What is Personal Finance?
Personal Finance is all about the journey to financial independence.
This module introduces the concept of personal finance and also discusses several skills related to personal finance that help you towards the journey of financial independence.
It is an age-inclusive lesson. It is not just restricted to grownups with regular paychecks. It is a necessary life skill regardless of one’s career objectives.
Neither, does it discriminate between the affluent and the not-so-well to do. A man may inherit a substantial fortune but he cannot sustain it for long unless he has the virtue to manage his finances. This tell-a-tale reminds me about the $77 billion wealth gap between the Ambani brothers.
Often heralded as the most expensive sibling rivalry, the fallout traces its roots in 2002 when the group patriarch Dhirubhai Ambani passed away without a will. In 2005, the Reliance Group was split with Mukesh gaining control of flagship Reliance Industries with interests in Oil & Gas exploration, Petrochemicals, Refining & Textiles. Anil, the younger sibling took over Telecom, Power, Entertainment & Financial Services divisions.
Think about this for a minute.
Although equal in value terms, Anil was seen as the real winner in this mother-brokered deal between the feuding brothers. He was practically sitting on a goldmine of opportunities in new-age businesses. At the pinnacle of his stardom in 2008, Anil had a net worth of $42 billion and boasted the accolade of being the sixth richest person in the world.
Present-day, The Anil Dhirubhai Ambani Group (ADAG) is fighting against the odds for its mere existence. In February 2021, Anil pleaded bankruptcy in a United Kingdom (UK) court and informed them that his net worth is zero, although the veracity of his claims is yet to be verified. He went on to state that he is currently running a deficit (liabilities exceed assets) of about $305 million or ₹2,257 crores.
So, what brought things to such a pass?
A one-word answer to this question would be overleverage a.k.a. borrowing more than one’s means permit.
Financial discipline is a vital character. I have observed many people in my circle belonging to humble backgrounds who gradually built their wealth over time. The rags to riches stories. And almost none were overnight successes. They toiled hard for it, consistently. I am cognizant of the hard work & struggles they endured to reach what they are today. And they are not just rich, they are good human beings. I am elated when I see them providing their families with all the luxuries of life. Doing things they finally wanted to do.
“ The number one problem in today’s generation and economy is the lack of financial literacy “ - Alan Greenspan, Ex-Chairman of the US Federal Reserve
It is important to start saving at an early stage of life. This helps you learn the path toward financial independence. We will discuss the benefits of ‘starting early’ in the next unit.