The daily grind of earning money dominates the lives of most of us, and a permanent reprieve from this is obviously the kind of freedom that is most desirable. However, there are many degrees of financial freedom, and the ultimate degree is not having to earn at all for the rest of one’s life. Obviously, apart from those with large inheritances (or those whose burden we taxpayers are committed to carry all our lives) it takes most of us an entire working life to reach that stage, if we reach it at all.
Leaving this ideal state aside, if you save and invest to a plan, lesser degrees of financial freedom can be achieved earlier in life, and can be just as useful and just as liberating. For salary-earners, achieving some kind of freedom early in life is even more important now than it was a few years ago. Over the last few years, India has been passing through one job crisis after another and Covid has just made things worse. There are a number of people among the urban middle-class who have suddenly lost their jobs. Youngsters are finding their first jobs difficult to find, or have had to take low-quality employment. Middle-level executives in their 40s and 50s are being shunted out of their employment because employers think they can be replaced at lower cost. Not just that, those who have jobs feel shaky about them, and find that they are unable to negotiate any improvement in their position, either with their current employer or a potential future one.
All this is a complete shift from the way things used to be a few years ago. I’m not talking of the bad old days about which some people get nostalgic. Even till four or five years ago, things were quite different. Most salary earners were confident in their jobs and were quite sure of frequent raises, either in their current jobs or better ones. They may not have had actual financial freedom, but effectively felt like they did.
I have no idea when the employment situation will change for the better. However, those of us who change their attitude towards money, savings and personal finance will be much happier, and will be able to deal with this new, uncertain world much more easily.
While all these job-related problems are going on, the only people who are relaxed and not stressed are the ones who have enough savings. Unfortunately, the proportion of younger salary-earners— those in their 20s and 30—who save is quite low. In fact, the young generation is almost uniformly dedicated to negative savings! As soon as people start earning, they take on some EMIs, essentially spending future savings today.
“Those of us who change their attitude towards money, savings and personal finance will be much happier, and will be able to deal with this new, uncertain world much more easily.”
I’m sure I sound like a crusty old uncle
ji giving a speech to youngsters, but like many of those speeches, there’s more than a grain of truth here. Whether the jobs environment improves or it doesn’t, saving as much as possible at the beginning of one’s career immeasurably improves one’s happiness level later. Today, those who have even a year or two’s expenses (including any EMIs) worth of savings feel much more relaxed about careers. Not just that, I’ve seen that those who are financially secure in this way are also able to negotiate in their employment better than those who cannot take any risks.
So how can one do this. It sounds like such an obvious thing to say, but the first step in having enough savings is to save, and the second step is to save enough. Many of us don’t get started for years after we start earning. People get far too bothered by the nitty gritty of the savings and forget the fact that time is of importance, not perfection in your choices.
(The author is CEO, Value Research)