Thursday, July 9, 2015

Greek Crisis…Lesson we can learn!

Image result for people suffering in greek crisis
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People of Greece have voted against any more humiliating bailout proposals. 
Kudos to their decision! This may mean their exit from Eurozone and longer struggle to get back on their feet as a debt free country. Next few days are very important as they will decide the future of this debt ridden country. Whatever may be the result, the sufferings of its people may not end soon.

In the midst of every crisis, from wars to financial meltdown, are the People! It is always the common man who suffer. People loose their means of livelihood, youngsters cannot find jobs and sick cannot get enough medical treatment and when the crisis deepens, people leave their motherland and their homes in search of better living conditions elsewhere. In case of Greek Crisis, along with all of the above problems, there is one more severe problem…Greeks are not allowed to withdraw their own cash beyond a certain limit! We can only imagine their difficulties.

There have been several analysis of How and Why Greece has landed in such a situation. Analysts say Tax evasion and corruption clubbed with Greek Government’s people pleasing policies forced its government to borrow money from other countries. One of such people pleasing policies is their ‘Pension System’.

Greece has an envious Pension System! Anyone above 50 can retire and be assured of getting pension from the government. People were getting better deal after the retirement than if they have stayed at work. Consequently, non-working population handsomely outnumbered working population. No one cared about the source of funds for such policies until it hit them back! As long as it benefitted everyone, no one was worried about the situation being illogical.

When something unnatural and illogical happens, shouldn’t we raise eyebrows and question it? Unfortunately we accept it as a way of life as long as it benefits us. It seems that we suffer from selective myopia and only see immediate gains. Also we have short memories and always forget our lessons (we forgot the lessons from Subprime crisis, where everyone was encouraged to live beyond its means and buy houses which they could not afford).

If we look around, two things are happening which defy logic to me. First is ‘The eagerness to achieve all material possessions as early as possible’ and second is ‘to retire early’! The question is: Is it the first one triggering the second or is it the attraction of the second one inspiring the first?

During the course of my Financial Planning practice, 4 out of every 5 clients want both. Everyone wants to have more number of possessions like cars, properties. They want to splurge on lifestyle enhancement. Also they want to retire early to enjoy post retirement life and sometimes to do the things they could not pursue because of work pressure.

In both the cases one word should catch our attention, it is…’Early’! In Greece also, people wanted to enjoy life Early. Their Government supported them. But this may not be the case with a lot of us. Our governments may not be able and willing to support us so we will have to fulfill our wishes with our own hard work. Which means we have to speed up the process of earning, means longer hours of work or looking for risky investment options which can give us higher than ordinary returns. In nutshell we need more money that too quickly to fund our increasing wish list quickly.

There is nothing inappropriate in enjoying and splurging in life as long as we are able to do it within our means, which means our physical and mental means! But it is an unnatural desire if it is forcing a person to work beyond its capacity and there by leading him/her to emotional and physical health crisis (every other person complains of being stressed and fatigued).

Similarly there is nothing sinful in hoping to retire early and relax. But we must remember that early retirement means more number of non-working years. It means that after retirement we will be living off on income we generated during our working years. For example, If a person’s working life starts at 24 and he decides to retire at 54 and he is alive till 94 (enhanced life expectancy world-wide) then he is earning for 30 years to feed himself for 70 years! Also in those 30 years he will go through several major landmark of life cycle as well like marriage, kids, settlement of kids, aging parents, living a lifestyle they always dream of along with professional up and downs. We can well imagine the pressure we are unknowingly putting on us.

Greece enjoyed too much too early, their system collapsed. Likewise if we wish to enjoy too much too early, our emotional, physical and financial system may collapse!
The only answer is ‘Take it easy’!

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