There is a line in the movie “Three Idiots”, “It hurts if a friend fails, but it hurts even more if a friend comes first.” In fact, this is human behavior. It would be sad if a friend was so far ahead not only in studies but also in income. Because whether you are studying or making money… you have to work hard in two places. But even if they work equally hard and get the same salary, some friends still fall behind in the financial race. Because one friend spends his salary strategically, while the other friend starts spending as soon as he gets his salary.
Today we are telling the story of two such friends, Ravi and Sohan. Both are currently 40 years old. The two studied together. Work also started at the same time. The starting salary is also on par with Ravi and Sohan. But now the economic status of the two is very different. Although the friendship is still the same as before. But with only one decision, Ravi was in the lead and Sohan was behind.
Now let’s talk about what happens between the two that creates the obvious difference. In fact, both Ravi and Sohan got their first jobs when they were 25, 15 years ago. The starting salary for both is Rs 20,000 per month. But with the arrival of their first salary, Ravi and Sohan’s spending habits changed.
Do you have money after working?
15 years ago, Sohan had said that he would get Rs 20,000 and now he would live a comfortable life. After a few months, Sohan left the small room and rented a larger room in a good location. Also rode a great bike. Going to restaurants and hanging out with friends became a daily routine. During this time, whenever Ravi interrupts Rohit, what are you doing? You spent all your money on partying and showing off, you should be focusing on saving. You shouldn’t waste money like this. But often Sohan’s answer is that now is the age to have fun, and later we will consider saving so that we can live freely. As Sohan’s salary increased, so did his income, but in the name of savings, nothing came of it.
Ravi, meanwhile, focuses on spending and saving. He also spends a lot of money partying with friends and traveling, but at the same time he saves a fixed amount of money every month and invests it in the right places. Not only that, as Ravi’s salary continued to increase, so did his investments, and 15 years later, at the age of 40, Ravi is in a very strong financial position today. If he wants, he can buy a house, a car and everything together.
However, during this period, Ravi kept motivating Sohan to invest. Finally, Sohan also took the first step of investing at the age of 35, that is, Sohan has also been saving for the past 5 years and is investing it in the right places. But now there is a huge difference in the portfolios of Ravi and Sohan. In such a situation, Sohan will not be able to compete with Ravi in the coming years even if he wants to.
Keep an eye on the portfolios of both
Now let us look at the portfolios of both of them… We have said that both of them started working 15 years ago with a salary of Rs 20,000. Initially, Ravi spent Rs 15,000 and deposited Rs 5,000. However, as wages rose, Ravi also increased investment. According to the formula, investments increase by 25% every year. That is, when Ravi turned 30, the investment amount increased to Rs 10,000 per month, when he turned 35, the investment amount started to become Rs 16,250 per month, and as soon as he turned 40, the investment amount started saving Rs 22,500 per month.
How did Ravi become a smart investor?
Mathematically, Ravi has been doing SIPs in mutual funds for the past 15 years. The initial investment was Rs 5,000 and today Ravi invests Rs 22,500 every month. If you take the help of the SIP calculator, Ravi will get Rs 82,73,559 on a monthly SIP of Rs 5,000 in 15 years, which is an annual return of 12%. During this period, Ravi invested a total of Rs 2.4 million and Rs 75,000. And if the annual return is 15%, then the total amount you will get is Rs. 1,14,84,996. At the same time, Ravi also increases the SIP amount by 25% every year.
You can also do the math. SIP Rs 5000 per month, tenor – 15 years, investment increases by 25% per annum, expected return – 12% to 15% per annum. Total Return – Approximately Rs 1.15 Lakh.
Due to Sohan’s repeated insistence, Rohit also started a SIP of Rs 5,000 at the age of 35. Therefore, at the age of 40, Sohan had only Rs 6,43,119 in savings. This estimated amount is also based on an annual return of 12%. This means Sohan is now far behind Ravi in terms of investments.
The current salary of both of them is around 100,000 rupees.
Not only that, based on industry growth, the duo’s monthly income of Rs 20,000 when they started working 15 years ago has now increased to around Rs 1 lakh. In other words, after 15 years of service, Sohan’s nominal savings are only about 600,000 rupees, because Sohan did not take the path of saving at the beginning of his job, while Ravi decided to save at the beginning of his job. Start with just Rs 5000 per month.
Why is Soham lagging behind?
As soon as Ravi turned 40, he had over Rs 1 crore in his portfolio. With this money he can buy an ordinary house and a luxury car. Moreover, Ravi is now very financially strong, and his family responsibilities have also increased when he turned 40. Therefore, Ravi can manage finances easily. Additionally, if he continues at his current investment stage over the next 10 years, we can estimate how much money he will raise.
At the same time, Sohan has been investing in the last 5 years because in the first 10 years, Sohan spent all his money on partying with friends and making a fortune. To achieve his financial goals, Sohan will now have to invest more than Ravi.
Under such circumstances, everyone should start investing as soon as they get to work. There is no need to invest a lot of money in the beginning. By just saving 20% of your salary every month and investing it in the right places, you can raise a huge amount of money. Especially those in private employment should always be aware of their investments.
(Ravi and Sohan are fictitious names in this article. The purpose is that time waits for no one, so it is important for everyone to take financial decisions in time. So that people do not face financial difficulties as they grow older. You can decide for yourself Do you want to be like Ravi or Sohan financially?
