Six decades later, it’s time to celebrate Financial Freedom Day

Sixty years later, as I look at four generations — two of yesterday’s, one of today’s and one being created and nourished for tomorrow — I note clear distinctions in the cultural and psychological DNAs of the four. Don’t hold me to every word, for had it not been for exceptions, trends would have been difficult to capture. The underlying paradigm of this piece is an individual who has been able to get an education based on which an opportunity could open up before him.

G-1947. In our grandfathers’ generation — those who were in their 20s in 1947 — you had to be lucky to get a job. This generation had seen freedom come but was perhaps ill-equipped to profit from it. Its aspiration then was to get a little toe into a secure job market, provided largely by the government. This made government jobs not only a revenue stream but brought with it a shimmering status. A pension at the end of 35 years was the cherry. A time-and-motion process guided them towards this pension.

G-1967. Our fathers’ generation — those who were in their 20s in 1967 — was a little better. Not because job opportunities had multiplied but because new avenues of income generation were born in the form of lawyers, accountants and other professionals. Doctors and engineers were needed the most and hence the doctor-engineer obsession with their parents. Here too, some professions carried more status than others — doctors, for instance, commanded and carried as much respect and status as government servants, more so perhaps as the decline in service delivery by government servants had begun.

G-1991. My generation — those who were in their 20s in 1991 (apologies for the break in rhythm but that was the turning point) – is a little different. We were children of liberalisation and fresh from guitar serenades in college were wonderstruck with the economic crooning that hit us and turned into non-stop hits. Here an opportunity, there an opportunity, everywhere opportunity. Many, not all, were lucky to find our ‘calling’ and turn our jobs into joys. Hard work and smart thinking was and is our survival mantra.

G-2007. The next generation — those who are in their 20s in 2007 — is the luckiest generation free India has ever seen. This generation can not only turn whatever it likes into an opportunity — music, acting, talking, managing, teaching, accounting, flying, anythinging— but can take risks like never before. This 9.4 per cent generation can read and analyse but can’t empathise with shortages. A generation born into the digital age of information that respects knowledge workers like never before, a generation that takes the current and growing urban prosperity for granted. So enviable.

The financial habits of the four generation reflect their working outlooks. And it is these habits that the Enviable Generation needs to become conscious of. It needs to reject the past habits as those of a bygone era. It is for this generation I tried to get a hold on definition of financial aspirations but couldn’t. So, for lack of a better definition, here go my two bits on the classification of financial aspirations.

Financial aspirations of G-1947: financial security. A family is financially secure when it is able to generate savings that are greater than its expenses, invest those savings in low risk instruments and when age comes in the way of doing productive work, can live off those savings. These savings and the returns from them are enough to get by— housing, food, clothing, healthcare, travel and maybe a little more. Typically, the house our grandfathers built and the pensions they lived on.

Financial aspirations of G-1967 and G-1991: financial independence. A family is financially independent when the savings it generates are very significant and are converted into investments — further defined as instruments that carry higher risk and deliver higher returns. This family need not retire at 60 but at 50 or even 40. Higher incomes translate into higher return assets like property and stocks and ensure that while the monthly expenses are taken care of through rents and dividends, capital is not eroded by inflation and in fact appreciates, keeping the standard of living intact. Our father’s generation and some from mine aspire for this.

Financial aspirations of G-1991 and G-2007: financial freedom. Aah… this is the greatest aspiration of all. But only risk takers can embrace it. A family is financially free when by engaging with market opportunities that the economic environment offers it creates businesses and enterprises that flourish. The aspiration for this family is not ‘expenses taken care of’ but ‘wealth creation’. This can happen either by setting up a business or by working for large companies and turning mind into money through stock options. In short, financial freedom is the power, the ability to make working, spending, leisure choices without worrying about its financing. It’s like reading only the left side of a plush restaurant menu.

This is the aspiration of some of my generation and most of the next. And it is this aspiration that will simultaneously ride and drive economic growth of India, as it turns into a generation of prosperous entrepreneurs whose companies grow into the Sensex. As we look behind and celebrate the freedom path carved out for us by our grandfathers, let us not forget to look ahead to enable G-2007 to touch the next freedom.