Why we all must save a lit­tle

Uma Shashikant

The Times of India (New Delhi edition) - - Times Personal Finance -

Last week, the hash­tag #Mil­len­ni­alRe­tire­men­tPlans was trend­ing on Twit­ter. The tweets of­fered hu­mour, prag­ma­tism and a range of emo­tions. The young were per­sis­tent in point­ing out that what worked ear­lier won’t work now. Should we be in charge of our re­tire­ment or let the govern­ment pro­vide re­tire­ment ben­e­fits and so­cial se­cu­rity? This de­bate is old, and we have lived through the cy­cles of one school dom­i­nat­ing the other. The baby boomers (born 1946-64) broke away from hand­outs and ex­pected their gov­ern­ments to only pro­vide the frame­work for re­tire­ment se­cu­rity. The fo­cus moved from ben­e­fit to con­tri­bu­tion. Peo­ple be­gan to save early, in­vest with­out touch­ing the cor­pus, and al­lowed it to grow and fund their re­tire­ment.

Gen­er­a­tion X (born 1965-80) stepped into their work lives dur­ing the pe­riod of boom and bust, mak­ing money or los­ing jobs into their adult­hood. They were the con­sumerist gen­er­a­tion. They got them­selves into debt for homes and used credit cards hap­pily. They wor­ried when con­ver­sa­tions turned to re­tire­ment, felt guilty about not do­ing enough, but hoped to be­gin to save sooner than later. They wished the govern­ment of­fered some so­cial se­cu­rity.

The mil­len­ni­als (born 1981-96) are not sure what the long term holds. The pri­mary marker for the mil­len­ni­als are that they are not in the for­mal work­force by choice; they like the gig econ­omy in­stead. They in­creas­ingly don’t own homes and cars, for they find loans bur­den­some.

What would an ed­u­cated gen­er­a­tion that works hard, but finds the un­cer­tainty they have to deal with too high, do? Re­tire­ment would be the last thing on their minds. The tra­di­tional an­swer to an un­cer­tain fu­ture was sav­ings. The baby boomers de­nied them­selves the lux­u­ries to save for the fu­ture. They saw the sav­ings as their in­sur­ance against un­ex­pected events.

Mil­len­ni­als’ view of their fi­nances re­volves around the bal­ance be­tween spend­ing and earn­ing. Since they are strug­gling to get past this ba­sic equa­tion of com­fort, their abil­ity to have a long-term view is limited.

The in­equal­ity in in­come ran­kles many who posted on Twit­ter. They find ear­lier gen­er­a­tions have not only be­come very rich, but have also elim­i­nated many tra­di­tional jobs that paid a steady in­come.

Health is a big con­cern, ex­pressed in var­i­ous ways in which it af­fects the mil­len­ni­als’ lives. They see them­selves as be­ing af­flicted by lifestyle dis­eases, as they keep long hours and eat er­rat­i­cally. They worry about fall­ing ill and los­ing their jobs. They don’t see them­selves pre­pared, nor do they see so­lu­tions.

The dis­taste for sav­ings is to my mind the core prob­lem, a small and per­sis­tent sav­ing as a habit. The mod­ern times are not easy, and the mil­len­ni­als’ sto­ries about un­cer­tain jobs are real. How would you solve a prob­lem you do not con­trol?

It is the na­ture of eco­nomic cy­cles to not re­veal the trends un­til we are well into it. That one ground rule re­mains un­chal­lenged through this churn—the pre­cious merit of our lit­tle sav­ings that have been in­vested to pro­tect us when in trou­ble. The mil­len­ni­als need not kill them­selves to save, but hold­ing back on one spend a day will go a long way. Put aside the cost of one meal a day, you will be sur­prised how it grows with time. Old fash­ioned, but im­mensely doable.

Re­mem­ber the Tro­jan Horse story? The city of Troy thought that the wooden horse was a vic­tory tro­phy, but it turned out to be the cause of their de­struc­tion. Sim­i­larly, in com­put­ers, a Tro­jan Horse is a ma­li­cious soft­ware pro­gram that users will­ingly run, not re­al­is­ing the dam­age un­til it is too late. How many such pro­grams are you run­ning in your pro­fes­sional life, which ap­pear to be be­nign or even help­ful even while it un­der­mines ev­ery project and en­deav­our? Face and neu­tralise the en­emy within your­self to un­block your ca­reer.

Logic is your en­emy

All your ed­u­ca­tion and work trains you to master the log­i­cal con­struct us­ing which you an­a­lyse, ex­plain and solve prob­lems. How­ever, com­bine strong logic with large frag­ile egos and what re­sults is an abil­ity to ra­tio­nalise what went wrong, whose fault it is and how in­ten­tions were hon­est. Logic is meant to fo­cus on prob­lems. When it shifts fo­cus to a per­son and why you are not re­ally to blame for a fail­ure – it be­comes an ex­cuse. In­stead of try­ing to es­cape blame, sim­ply dis­card all logic and take full own­er­ship for fail­ures even if it is not jus­ti­fied. Once that is done, fo­cus only on the fu­ture with ‘Now what do I do?’ and com­mit to an ac­tion plan for to­day and this week.

Don’t over-plan or over-think

The 40-70 rule comes from Colin Pow­ell, US Chief of Armed Forces and then US Sec­re­tary of State, the first black per­son in both cases. It says that lead­ers should make de­ci­sions when they have

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