Study hard, get a good, safe government job, and your life will be set. This is what our parents and grandparents told us in our schooling years. Although the advice may seem wise, the fact is—it's not.
To prove that, we need to go back to the period from 1950 to the 1980s, when the majority of the population left farming and self-employment to get a safe, secure job. Yes, it was the boom of the Industrial Revolution.
The people who took up salaried jobs stayed in them till 60, a.k.a. retirement. So, it is normal for them to expect their kids and grandkids to find similar work and to retire peacefully. This is why they say, “go find a good and safe government job and secure your future.”
This advice is not so black-and-white now. Firstly, because the concept of a long, secure job is fading away. Take a look at how artificial intelligence (AI) is creating massive job restructuring worldwide. People are getting fired in their 30s and 40s, which was not the case from the 1950s to the 2000s.
Secondly, because of the concept of MMT, or "More Money Today"—the value of getting more income earlier on in your career. Let me walk you through some illustrations.
For example, let us take the case of two people:
Ramesh, who earns ₹2 lakh per month, but only for 5 years
Suresh, who earns a monthly income of ₹20,000 for 30 years
In the eyes of society and the people around us, Ramesh might be branded a "loser" because he was laid off after 5 years, whereas Suresh will be seen as a respected person because he stayed in a job for 30 years.
This is where the theory of MMT makes sense.
Let us assume that both of them invest 20 per cent of their earnings in a mutual fund that earns a 12 per cent ROI.
Case 1: Ramesh invests 20 per cent of ₹2 lakh: ₹40,000 per month.
Value of corpus at the end of 5 years: ₹32,44,145.
From the 6th year, he has no excess to invest as he is jobless. So he just reinvests his original capital for the next 25 years.
Value of this corpus at the end of the 30 years: ₹5,51,50,674. That is, around ₹5.5 crores. (i.e., ₹32.44 lakh at 12 per cent ROI for 25 years)
Case 2: Suresh invests 20 per cent of ₹20,000: ₹4000 per month.
Value of corpus at the end of 30 years: ₹1,23,23,893, i.e., ₹1.23 crore.
Ramesh, who had only worked for 5 years, was able to create a corpus 4.5 times that of Suresh, who had worked for 30 years.
In the eyes of society, Suresh was branded the winner, but the real winner was Ramesh. The reason is that he was able to win back 25 years by doing nothing.
Ramesh was jobless from the 6th to the 30th year, while Suresh toiled day in and day out in his regular job.
This also meant Ramesh was literally free for 25 years and could have done anything he was passionate about—gardening, singing, driving, filmmaking, writing, etc.—after he was laid off.
This means it is very important to secure a high-paying job or income source early in one's career.
A higher income for a shorter tenure beats a lower income with a larger tenure. This math will work if your shorter-period monthly income is more than 2.5x your longer-period income.
If yes, you can leave your job after 5 years and beat your counterpart, who would continue working for another 25 years.
This exit can fuel your passion. You could handpick the kind of job you would love to work, even if it does not pay you handsomely.
You can even work for NGOs or become a social worker. This would be possible only because your initial capital will continue to compound over time. This is the true realisation of financial independence.
There is no shame in being jobless if you are financially free.
This also brings us to the next interesting discussion—the people who pay an initial capital to secure a job.
I have noticed multiple people fall for this scheme. Deposit a large initial amount to get a job, in exchange for a regular salary until retirement.
Let me illustrate why it could be a potential scam and not a scheme.
If you are giving away ₹1 crore in exchange for a ₹2 lakh monthly salary for 25 years, this is what it looks like:
- Initial amount, if invested: ₹1 crore
- Tenure: 25 years
- ROI: 12 per cent
- Final amount: ₹17 crore
In exchange, you are getting a salary of ₹2 lakh, and the maximum you can invest is 20 per cent for 25 years. The final corpus would be:
- Monthly salary: ₹2 lakh
- Monthly investment: ₹40,000 (20 per cent of ₹2 lakh)
- Tenure: 25 years
- ROI: 12 per cent
- Final amount: ₹6.8 crore
You would have been better off being jobless than giving away your capital. If you had borrowed this ₹1 crore to get that dream job, you would be worse off.
I am here to tell you that there is no shame in being jobless. Even though many in society look down on the "jobless", only you know things aren’t as bad as they think.
The so-called respect one gets by working a job for 30 straight years is no longer valid. What really matters is financial independence, and if you have built a good corpus in your 20s or 30s, you don't have anything to fear other than reckless spending.
The writer is a SEBI Registered Investment Adviser (INA000021757), SEBI Registered Research Analyst (INH000025045), and author of ‘How to join the top 1% options traders club’.
DISCLAIMER: Investments in the securities market are subject to market risks, including the potential loss of principal. Past performance does not guarantee future results. Information provided is for educational purposes only and should not be considered financial advice. Investors should read all related documents carefully and consult a certified advisor before investing. Registration granted by SEBI and Enlistment with RAASB/BSE and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors. The investor is requested to take into consideration all the risk factors before actually trading in stocks or derivatives.
The opinions expressed in this article are those of the author and do not purport to reflect the opinions or views of THE WEEK.
