Problems of A Fast Changing Modern World
We need to reboot the Old System and Speak Out the New Stories of the 21st Century
1) In 1900, an American Household Spent 43% of it’s Budget on Food in the US
2) In 2000, this proportion reduced to only 13%
3) The case in India too will be similar
4) In every economy as it progresses, the proportion of money being spent on Basics keep coming down
5) For example a family of 3 spending Rs 1 lac per month on household expenses would be spending Rs 20,000 to Rs 25,000 on Food whereas the spending on chauffeur and servants would be in the range of Rs 30,000
6) So we spend perhaps the same amount of money on food as we do on salaries of those who serve us
7) Since the proportion spent on food is reducing with time, the old classical enemy called “Inflation” is also getting weaker. Long term inflation is projected at 4% and many other areas like Holidays, Education etc can see a deep cut in the inflation. Designer stuff are things where inflation is the value sought out by those who wish to see themselves apart from the rest and should not be confused with inflation in general
8) With Online Technologies gaining momentum due to massive development taking place, one can very well see the climbing down of cost of education
9) With the advancement in areas of women empowerment, one can also assume that Marriage will no longer be a challenging goal
10) Most often these days marriage cost is shared by both the families and also the trend of simple weddings is picking up.
(In fact this is something which needs to be looked at seriously because it may be a blunder to extinguish the corpus of Financial Freedom on the altar of Rituals of Wedding Extravaganza. We will discuss this part in another blog)
Also late marriage, no kids are trends that will affect demand of various things we take for granted like education etc
11) The Work from Home Culture will strengthen further with time and this will have a telltale effect on housing cost
12) Disparity of Housing Cost between different locations will fall and overall affordability will rise due abundance of choice for the customer. He or she no longer has to take an expensive flat closer to work
13) Digital Education will mean children will also have an option to get educated at home
14) Inflation is usually linked with short supply. In the digital world we can expect a higher degree of abundance due to unimaginable exponential productivity growth across all key areas that matter to us and are a part of our goal system like those discussed above
15) Hence Inflation is no longer the story of sorrow and pain. It is now clearly an old story and losing relevance. No point in flogging a dead horse
16) The New Story, if I may say, is the story of imbalance between the “Making Money” period of Life and the “Managing Money” Period of Life
17) Earlier, people worked till 60 and made money for a period of 35 to 40 years and had to manage a Retirement Period of 10 to 15 years
18) So Managing Money Period was 10 years and Making Money Period was 40 years
19) Now people have shorter working careers and retire or rather are forced to retire at a much earlier age of say 40 to 45 years. This is a fall out of having a young population coupled with advancement in AI, Automation and Technology
20) So Making Money Period had drastically reduced from 40 years to perhaps 20 years and Managing Money Period had risen from 10 years to approximately 40 years
21) This is the problem of 21st century
22) And the solution to this problem also lies in Power of Compounding but at the other end of the Spectrum where Cash Flow becomes the operating strategy
24) Hence creating a corpus by earning more and spending less will become the fodder for the Power of Compounding Machine to Produce a Series of Life Long Cash Flows to ensure a Life of Respectability
25) So instead of obsessing over Inflation and calling upon Compounding to Create A Desired Corpus for Goals, we now need to change Perspective and Focus on Creating a Corpus as soon as we can by Earning more Spending less and call upon Compounding again to create a continuum of Cash Flows
#MFD #article
