The Hindu Business Line : Rules for getting rich slowly

FINANCIAL concerns cause a great deal of anxiety, but worrying about them takes far more energy than just going ahead and taking care of them, writes Diane McCurdy in "How Much is Enough?" from Wiley (www. wiley. com). The book is about `balancing today's needs with tomorrow's retirement goals'; and, on the cover, there's Lee Iacocca's praise for the book as `the best way to financial independence'.

The real question is `your enough', not somebody else's, because `nobody is typical'. Successful professionals such as doctors and media people are embarrassed to admit that they don't understand the financial stuff, rues the author. Often, it is due to their previous bad experience with financial planning or advice, says Diane. Quite tragically, many professions `get conned into believing that someone else will do it all for them', with disastrous results.

So, first, take `the attitude quiz' with 14 questions beginning with: `1. A. Shopping is my favourite sport. B. I shop when I need something. C. Shopping can be fun sometimes, especially if I'm shopping for other people. D. Shopping is torture.' Depending on your score, you'd find yourself predominantly in one of the four categories, viz. the spender, the builder, the giver, and the saver.

"If you walk into a house that has the best and the latest of everything, especially when the owners don't use it all, you're in a spender's house," writes Diane on the giveaway tips. Builders might work at mindless jobs and pour all their money and energy into restoring cars, for example, but they can get into trouble "when they're so intent on building that they miscalculate the risks involved or fail to leave themselves a margin of error".

Givers ignore their own needs. "Tempting as it may be to help your kids buy their first homes, if you're doing it at the expense of your own retirement income, you could end up becoming a burden to them in the long run," cautions the author. How true! "Savers are very good at spotting money-wasting activities and avoiding them," writes Diane, and adds that savers can be so conservative with their investments that their money doesn't grow as much as it could.

Far worse, savers sometimes postpone enjoying their money until it's too late and they can't do the things they've always wanted, alerts the author. There can be attitude combinations too, such as the apparently unlikely spender-saver who makes sacrifices to save but suddenly blows all his/ her savings in some impulsive spend, only to again start from the scratch.

There are nine myths that Diane lists as common excuses for doing nothing. One such is `I'm going to inherit'. To break this, the author asks, "What if your parents live to 110? Or what if they haven't set up their affairs properly and most of your inheritance goes to fees and taxes?" Another myth reads, `The right mutual fund will make me rich.' Remember that the funds carry risk, and that they can go down, says the author, because novice investors panic easily when their MF turns out poor results.

The book teaches you how to keep track of your cash flow and also to calculate your net worth. Draw yourself a map, by preparing every year two lists of what you want: "The first should be a wish list of things you want to acquire. The other is a list of your personal, career, financial, and relationship goals." This can get complicated when you are part of a couple or a family because "you have to incorporate someone else's wishes into your life"; this is where fights can start, warns the author and counsels the preparation of separate lists, as antidote.

"There are no rules for getting rich quick. There are, however, rules for getting rich slowly." Diane emphasises in part two of the book on `getting enough' that you need to differentiate between needs versus wants. To control impulse buying, she suggests practical ploys.

For example, "when you see something you want, wait 48 hours before you buy it". In nine out of ten instances, you may forget about it two days later! "Sellers make products more desirable by indicating that they won't be available at this price forever, or that the quantities are limited," writes Diane. "It's an old trick, but it gets hands reaching for wallets every time. Keep in mind that a bargain is only a bargain when you save money on something you planned to buy in the first place."

The chapter on `finding financial advice' speaks of `the tummy test'. Tummy is an amazing piece of warning equipment, according to Diane. "If you feel the least bit uncomfortable about something, don't invest in it. Your gut reaction isn't going to tell you whether an investment is a good one or a bad one, just whether or not it's in your particular comfort zone."

A book that'll put you in a zone comforting enough!

BookValue@TheHindu.co.in

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