Did you think that having ample money is an assurance of a good, prosperous life? Mr. & Mrs. Malhotra live in an upmarket housing society in South Mumbai. Most people would see them to be truly blessed, prosperous and would want to be in their situation. Read on and discover how you would feel in the shoes of Mr. & Mrs. Malhotra.
Here is an insight into the perfect life of Mr. & Mrs. Malhotra
* Current networth of Rs. 11 crore. (This includes home worth Rs. 2 crore, farm house worth Rs. 1 crore, RBI Bond Investment of Rs. 1 crore, jewellery worth Rs. 75 lakh, PMS schemes Rs. 25 lakh, their share in family's commercial properties in Aurangabad, Delhi and Ahmedabad valued at Rs. 4 crore, their share in family's business premises in Mumbai valued at Rs. 2 crore)
* Loans and liabilities: Negligible, some car loans
* Have half a dozen gold and platinum credit cards
* Have premium relationships with all companies: Private banking, premier banking, priority circle, etc,.
* Sought after for business by all relationship managers of all companies
* Two children studying in the United States.
* Generally, a 5-star lifestyle
Here are some more insights
* Ongoing business income: Practically nil
* Investment income: Rs. 6 lakh p.a. from Rs. 1 crore invested in 6 per cent RBI bonds
* Basic expenses: Rs. 9 lakh p.a. approximately a deficit of Rs. 3 lakh and gap widening each year with inflation.
* Commercial properties are all under double dispute i.e. amongst siblings and with encroachers. Assets cannot be used as they are part of family trust and trust was formed by Mr. Malhotra's late father, who died in 1996 without a Will. Assets can be seen but cannot be used or touched till disputes are resolved. As a result business premises in Mumbai also under family squabbles for the last eight years.
* Children's fees in USA (partly paid) – no more liquid money available for fees.
* Now, the Malhotras are considering taking a loan for a number of things, which in my opinion is a very bad idea given their situation.
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Their situation is so critical that it is hard to imagine that someone who is worth Rs. 11 crore today has problem in funding their children's education. Children have to work and earn their fees, while their parents i.e. Mr. & Mrs. Malhotra are under depression, cannot afford to think about holidays, feel strangulated to maintain their lifestyle.
If you think that they can cut their expenses it is not possible. That's because they come from a section of society where either they continue to be part of that society or get totally cut off and go to another part of the city and live there. I am not being sarcastic here but we must grant them their lifestyle requirements, given our societal thinking and background.
Things are only going to get worse; both Mr. & Mrs. Malhotra are now looking for jobs and at their age of around 50; and with little or no corporate experience, things are difficult. They have been business owners forever.
Why did this happen and how do they come out of it?
Image courtesy: shannonleighanderson.com
The Malhotra family suffers from paranoia of safety. Late Mr. Malhotra (senior) was overbought in real estate with no proper plans to manage real estate. Now, there is encroachment on their land. Moreover, given legal expenses and absence of father's Will, how and who will bear all expenses, legal and otherwise is a question.
Our Mr. Malhotra has hardly got anything to pay but some of his siblings do and because they will fund all expenses they want a larger share of the estate which is naturally not acceptable to the other siblings who are not as wealthy.
Even in Mr. Malhotra's case he has majority of his investments in RBI Bonds from which he is earning a meagre 6 per cent given his lifestyle and expenses. His PMS is doing just okay as we already know. Mr. Malhotra, given his risk profile earns about 6-10 per cent on his PMS post taxes, brokerage and accountant's charges.
Each year he is cutting slices from his PMS to fund his life and is worried as the PMS he started with Rs. 50 lakh is now down to half given his slice cutting each year for the last four years. Mr. Malhotra is really stuck. Even if he takes a loan against RBI bonds, from where will he pay interest on the loan?
So much for safety. All this safety at what cost? What is the point in such type of safety if he or future generations may not have enough to eat?
Now we may not see many with a Malhotra type family situation but we surely see many with a financial management situation that is really similar to the Malhotra's. Large assets and tiny earnings. The solution is not easy for such people.