Never be complacent about your wealth

Kartik Jhaveri Posted: Nov 26, 2012 at 0001 hrs
Picture this: You being four times as wealthier than your boss — given that he earns about six times as much as you do and has about three times the work experience that you have.

Kishen Khanna, 39, is the national head of operations of a leading MNC. He earns about Rs 48 lakh per annum and has stock options worth about Rs 2 crore, which will accrue over the next couple of years.

He has a cash balance of Rs 6 lakh in his bank account, zero life insurance, no stocks, no mutual funds, an ancestral home about 50 km from Kanpur having little value for him.

But he uses Mont Blanc pens and belts, wears Armani suits, sports a Movado watch, uses a BlackBerry. If you were face to face with him you can easily count the Rs 4 lakh he has spent on himself by totalling the cost of his accessories and apparel. In addition he owns two cars, flies only business class, dines at five-star restaurants on weekends etc. In sum, he lives a dream lifestyle.

Looking at another side most of his subordinates today have more wealth than he has. One would think that it is quite easy for Kishen to produce assets if he really desired so. In about a year’s time by simply saving part of his earnings he can create far more than most people would be able to in say 10 years. But that will just not happen. Does that seem weird? By all means — this really is quite weird for most people. All the same I see this happening — quite commonplace.

Kishen suffers from a new kind of financial disease — one that comes close to financial intoxication. It is kind of a feeling where one thinks that there is no perceivable shortage for supply of money.

One knows that one has reached a station in life and career where money is generally not as important because there is ample supply. You are a sought after candidate for some of the most coveted jobs.

Stock options worth crores of rupees does not mean much as your next employer will offer you even more. Nothing in life seems unachievable. Add to that the power that comes from the chair you sit on, the network that you are a part of. At the pinnacle of your success that you are enjoying power that can change lives — write a part destiny for your people and for your company. Your views and opinions are critical to decisions worth several hundreds of crores and so on.

There are many like Kishen around us today. I dare not put a percentage figure to that but lets say quite a majority of top management of the companies we work for.

If you want to test what I am saying, ask a couple of your bosses to advise you on tax planning or for some tip of a company stock you could invest in or whether term insurance is a good idea. By that you will be able to gauge what I am trying to say. The companies run by thorough professionals like Kishen are no doubt extremely successful. The lifestyle that companies enable employees like him to lead puts them on a pedestal from which they become complacent about matters concerning their personal finance.

They are in a zone of a financial “high”. They live in that zone perpetually and conveniently forget that the party might end sometime. and sometime it does quite abruptly; courtesy the ego.

Who will chart the destiny of people like Kishen? They have no time to think about the “what-if” type of questions and to make matters worse they think that they know all that there is to know.

Often they also take big and drastic decisions about their own investments. In that case money ends up into some really expensive real estate or some ULIP or some high risk fund. We all know this quite well is it not?

For the ones who are a station lower than Kishen, I am sure you will be successful in life and eventually will reach the his level in due course. But before you end up there; before you are part of that circle would it not be better if you already have your backup plan in place?

—Author is Director, Transcend Consulting kartik@transcend-india.com