Ron Paul saw it coming long before we could coin “sub-prime mortgage”.
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He is also a Republican, he is also from Texas. Lets just say all things are not created equal in the Republican party, or in Texas or for that matter, the world.
Today’s Price list:
Tomato - Rs. 30/kg
Carrot - Rs. 40/kg
Beetroot - Rs. 20/kg
Big Onion - Rs. 40/kg
Cocnut - Rs. 10
Kosuru:
Coriander leaves, Bear sterns, IndyMac bank, Merill Lynch, Lehman Brothers, AIG, Washington Mutual, Citigroup, Wachovia, etc for purchases above Rs. 100.
Some folks classify it under emotional quotient. But let’s just stick to GQ for now. I need to do some value add, see!!
Unlike my IQ, my GQ is pretty decent. Last week I commented on a fellow blogger’s post which turned out to be as much as her post and felt guilty. Maybe I should’ve written about it in my blog and given a link.
But some days, rather most of the days, I tend to do some stuff and think about it later. Like the way I thought I should’ve taken the day off, after reaching office at a leisurely 4 PM. I thought I will be delayed but not to THAT extent. Eventually I met with some QA folks, had Kozhukattai and Veg. spring rolls (thought of avoiding it, but someone said vegetables are good for health :p) from the cafeteria enterprise owned by Radhika Sarathkumar and came back at 6.30 PM sharp. Thanks to flexi timings and some such funda, I will get paid in full for the day, but I did feel guilty for a moment.
My feeling bad quotient even extends to Wall Street firms. It’s bizarre to see events which used to happen in public sector companies in India in the seventies, eighties are happening to Wall Street firms now. These firms are almost on the verge of begging the Fed to give them some pocket money for the day. Bear Sterns was thrown $2 USD per share by JP Morgan and they gratefully accepted it. The Fed is funding the whole transaction (a body called BIFR used to do such similiar activities in India).
In another sense, this is socialism of the highest order as one great investor had pointed out. Carlyle capital is voting unanimously to wind up operations and Lehman Brothers is shedding jobs. I was one of the beneficiaries of Lehman’s offshoring of IT application and development services way back in 2003. BFSI segment is one of the major outsourcers of IT services. They still remain so for the most part I guess.
I used to tell my friends that my first home was part funded by HDFC and Lehman Brothers. I have moved out of that segment in the recent past. But I know several of my friends’ homes are still indirectly funded by the IT budgets of Citigroup, JP Morgan, Merryll Lynch etcetera. The trouble is, a lot of high end work for these firms involve working on complex financial products which one Mr. Warren Buffet calls ‘Financial WMD’. Whatever.
I think it’s good to feel bad or guilty occasionally.
For one, it shows how sensitive you are. Nobody likes an insensitive sob. But equally important is to remember the lessons and move on. Nobody likes a loser who harps on his past mistakes forever as well. Given a choice between a sob and a loser, I think young women might prefer the former :p.
Now, why did I write a post like this, spending my useless time and also forcing my readers to spend their valuable time??
What happens when a 24 year old, 3 years experienced software pro gets a CTC of 8 lakhs plus?
She has no precedent in her family who can guide her on how to handle all the new money. Nor is she taught about the importance of financial prudence in school or college. While a fat pay cheque is a good thing, it does come with its own perils.
As the economy sees GDP growth rates of 8% for the nth consecutive year,and with the industry facing acute shortage of manpower, more and more young people are earning a lot more per annum than their fathers and forefathers ever did in a decade. Where does this lead to? As is always the case with most youngsters, they end up learning things the hard way.
Almost always, the jobs that most of these MNCs dish out just plain sucks or is too demanding. This is not to say that work with lesser pay packets are revolutionary. What I am stressing here is, a crappy work can make you more cynical, and more frustrated in the long run, and a fat salary can just make more people enter into quirksmode. Typically, people would respond by trying to compensate their dull day life with exciting things in life that money can buy - fun nights or weekends, lavish lifestyle etc. just to went out their frustration.
Soon this 8 lakhs per annum CTC leads to parties, buying expensive clothes, a car on EMI scheme, new mobile phone every few months, LCD television, monthly mobile bills big enough to can get a mobile phone, move to ridiculously expensive apartments - purchase or for rent. The term ‘compensation’ is more in line with the compensation for loss of happiness than for the time spent and knowledge gained.
Let’s see the less glamorous facts.
First, 25% of that CTC is what i call ‘God money’. You know it’s there but you can never see it - e.g., Variable Pay, PF etc.
Second, 33% of the balance will go to the tax man (or to the Home loan lender - essentially the money will go out of your hand and will be taxed again if and when it returns to you).
Third, your job was secure only till your last payslip, in other words, not any more. You never know when USD will go below 35 rupees, how much loss can your investment banking employer/client can absorb on sub-prime crises before axing you, and when your boss can get so cranky that you cannot stand.
Fourth and very importantly, the opportunity cost incurred is enormous. For one, not many can move to less paying but more potentially rewarding vocations in future (higher studies) because of societal and financial/lifestyle pressures.
If X wants to pursue a full time MBA in a good B school, he knows that he cannot because he absolutely needs the paycheck NOW to pay his home loans, car dues, credit card bills, mobile bills etc. This leads to even more frustration and consequently he requires more exciting things to keep him happy. All these are classic illustrations of ’salary trap’. Unfortunately, i find more and more fellow MNC folks falling into this trap. And it looks like there is no way out.
Frankly, i bet almost all of the salaried class would’ve, at some point or the other, felt trapped by their monthly pay checks. At least I’ve felt the same now and then. And this is true indeed, only the degree of entrapment varies.
So what’s the way out? Well, the way out will depend to a large extent on the degree of entrapment. And that can be deduced by a simple method. If you think you’ve been trapped as well, imagine a doomsday scenario. Just think you will be out of your job by EOD today. How long do you think you can survive with your own resources? An honest answer to this question will show you the dire straits or financial paradise you are in. If you are financial paradise material, then you do not belong to salaried class.
Once you know where you stand, just accept that as a fact. Realize that it’s gonna take sometime for you to come out of the mess - a year or two. Remember you did not get into the mess overnight.
Here are some common TO DO items which i sincerely think that you can do to help yourself:
Make sure you close at least 10% of your outstanding credit card dues every month. I know many jithan’s who dodge with balance transfers, but hey, a debt is a debt. Just because it’s interest free does not mean you will ever be worry free. The sooner you make it to zero, the better off you are. Credit card interest rates in India can be as high as 36% per annum - legal kandhu vatti.
Make sure you save at least 10% of your salary per month.
No matter what the tax benefits on your home loans are, target to close at least 10% of your outstanding principal every year.
Develop interests or hobbies which are engrossing but which does not cost a bomb. There are tons of hobbies and pursuits satisfying this criteria.
Never, never trade in stocks using margin funding. Avoid day trading in stocks per se. Day trading in stocks is not investing.
Get a decent health insurance cover for your family members.
All the above gyaan is not to prevent you from enjoying your hard earned income. My only concern is, know what you are getting into. Balance and moderation works well in most of the situations in life, but it works best in these aspects.
It’s great to live king size today, but make sure you and your family do not end up living pauper size tomorrow.