How to get rich. These four words tickle the aspirations of anybody who is not living in a cave having given up on maya or this world of illusion! The usual answers to this question deal with tips, some stocks, some real estate that is changing from agri to commercial very soon, some new crypto sure-shot deals. It is usually better to buy a lottery ticket than go down the path of somebody who is promising to make you rich in a very short time by doing very little work. A more mundane but possibly more useful question is this: how do I get financially fit? The answer is more boring than the exciting deals and just-in-time investing in a project that is closing soon. Financial fitness is about earning more, saving more, spending less and investing better. But we all struggle with living life today while planning for a future that we cannot experience. It is really difficult to resist instant gratification, especially for a generation that has grown up with relative plenty rather than the socialist supply and choice-starved regime of India in the 1970s and ’80s. How should we then think about getting financially fit without compromising on our todays that much? Let’s work with some rules that have survived the test of time.
Stung by the suit-boot-ki-sarkar jibe and wanting to distance itself from allegations of crony capitalism, levied ironically by those who wrote the manual on it, the Narendra Modi government used every subsequent budget to display its socialist face. In its attempt to get the rich to pay for the poor, the government has gone on increasing the burden on direct taxes on the relatively well-off Indians.
We asked our Budget 2020 knowledge partner EY to run some numbers for us on taxes that different income levels paid 10 years ago and what they pay today. The numbers tell their own story. Taxes at the bottom of the income slab have reduced; the person with ₹5 lakh of gross income used to pay around ₹22,000 as tax in FY11 but today goes tax-free. Those earning ₹12 lakh are better off by about 36% and pay just under ₹65,000 less in personal income taxes in a year. But start going up the income ladder and the taxes rise hugely. At an annual income of ₹55 lakh, you pay an additional 6% tax, at an income of ₹1.5 crore, you pay an additional 14% and at ₹6 crore annual income, you pay a huge 38% more tax.
The amount spent on the wedding of the daughter of India’s richest man, how much the bride’s clothes cost, what the invitation boxes contained have been the subject of almost every conversation for the last few weeks. This is a carry-over from the same talk about the two big Bollywood 70mm weddings just a few days earlier. Why they are spending so much, how vulgar such spending is and how this money could have been better spent elsewhere is the one thread that runs through most of these social media forwards, office café talks, metro gossip and drawing room debates. The gasp of middle India horror at this vulgarity is loud and clear.
How much should the very rich spend on themselves? This seems to be the issue at stake. Let’s stay with first principals. Media reports say that India’s richest man Mukesh Ambani spent on his daughter’s wedding anything between ₹100 crore and ₹700 crore. Mukesh Ambani’s net worth, according to Forbes, is $47.3 billion, or ₹3.4 trillion at current exchange rates. This makes his spend between 0.03% to 0.21% of his net worth. The 2018 combined earning of the two movie stars, Deepika Padukone and Ranveer Singh, who got married to each other, according to Forbes is almost ₹200 crore. Though estimates vary, a conservative number of ₹4 crore spent on their wedding is about 2% of their annual earning. Or they just had to work for slightly over a week to pay for the wedding.
Will Smith was clearly one of the big stars at the HT Leadership Summitlast week. The packed hall of suits and saris at Taj Palace Delhi went a little crazy when he bounded onto stage emitting war cries to get the energy of the room up. That prompted actor Farhan Akhtar who was moderating the conversation to say: we can do this for 30 minutes and then take questions, to another round of mass hysteria in the room. But jokes apart, Smith the star came across as a feet-on-the-ground person who found his spotlight the minute he got himself into a plan. In fact, some of the one-hour talk was around money and I found lots of money lessons in that time. Here are five of them.
The $16 billion Walmart-Flipkart deal came closer home to many Flipkart employees when a letter sent to them listed out the process and price of the employee stock buyback. For those who are current employees with already vested options (see this story to know more about this: bit.ly/2wDOsfC), the money will come in three tranches—half on the date the transaction closes in about 60-90 days, a quarter a year later and the rest at the end of two years from the first liquidation. The letter puts the value per share that the firm will buy back from the vested stock options between $125 and $129. At the current conversion rate, a person holding 10,000 shares will make approximately a pre-tax Rs8 crore.
Around this time every year, for the last few years, Mint does a special edition tracking the uber rich in India. Conceptualised and edited by my colleague Vivina Vishwanathan, the edition looks at the lives of the super rich Indians through the lens of money. Economic liberalisation allowed new categories of people an entrance into the uber rich club. Doctors, lawyers, professionals, first-generation entrepreneurs, actors and sportsmen joined the high table of the super rich where the already rich through inheritance sat.
Year 2014 kicked off the edition idea with an issue that mapped the new Indian rich. You can read the edition here: bit.ly/2xsiOjF. Year 2015 mapped the Rich Professional. You can read the edition here: bit.ly/2wAF1be. In 2016, Mint Rich Stars mapped the money lives of India’s movie and sports stars. You can see the edition here: bit.ly/2hapZaf. We found behind the glitter and the high living was an uncertain future, sporadic income and a short tinsel earnings lifespan. This year, we mapped the lives of the young inheritors of some of the biggest business houses in India. You can read the edition here: bit.ly/2xfj6tY.
The reactions to the editions have always been a mirror to our difficulty in dealing with money. The basic question asked is: why do we map the lives of the rich? Why feature their lives in a poor country? I can only answer with a counter-question: why not? Mint aims to be an unbiased and clear-minded chronicler of the Indian dream. A lot of young Indians dream to be rich. Surely it is better to dream to be rich than dream to be poor. Chronicling the lives of the rich in one edition a year doesn’t make Mint an apologist for the rich.
The stories you hear are romantic only in hindsight. A young man starting with just Rs50 in his pocket sets out into the world. Thirty years later, he is the king of a large multinational empire. The stories of deprivation and lack of food in the early years make for good copy today, but only somebody who has been through it can even begin to imagine what it was like.
When you are struggling to get out of a bad place, you don’t know how it will end. Whether you will break through or get sucked in. In that struggle, however, comes the transformation. It is that fire in the belly to change, to transform, to win that pushes some people to do superhuman things. And once you make the breakthrough, it is a very human desire to promise that your children will never go through the bleak and seemingly bottomless darkness you have lived through.
You remember what the cold felt like without the money for an overcoat. Or the smell of hot food when all you had was a hole in the pocket. Not your children. Never.
Stinky rich. Filthy rich. Ever wondered where that phrase came from? When did money become so dirty? A Google search tells me that it came from “filthy lucre” in 16th century English writing, where the idea was to separate legit money from money acquired by dishonest means. I think that’s wrong. The term, I think, came out of middle-class angst at those who managed to get there. I have been a part of many middle-India conversations about money. Most of them about the dirty, filthy, no-morals rich, and us middle-class people and values. It is usually a case of sour grapes rather than any real aversion to the rich life. Given half a chance, most people bemoaning the low-life rich would happily swap their chartered buses for chartered flights.
To the guy knocking on the rolled-up window of my old Swift Dzire, I’m surely rich. I get driven around and sit reading a paper in air-conditioned comfort. But as I turn into the office parking lot and my car becomes one among the many parked there, my aura of “richness” fades a bit. To the parking attendant, my value-for-money car compares unfavourably with the high-end cars parked there. To the young intern who lives in a south Delhi barsati, I must seem rich—life looks sorted and the home bought. But to a financial sector business leader who I meet the same day—I surely seem very middle-class, not rich. The same chief executive who looks rich to me—with his small aircraft-like car and the two digit with a crore at the end of it house in Cuffe Parade—looks positively poorer than the 20-something e-commerce entrepreneur who is now worth a few million dollars, or to the third-generation inheritor with the right last name to do business in India. Who then looks not-so-rich when he finds his name missing in the list of the 100 richest people in the world. But then, one of the richest people in the world who sits on that list still cuts out coupons to eat cheeseburgers and drinks Cherry Coke rather than the finest single malt. That’s not a very “rich” thing to do. Want to guess who that person is? It’s legendary investor Warren Buffett.
Expense Account, Mint
A lottery. A rich ancestor. A winning stock. No, I don’t get any of these, so how do I get rich? If you’ve never had this thought then either you need the truth serum or you already work in the non-profit sector (wicked grin!).