Nandini and Rahul start their careers at an identical salary of Rs 20,000 a month, or Rs 2.4 lakh a year. Both work for 30 years. In the last (30th) year of her career Nandini takes home a salary of a little over Rs 3,49,000 a month, or about Rs 42 lakh a year. During the career span, her salary rose about 17 times, or about 1600%.
That’s impressive, but only till you hear Rahul’s story. In the last year of his career, Rahul took home a salary of a little over Rs 13 lakh a month—or about Rs 1.59 crore a year. His salary increase was 66 times or 6500%. You aren’t just impressed, you are probably saying “impossible”.
Here comes the last revelation of the story: the only difference between the two careers was that while Nandini got an average annual salary increment of 10%, Rahul’s average yearly increment was 15%. The 5% difference in the annual return on career ensured that Rahul’s salary was four times higher than Nandini’s at the end of their career.
This simple calculation illustrates a common lacuna in our investment strategy. We concentrate on exploring the investing options—stocks, mutual funds, fixed deposits, real estate and gold — for our savings, unmindful that by doing so we are actually fighting over crumbs but ignoring the cake. The cake is our income, the source of all savings and investments we make.
If the cake doesn’t grow fast enough, the investments, however intelligently made, will be relatively insignificant. Imagine the investment options you have when you earn Rs 1.59 crore a year vis-a-vis Rs 42 lakh.
The moral of the story is not to forget all about intelligent investing — that would indeed be suicidal advice to make for a personal finance magazine. It is to focus first on the returns from the biggest financial asset we all have — our career.
This mother of all assets has two unique features. It comes to us almost by default (our job, if we are employed; our profession, if we are self-employed) and we have far greater control over returns from this asset than we have on returns from any other investment.
We have been emphasising on the asset value of career right from our first issue by devoting a regular section in the magazine on ‘Career As Asset’. This issue’s cover story is the one-stop guide to maximising returns from your biggest asset. Make career planning an essential part — or perhaps the starting point — of your financial planning. You will save and invest better if you earn better.
