5 Habits That Are Wealth Destroyer In A Long Run

A few years back there was a big debate “How Inflation act as a wealth destroyer?”. At that time the average inflation was around 10%. I highlighted it’s impact in my post, Impact of Inflation. As the inflation cooled off from 10% to comfortable zone the discussion subside. Now the inflation is no more a wealth destroyer. Thanks to the steps taken by the Govt and RBI.

Have you ever wondered besides inflation what else is wealth destroyer? The first thought that comes to the mind is wrong investment decisions. I agree on the same. If you are stock market investor then you must be recalling blunders of equity investment. Such stocks are referred as “wealth destroyer”. I can recall 2 such wealth destroyer (a) Reliance Communications or RCOM and (b) MMTC. The lifetime high of RCOM and MMTC was Rs 844 and Rs 2846 respectively. Unfortunately, both stocks are trading at under Rs 50 :(.

Anyways, this post is not about stocks or financial investments. In this post, we will discuss some of the habits that are slowly and gradually destroying your wealth similar to inflation. The only difference is that inflation is not in our control but our habits are very much in our control. The worst part is that we spend considerable efforts and time to generate wealth but do not pay heed towards wealth destroyer. One of the reasons is that these habits/destroyers are not visible to us and are a slow poison. Let’s check out

5 Habits That Are Wealth Destroyer In A Long Run

1. Bad Habits:

Recently i received a forward on Whatsapp in Hindi. It reads “Gun Milne Pe Shaadi Ho Jaati Hain aur Avgun Milne Pe Dost Mil Jaate Hain“. A loose translation of the same is  “if the kundali matches then people get married and if bad habits match then you become friends“. I am not saying that you should not have friends but friendship built on bad habits should be avoided :).

Some of the most common bad habits in India are Smoking and Drinking. Thanks to my (strict) teachers and parents, i am a non-smoker and teetotaller :). In my past organization, one of my colleagues (not a friend) used to smoke 2 packs of cigarette daily i.e. 20 units. Out of four, every three chain smokers are also habitual drinkers. One day i was estimating his monthly expenditure on smoking and drinking. I was shocked to know that it must be around Rs 15k per month. One day when he was in a good mood, i asked him and my estimate was correct :). In other words, 15% of his monthly salary of 1L was spent on smoking and drinking. Thus bad habits are wealth destroyer at the annualized rate of 15% in his case.

I was wondering whatever efforts he makes he cannot generate returns of more than 15% to beat the loss due to bad habits. His thought process is that he assume his income to be 85k instead of 1L. It does not change the facts and it is very weak & lame justification in favor of bad habits.

2. Company:

Here by the company, i mean people who influence your thought process. It might be friends on social media or close relatives. In one of the books i read that “Everyone’s journey is different. Therefore, one of the mantra to remain happy is to stop comparing yourself with others”. At the same time, Human being is a social animal and it is not possible to stop comparing with others.

Recently, one of my friends told that they are planning an international holiday to Mauritius. Reason being one of her wife’s friend posted Mauritius holiday pics on Facebook. In other words, we easily get influenced by the lifestyle of others. It is also called peer pressure. In another instance, one of my ex-colleague recently purchased high-end XUV because he cannot go to social gatherings in his small hatchback.

The point i am trying to make is that our “company” is another wealth destroyer. During my childhood, teachers and parents taught me that i should not compare myself with others. Therefore, what i read recently in a book was taught to me 25 years back :).

3. Impulsive Buyers:

Impulsive buyers are god for marketers. Cashback offers are one of the potent tools to trap impulsive buyers. Recently, i was buying some products from an e-commerce website. My cart value was Rs 2300 and there was a 10% cash back on a purchase of Rs 5000. I resisted my temptation to spend Rs 2700 more :).

Another example is the launch of new models. Some people are over obsessed with new models. Just 3 months back i bought Redmi Note 3. It is now tagged as the old model because company launched new models. Still, it is OK for low-cost handsets. One of my relative upgrades with every new launch of the most premium smartphone brand every year. The new model cost 60k plus.

Continuing with an example of smartphones. Recently there was a research published that on an average people change smartphone every 6 months. In the case of cars, people change it every 2 years. In big purchases, Smartphones and Car qualify as a wealth destroyer. We normally ignore other small ticket purchase that cumulatively put a deep hole in our pockets.

4. Lifestyle:

The lifestyle of an individual depends on the family background. Normally, A person from humble background value money more than the person from a business/rich family. Recently i was reading a news that son of one of the wealthiest family in Gujarat worked as a bartender in Kerala. The reason being, his father told him that it is very difficult to earn Rs 10,000 per month & he challenged his son to earn this amount on his own

Another news story mentioned that some of the sunshine business houses of 90’s are nowhere today. One of the reasons being the lifestyle of a next generation. The next generation was not able to cope up with the changing business environment and maintained lavish lifestyle despite severe losses in business.

In layman terms, my lifestyle should not be a wealth destroyer. I should change my lifestyle depending on income/resources. If my income is 1L and i spend 10k per month on my lifestyle. I should maintain the same ratio of 10% i.e. scale up or scale down my lifestyle with the income level. Just to clarify, my definition of lifestyle means spend on clothing, eating out, socialization, luxury purchase etc. Any disproportionate spending on lifestyle becomes wealth destroyer.

5. Debt/Credit Management:

Let me admit that some people are not good in debt/credit management. Here i am using the debt or credit in a wider perspective. To share example, one of my college friends has never paid any utility bill on time. He always pays penalty or interest. If you add up the lifetime penalty/interest it will be a huge no. In other words, any penalty or interest we pay for delayed payment be the utility bill, loan EMI or Credit Card bill is a wealth destroyer. In some cases, these penalties are steep.

Another instance is when people fail to manage the fine balance between debt/credit and income level. Though experts suggest that we can easily pay 50% of our income towards debt servicing/EMI payment. Trust me it becomes a major pain for most of the borrowers. Thus default/delayed EMI’s. I shared a dedicated post on this topic, 7 Ways to Avoid Debt Trap. The drastic increase in Bank NPA’s is a proof of poor debt/credit management.

Words of Wisdom:

The biggest problem with people (with habits that are wealth destroyer) is that they don’t acknowledge the same easily. Another issue is when both spouses suffer from the same habit :). The example of my friend shared in this post, both husband and wife are impulsive buyers :).

In my opinion, the easiest way to change the habit is to study its financial impact. Here i am assuming the person values the money. Normally the financial impact on a daily basis will be a small amount but it will be wise to calculate monthly/yearly/lifetime impact. Because of this reason, you must have observed that marketers share the daily cost to sell a product/service. For example, insure yourself at just Rs 10 per day or less than a cost of tea. On the contrary, you have to follow the reverse strategy to leave the habits that are wealth destroyer i.e. calculate lifetime cost :). The high cost hit hard and may encourage the individual to leave these habits.

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