Lessons from a middle-class crorepati!

Published: November 14, 2020 at 12:26 pm

Last Updated on November 14, 2020 at 12:26 pm

A very happy Diwali/Deepavali to all readers. In this article, I share some lessons from interacting with my friend and mentor. Getting this published took quite a bit of persuasion, and he asked that any specific references to his past be removed so that his friends/family could not identify him. Let us refer to him as Santhosh.

Santhosh celebrated his 50th birthday this year, and his 22-year old daughter is in two minds – work for a while and then study further or study further immediately. His portfolio liquid net worth is about seven crores – this means excluding his own house, money that he can withdraw and spend at will.

Spending is a problem for Santhosh or I should say the lack of spending is a problem. He does not have a car or an expensive smartphone because he never felt the need for them. He is not on social media, rarely uses the phone and is unlikely to read this. There is no giant flat-screen TV at home because he realised a few years ago entertainment was becoming personalised. Each member of his family (wife + daughter) have their own computer.

The most expensive gadget he owns is a Mac Pro (not the laptop, but that box with holes which looks like a portable dog kennel) which was given by a client. After 20 years in the software industry, he became an e-commerce consultant in the last decade. There is no paid help at home. Not because of the lockdown, but because they find satisfaction (and fitness) from it.


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What is the secret of your success I asked? I was lucky to be in an industry which would rapidly change the way we live. I started following developments related to the internet from the 90s and understood the need to re-skill myself every year. When I talk in conferences, I am the oldest person in the room. The kids look at me like a dinosaur but warm up after my talk.

Where did you invest?  Initially, it was just EPF, PPF and fixed deposits + ESOPs. I started investing in mutual funds only in May 2005. PPF rates had reduced by about 2%, and the stock market started moving up. So I got greedy and entered. In the middle of 2006, I saw my first crash. I saw a drop of about 25% or so over a month and stopped investing. I re-entered only in later 2009 and since have been regular.

My asset allocation at that point had only 10% equity exposure (I never viewed my ESOPs as equity. To me, it was like EPF!).  Over the years, I have been able to increase it to 40%. My goal is to keep it at that level for the rest of my life.  It was during the bull run up to 2008 I learnt about the economy. How interest rates, inflation and the stock market are related to each other. It was not easy to change from cushy fixed income to the vicissitudes of the stock market. I think I am still not used to it.

I purchased my house only from my ESOP funds. Strange I never bothered about volatility in my ESOP value as much as I did from my MF investments! I somehow did not think of it as my investment!

Note: Santhosh asked me to run a stress-test on his portfolio if he were to stop earning today, and it is pretty solid.

Anyone who looks at your lifestyle could never guess that you are a crorepati! My wife and I joke about how pathetic we are: we cannot bring ourselves to spend on a car, furnishing etc. because we do not have any need for it. We think of ourselves as a middle-class crorepati family! Many from my generation with a similar job profile are middle-class crorepatis too. 

I am fortunate to have a met a financial compatible wife. It is probably because of our middle-class upbringing where things got tight from the 20th of the month for our parents.

My daughter grew up in a different world than us. She probably will not think twice before spending big. We will know only after she starts earning how she fares.

My readers are going to assume you have deprived yourself of life’s pleasures!  We have travelled extensively over the last 15 years. So we did spend our money on our wants. Very few know about this as we are not on social media.  I would rather support as many low-income families as I can than buy a car for 70-80 lakhs. That would give me a purpose in life. Ps. He does!

What would you advise our young readers?  I would only like to make an observation. I am lucky to have defined my happiness in terms of hard work and being helpful to others at all times. This helped me get through big disappointments when things did not go my way. True happiness, in my opinion, is defining it in terms of the means and not the end. The rest will then fall in place gradually.

At this point, he became visibly uneasy that I had to stop further questions. Santhosh’s lifestyle is a classic example of visible wealth vs invisible wealth. How do we know a person is wealthy? We look at their clothes, accessories, cars and home. That is visible wealth – all of which are consumables. Invisible wealth is the liquid net worth that can be used at will to help us or others in the time of need.

Many of his friends find it hard to believe, but Santhosh does spend big on travel. His house is large and roomy but minimally furnished. He is a master of balance. He has found the right balance between work and life, between needs and wants, between earning, spending and investing.

How does one find this balance? “Every time a potential purchase looms, I ask what is the short-term gain and short-term loss? What is the long-term gain? What is the long-term loss? If I do not gain in value over the long-term, I do not buy it. I have tried to teach my daughter to do this”. He says.

To me, this is the single biggest takeaway. Every action has a reaction. Sometimes it is clearly visible and sometimes not. Before we spend or invest or being an assignment, we should take some to appreciate both short and long term implications of our action.

Kevin Hart’s Twitter profile reads: My name is Kevin Hart, and I WORK HARD!!! That pretty much sums me up!!! Everybody Wants To Be Famous, But Nobody Wants To Do The Work. This true for wealth too.

Each time an account of financial independence is shared, there are comments like, “that is because he started in IT at the right time”; “he went on-site a few times”; “his ESOP was huge”. This is how losers think – define their ability to succeed based on another person’s circumstances. Winners write themselves a one Crore Cheque and get to work.

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Pattabiraman editor freefincalDr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
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