I have seen a few people extremely intelligent people who are mediocre in their journey to be rich. They seem to be hitting several potholes instead of a smooth road. May be, some of you may recall the names of a few from your circle of friends and relatives.
It is indeed paradoxical that instead of really going smoothly with their native intelligence, they lag behind. Have you ever wondered why? Let me give my thoughts.
When some intelligent people hear the concept of ‘Pay yourself first’ they resist it saying, "It is illogical to commit to saving and if unforeseen expenses arise, I need to resort to borrowing. I will rather spend first and save at the end of the month." You know what will happen to such people. They not only end up not saving enough but also will create or attract or create expenses that will prove them right. They will be missing on their creativity to manage their expenses without any struggle. I might have mentioned this before but this bears repetition: "Out of 100, when you save 10 and have a balance of 90, your mind will treat 90 as 100."
One crucial area some intelligent people underestimate the great 'Power of Compounding.' This is because of their logical thinking that a few years of delay in investing will have a marginal effect on their wealth. I have seen many wonder at the following simple example:
- 'A' starts investing Rs 50,000 per year at the age of 25. 'B' starts investing the same amount every year at the age of 30.
- When they attained the age of 55, A’s corpus is Rs 6.1 millions while B’s corpus is Rs 4 millions @ 8% return pa.
- The difference of Rs 250,000 in the amount invested made a difference of Rs 2.1 millions to their corpus.
Some intelligent people also think that they are knowledgeable-enough to manage their Personal Finance. After all, they get a lot of information from books, internet, seminars, and friends and so on. They may ask, "Why should I pay a Financial Planner to tell me something I already know?" They miss out on two counts; unbiased advice by a professional as compared to free advice from a seller of products and a comprehensive advice taking into account both the short-term and long-term goals of the client.
I have also seen some bright people are scared to death while taking risk in investing. As we have discussed, the name of the game is 'Risk Management' and not 'Risk Avoidance.' This is another vital area a good Financial can help by assessing various factors such as risk profile, age, the size of goals etc.
There are a few other lapses like inadequate insurance, overdoing in the initial stages and giving up sooner etc. So ultimately your application is more important than your intelligence in life and your journey to be rich is no exception.
Let us discuss intelligence in a lighter vein. A very intelligent person got married to a beautiful lady and took her to a famous summer resort. One evening he remarked, "But for my money, we would not be in this lovely resort." The lady replied, "But for you money, not only we would be here but also there would have been no honeymoon; more importantly but for your money, there would have any ‘we’ in the first place." The man just shut his mouth and never bragged about his money!
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