Over a long period of time, I have interacted with a lot of people – salaried people, doctors, businessmen, professionals. These are my observation regarding business people. I have just enumerated them, not necessarily in order of importance. Here it is for you: Most of them do not have a retirement plan!
It is not that they think they need a retirement plan, but they are hoping to sell their business for a few crores of rupees and use that money to retire! Many of them do not even know that their business is worth NOTHING without them and their accounting and tax shenanigans. God help them.
They do not pay themselves at all!
Forget paying themselves first, businessmen don’t pay themselves enough. Here is a catch— they might be living off the company by charging almost all the expenses to the company. However, once the company has other shareholders, this becomes difficult and embarrassing. But they manage to camouflage their travels and hobbies into business expenses.
Most of them do not know what they are spending.
The camouflaging takes its toll. They tell you that their expenses are Rs 40,000 a month, but their real expenditure could be Rs 2 lakh, most of them being charged off as business expenses. Largely, travel, conveyance, food and telephone bills are easy to charge off as expenses. Not only is this morally wrong, but it also means that these businessmen have no clue about how much they need for their personal life expenses.
Taking too much money from the company.
This is the opposite of the previous point! Some people can just blow all the money from the company and leave the company in dire straits. This again means that they have no money for retirement and honestly, there is nothing to sell.
Many small businesses have no sale value.
That is, without the entrepreneur and his accounting and tax shenanigans. Oops! Even listed companies that claim to be Board-driven! A case in point is a company with a market cap of Rs 200 crore — a lot of due diligence has happened, but there’s no sale happening.
When a friend started his working life in 1999, his boss FORCED him to do an SIP, thanks to the mutual fund house in which he was working. This has created so much wealth for him (he is just 45 years of age) that his portfolio is now 3x his provident fund accumulation and is enough to retire. Entrepreneurs do not normally have such bosses, pals or advisors.
You can surely “Retire Rich” even if you were to just “Invest Rs 40 a day”, which if compounded over, say a 40-year period, could be worth crores. If he or she were to increase this amount by 10 per cent every year, this could be in two-digit crores. Not bad at all EVEN with inflation chipping away at the value of rupee.
PV subramanyam
writes at www.subramoney.com and has authored the best seller ‘Retire Rich - Invest C 40 a day’