to schools where the fee is lower, and so on. Some of them have confided to me that they will not be able to sustain their current lifestyle if they are unemployed for even six months.
Dear reader, I hope I have convinced you to have an early start on your savings and investments so that you can enjoy your later years comfortably and adventurously. Those who fail to plan indeed plan to fail.
