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Middle-class Traps: 3 Steps to Become Rich in 2024
Table of Contents
Introduction
Today, I want to share a real story from my own family. I've changed the names to protect the identities of those involved. This story could be applicable to your own family, and after watching this video, it might change the way you approach your life. That's my promise. If you're new here, please subscribe to this channel for excellent financial learning videos. We are live, and we aim to transform your lifestyle into financial freedom.
The Story of Chintu
Chintu is a young working professional who is financially stable. He receives a lot of praise for his financial success. By the age of 30, he had bought a car and a house. He accomplished all of this in just 4 years. However, Chintu is not happy. You may wonder why. It's because he cares too much about what others think. Our society tends to judge people based on their possessions. In his quest to show off, Chintu got a loan for his wedding expenses. Now, he has to pay back the loan along with the EMIs. His financial situation is deteriorating, and he can only save around ₹10,000 after paying the EMIs. He has a car, a house, and a job, but he is not satisfied because he doesn't have financial freedom.
The Story of Mintu
On the other hand, Mintu, who is also a relative of mine, comes from the same social background as Chintu. However, no one appreciates Mintu because he commutes to work by bus. According to society's standards, he is considered poor. Mintu carefully manages his small expenses and only spends when necessary. Let me give you an example. Everyone needs a phone, and everyone should have one. Mintu is using a reasonable phone worth ₹10,000. He understands the difference between needs and wants, unlike Chintu. Mintu had a dream to show off to four people. He saved up for ten years to buy an iPhone 7. He made sacrifices, invested wisely, and set financial goals. The result? He is financially stable and tension-free.
The Difference Between Chintu and Mintu
You might be thinking that Chintu has everything on EMI while Mintu bought his house with his own savings. That's why Chintu is poor and Mintu is rich. But here's the thing: Chintu didn't plan for his future, he just wanted to show off. Mintu, on the other hand, didn't care about showing off to others. He focused on improving his own life. The opinions of others don't matter to him. That's why he made calculated decisions. In Chintu's case, everything is on EMI, while Mintu's house is debt-free. Mintu is stable and stress-free.
How to Avoid the Middle-Class Trap
Now, you might be wondering how to avoid falling into the middle-class trap. Is there only one way to save money, being extremely frugal? The answer is no. Let me explain the difference between needs and wants. There is a significant difference between the two, but people often struggle to understand it. As I mentioned in Mintu's case, a phone is a need, but whether it becomes a want depends on your financial situation. If after waiting for ten days, you still feel the need for it, then go ahead and buy it. Otherwise, it was only a want, not a need. Mintu's wife still uses a Nokia 3020, an old phone. In today's world, everyone needs a phone, but wants can wait. Mintu's financial goal is to allocate 50% of his monthly income to his needs, such as groceries and rent, 30% to his wants, such as weekend movies or outings, and save the remaining 20%. He prioritizes his savings over SIPs and EMIs.
The Importance of Financial Planning
It is important to have a financial goal and plan accordingly. Every person has their own financial capacity. Now, let's do a simple calculation. Suppose you save ₹10,000 per month. If we consider a return of 15% per annum for 10 years, the amount will accumulate to around ₹25 lakhs. Just imagine the happiness it will bring to someone who is saving ₹10,000 per month. It doesn't matter if their income is lower or higher. It depends on their financial goal. The same logic applies to the person living in a ₹25 lakh flat, a ₹50 lakh flat, a ₹1 crore flat, a ₹5 crore flat, or a ₹10 crore flat. Each person lives according to their financial capacity. Their happiness depends on their financial goals.
Before that, we didn't reveal Chintu's salary, and we won't reveal Mintu's salary either. But Mintu's salary is not the point here. The point is, what is your financial goal? Mintu calculated his amount based on his salary and financial goal. Long-term benefits will come out of the calculations you make at home, not from EMIs or SIPs.
So, please use this financial calculator and plan accordingly. Remember, every person is unique, and their financial calculations should be based on their own circumstances. Now, let's see the future value of Chintu's financial situation by using ₹25,000 per month for 10 years. The approximate future value is ₹86,000. Just imagine, if someone is saving ₹10,000 per month and their future value is around ₹25 lakhs, they will be dancing with joy.
That person is a true example of someone who values money. If they live within their means and continue saving, their long-term financial picture will be bright. Don't rely on random decisions; make systematic plans. That's what I am doing here, providing the lowest rates for everything. Now, back to the financial calculator, I am entering the amount I saved, which was ₹1,00,000. You can enter your own amount according to your figure. Your amount will be calculated, and the long-term results will be visible.
Conclusion
Every person has different needs and wants. You must plan your finances based on your own financial goals. Remember, there is no right or wrong amount. As long as you plan according to your income, your financial goals will be achieved.
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