Financial Illiteracy

How Can Financial Illiteracy Keeps You Slave Forever? Real Life Casestudy

“We were not taught financial literacy in school. It takes a lot of work and time to change your thinking and to become financially literate.” Robert Kiyosaki

This is a classic case of how financially prudent decisions can change your life forever.

Here is a family of 3, a couple and a young son just turned 20. Both husband and wife, in their early 50s, are working and probably would be earning together rupees one lakh per month.  The wife has been working for the last 25 years. Her average take-home pay would be rupees thirty thousand. She wanted to pursue her hobby of painting as a career but could not do so due to their financial constraints.

On the insistence of buying a sedan car by the young son supported by the mother they bought a car for Rs. 20 Lakh.  Yes, Rs. 20 Lakh.  Their average usage of the car per month would be no more than 300 kilometers. That too mostly could be taken care of by public transport like autorickshaw/ Uber.

Buying a costly car for a middle-class family whose usage is average 10 km per day is a big financial blunder.

Let’s see how.

First of all, buying a car in a time of Uber and Ola is a debatable issue where usage is not much. Even buying a car worth Rs. 20 lakhs is not financially prudent in such a case whereas buying a luxury car of Rs. 20 lakhs is a monumental blunder.

Let’s assume the aspiration of buying a car, that too a new car, for a middle-class family is high. Today there are very good cars available in the range of Rs. 7 to 8 lakhs. By buying a car in this price range this family could have saved about Rs. 12 lakhs. (they did not avail a car loan, the amount was self-funded from savings)

What change Rs. 12 lakhs can bring in your life?

The wife’s annual take-home pay is Rs. 3.6 lakhs, which means she could have left her job for about 33 months without any income loss. Rs. 12 lakhs saved by buying a cheaper new car could have compensated for her loss of salary for 40 months (even a couple more months if we consider Rs. 12 lakhs were invested to earn bank rate of interest).

In three years, she could have started and succeeded in her painting career, her lifetime dream. You would agree 3 years is a quite reasonable time to settle with your freelance business especially when you are passionate about it.  A career she was deferring for regular income, would have flown in these 3 years. Her life could have changed, she would have escaped the slavery of salary forever. She would have gained the happiness of doing something of her own and succeeding at it.

This golden lifetime opportunity was lost by making one financially imprudent decision. This is how many of suffering due to the ignorance of how to put money to the best use to live a dream life you always wanted to live.

“Freedom comes when you’re Brave Enough to chase your dreams and achieve the Success and the Financial Freedom you want.  In order to be FREE, you have to be BRAVE.” Jeanette Coron

Financial literacy is extremely important when we spend our life as a slave of money.

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