Financial Intoxication

Kishen Khanna is 39 years old and is the national head of operations of a leading MNC. He earns about 48 lacs per annum and has stock options worth about 2 crores which will accrue over the next couple of years. In the name of assets he has a cash balance of Rs. 6 lacs 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 etc. If you were face to face with Khanna you can easily count the Rs. 4 lacs he has spent on himself by totalling cost of his accessories and apparels. In addition he owns 2 cars, Honda Accord for self and Mitsubishi Lancer wife, flies only business class whether its business or personal, dines at the Taj and Hyatt on weekends etc. Basically 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 Mr. Khanna 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 a common thing.

I do not exactly have the right words to describe this but Mr. Khanna suffers from a new kind of financial disease shall we say. There is no english word I know of to describe such a situation but this situation comes close to a kind of financial intoxication. It is kind of a feeling where one thinks that there is no perceivable shortage for supply of money. One knows that he / she has reached a stage in life and career where money is generally not as important because there is amply supply of it. You can get some of the most coveted jobs just like that.

Crores of rupees worth of stock options do not mean much as your next employer will offer you even more. Nothing in life seems non – achievable. Add to that the power that comes from the chair you sit on. Add to that the fame that comes from the network that you are a part of. Add to that the pinnacle of your success that you are enjoying where you 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 so on and so forth.

There are many like Kishen Khanna around us today. I dare not put a % 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 advice you on tax planning or for some tip of a company stock you could invest in or whether term insurance is a good idea or similar. By that you will be able to gauge what I am trying to say. The companies run by through professionals like Khanna are no doubt extremely successful.

The lifestyle that companies enable employees like Khanna to live 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” akin to the “high” you would experience after say 4 pegs of whisky. 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 Khanna? 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 below the stage of Khanna I am sure you will be successful in life and eventually will reach the level of Khanna 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?

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