A tale of two cities

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SummaryHaving houses in two cities may not be a good idea, even if you are a CEO

Some time back I came across an interesting article carried by a financial daily. The article spoke of how so many people, especially high flying corporate executives, are living a life spread across two cities. Prima facie they would say they have jobs which are exciting enough for them to take to such a lifestyle, but we all know it is also the pay that is compelling them to do this split; the split of life and time between work and family. Based on my experience such a life is such a wasteful exercise. Here’s why:

The Emotional Angle

There is nothing second to ‘a touch’ or a sense of being there; physically in front of your family. Deep down there is nothing more comforting than to know that you not just around but in the house. While growing your child needs to hold your hand each day. Older ones need to see you in person each day. Being a phone call away or seeing your face and hearing you over Skype is not good enough. Needless to say that you will reap what you sow and this applies in your closest relationships as well. Much more can be said but I will leave the emotional angle here and focus on what I know better; money!

The Financial Angle

High-flying executives have no time. As a result their personal (financial) life is in shambles. Adhoc products, miscellaneous investments, badly performing portfolios due to bad choices and about two or three home loan EMIs running simultaneously. Often the 45-year-old executive does not have Rs 15 lakh of liquid investment which is easily identifiable. By experience, if I were to exclude real estate and provident fund, the networth of someone earning Rs 30 to 40 lakh per annum is even embarrassing to state. I am not saying real estate is a bad idea but during retirement the rental may not be enough and may not be in line with what you need (could be higher or lower) and you cannot eat bricks. Ultimately, it may seem that you are making a lot of profit but over the years if you consider cost of interest you paid and adjust for inflation the profits will not look attractive. Often I even see people selling property in distress after holding for 10-15 years and having paid so much interest.

Life itself can get so much more expensive when it is spread between two cities. I see examples of people working in India and having families in Singapore. Even a split between Mumbai and Delhi for that matter can involve significant costs each month. Do you see what a huge airfare bill you are running up each month? Some weekends you will need to be in your work city and sometime family will come to your work city. Having life in two cities is not prudent from a financial planning point of view. Somehow the expenses you are incurring may not seem double but will eventually turn out to be double of what you need to run just one home in one city. How will you save and invest after this? This is the reason why such corporate executives who appear to live a rich life are in reality quite poor when you see their personal balance sheet.

For some CEOs and very senior executives, the dual life might just be okay because you are perhaps 50+ and so is your spouse and spouse is perhaps busy as well. Your children are in late teens or over 20 and pretty much have a life of their own. You could make some quick bucks and good investments during this time provided you do not buy new EMIs. But please note that a company has just one CEO and few in its top management.

By design of Indian corporate life, if you become unfortunate on the emotional front then by the time you are CEO or someone really senior in the organisation, you will have only your corporate career with all the riches but no family, no life, no one to care for and no one who cares for you. What are you going to do with money if you did not have a family or anyone else to share it with? Worst of all, you do not even have enough money as you have just not saved anything. For some wiser people, at least they may have one or two properties.

The point is, emotionally you are compromising and financially you are already comprised. The latter, however, is a natural fallout of your own doings or shall we say, not doing anything because you just never had the time to get your financial house in order.

How to manage this? Well you are certainly intelligent to figure this out yourself.

The author is director of Transcend Consulting

kartik@trancend-india.com

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