(This is the second part in a series on the need for Customized Financial Planning)
Imagine! Ages ago, life for our fore-fathers must have been very difficult – what with all kinds of predators roaming all over the place, the most sensible thing to do would have been to stick to others, as in a group, the collective intelligence or strength or survival instinct of the group would have ensured the highest probability of surviving any ‘clear and present’ danger.
Point to note here – the hunter and the hunted belonged to different species of life forms. In layman’s terms ‘even a child could recognize the difference’!
Cut back to the 21st century – Long gone by are the days when the greatest threat to a man’s survival was from any other form of life. Man’s ingenuity at surviving the various odds has helped him in ensuring that most life forms which pose(d) a threat to him are either at a significant dis-advantage or are already extinct.
However, life never ceases to surprise us! Doesn’t it? We now face the risk of annihilation – physical and economic, from fellow humans who have armed themselves with WMDs and varied financial instruments (which can also be labeled as WMDs?) through the use of which life can change irreversibly for a vast segment of the population even before they can blink or think!
The hunter and the hunted now belong to the same species….though luckily, some things never change….. ‘even (now), a child can recognize the difference’!
Let me explain – Let us begin by assuming that there are 2 ways to reach a mountain-top which signifies achieving your goals. Path A leads you to the top through a rough terrain, through a forest of thorny bushes, a few life-risking steps etc. Path B leads you to the top by taking a chopper, a relatively comfortable-ride, provided you are able to get into the chopper. Since, quite obviously, there are many people willing to take Path B. There are few choppers available and each can carry only a fixed number of passengers. The probability of getting ahead in the queue and getting into a chopper, to reach the top within a certain time-frame is then subject to a number of variables. Variables which are uncontrollable, viz. – the total no. of people ahead of ‘you’, whether people behind ‘you’ will not break the queue to go-ahead, whether the choppers will be reliable (mechanical faults and weather related problems) etc.
It is in the context of the higher number of uncontrollable variables of Path B, that many or at least a few may choose Path A, where physical endurance, route planning and having a reasonable back-up (in the form of equipment and provisions) will likely ensure the successful completion of the journey to the top, albeit with a lot more sweat than in Path B.
However, based on real life experiences familiar to all of us, more people will opt for Path B. Why? Let’s try and understand. Perhaps more people prefer to avoid hard work, are not physically fit, don’t want to get involved in any planned activity etc. etc…..However; I get the feeling while all these could be factors, they are NOT the most important factor. The bigger, if not biggest factor at play is the unwillingness (or the ability?) to THINK!
….and, Any kind of unwillingness repeated over a period of time can become an inability, but the more pertinent aspect about thinking is that since the dawn of industrialization or mechanization (it has become more acute with the advent of computing) humans are increasingly becoming lazy. The expectation that every bit of work that we do can be ‘outsourced at a price’ to gadgets or other humans has led us to this current state of physical and mental laziness.
What is the relevance of all this to personal finances or Financial Planning?
Everyone wants to make a quick buck by investing in the stock-market or doing a ‘leveraged’ investment in real estate. Money making was never easier, right? Ask the guy who invested at 21000 (Sensex) and finally threw-in the towel at 8000! Do you think he is ever going to come back to the markets easily?
Path B definitely is like the ‘age-old stereotype’ - without any glamour or hype, but I’ll tell you what, it requires more brains and thinking and has a far higher probability of making it to the top (your goals)…….and that is exactly what is the objective behind doing Financial Planning - Reaching your Financial Goals, within an appropriate time-frame by taking ‘tolerable’ risks.
Caveat – For all those who are looking for some quick buck in stocks, riding on the decisive mandate given by the people to the UPA, will do well to remember the lessons from the past and not get carried away by the ‘euphoria’.
Footnote – For those who are wondering about the relevance of this write-up to the headline, I assure you that it was not a cheap attempt at grabbing eye-balls…..it was a deliberate ploy to make you ‘read between the lines’ and figure out the obvious…..maybe, I should apologize for playing mind games…..but then, isn’t that what the team management at KKR has been doing from day One?
Imagine! Ages ago, life for our fore-fathers must have been very difficult – what with all kinds of predators roaming all over the place, the most sensible thing to do would have been to stick to others, as in a group, the collective intelligence or strength or survival instinct of the group would have ensured the highest probability of surviving any ‘clear and present’ danger.
Point to note here – the hunter and the hunted belonged to different species of life forms. In layman’s terms ‘even a child could recognize the difference’!
Cut back to the 21st century – Long gone by are the days when the greatest threat to a man’s survival was from any other form of life. Man’s ingenuity at surviving the various odds has helped him in ensuring that most life forms which pose(d) a threat to him are either at a significant dis-advantage or are already extinct.
However, life never ceases to surprise us! Doesn’t it? We now face the risk of annihilation – physical and economic, from fellow humans who have armed themselves with WMDs and varied financial instruments (which can also be labeled as WMDs?) through the use of which life can change irreversibly for a vast segment of the population even before they can blink or think!
The hunter and the hunted now belong to the same species….though luckily, some things never change….. ‘even (now), a child can recognize the difference’!
Let me explain – Let us begin by assuming that there are 2 ways to reach a mountain-top which signifies achieving your goals. Path A leads you to the top through a rough terrain, through a forest of thorny bushes, a few life-risking steps etc. Path B leads you to the top by taking a chopper, a relatively comfortable-ride, provided you are able to get into the chopper. Since, quite obviously, there are many people willing to take Path B. There are few choppers available and each can carry only a fixed number of passengers. The probability of getting ahead in the queue and getting into a chopper, to reach the top within a certain time-frame is then subject to a number of variables. Variables which are uncontrollable, viz. – the total no. of people ahead of ‘you’, whether people behind ‘you’ will not break the queue to go-ahead, whether the choppers will be reliable (mechanical faults and weather related problems) etc.
It is in the context of the higher number of uncontrollable variables of Path B, that many or at least a few may choose Path A, where physical endurance, route planning and having a reasonable back-up (in the form of equipment and provisions) will likely ensure the successful completion of the journey to the top, albeit with a lot more sweat than in Path B.
However, based on real life experiences familiar to all of us, more people will opt for Path B. Why? Let’s try and understand. Perhaps more people prefer to avoid hard work, are not physically fit, don’t want to get involved in any planned activity etc. etc…..However; I get the feeling while all these could be factors, they are NOT the most important factor. The bigger, if not biggest factor at play is the unwillingness (or the ability?) to THINK!
….and, Any kind of unwillingness repeated over a period of time can become an inability, but the more pertinent aspect about thinking is that since the dawn of industrialization or mechanization (it has become more acute with the advent of computing) humans are increasingly becoming lazy. The expectation that every bit of work that we do can be ‘outsourced at a price’ to gadgets or other humans has led us to this current state of physical and mental laziness.
What is the relevance of all this to personal finances or Financial Planning?
Everyone wants to make a quick buck by investing in the stock-market or doing a ‘leveraged’ investment in real estate. Money making was never easier, right? Ask the guy who invested at 21000 (Sensex) and finally threw-in the towel at 8000! Do you think he is ever going to come back to the markets easily?
Path B definitely is like the ‘age-old stereotype’ - without any glamour or hype, but I’ll tell you what, it requires more brains and thinking and has a far higher probability of making it to the top (your goals)…….and that is exactly what is the objective behind doing Financial Planning - Reaching your Financial Goals, within an appropriate time-frame by taking ‘tolerable’ risks.
Caveat – For all those who are looking for some quick buck in stocks, riding on the decisive mandate given by the people to the UPA, will do well to remember the lessons from the past and not get carried away by the ‘euphoria’.
Footnote – For those who are wondering about the relevance of this write-up to the headline, I assure you that it was not a cheap attempt at grabbing eye-balls…..it was a deliberate ploy to make you ‘read between the lines’ and figure out the obvious…..maybe, I should apologize for playing mind games…..but then, isn’t that what the team management at KKR has been doing from day One?
