Here’s what 100 ml potion of financial disaster comprises-40 ml of igno-rance, 30 ml of laziness, 20 ml of arrogance and 10 ml of overconfidence. Now ask a couple of well-placed people for some simple financial ad-vice. It could be anyone from senior colleagues to successful persons in your family,Here’s what 100 ml potion of financial disaster comprises-40 ml of igno-rance, 30 ml of laziness, 20 ml of arrogance and 10 ml of overconfidence. Now ask a couple of well-placed people for some simple financial ad-vice. It could be anyone from senior colleagues to successful persons in your family and circle of friends. Ask them to advise you on tax planning or about company stocks you could in-vest in or whether term insurance is a good idea or whether you should pre-pay your loan etc. You will be able to gauge how much they understand personal finance by their response. From stashing cash in the banks to investing in fixed deposits and insur-ance policies, most people feel fi-nances will eventually work out.Sample this: thirty-year-old Amit has a household expense of Rs 25,000 per month. Considering just 7 per cent as inflation, what would be his position when he is 60? His household ex-penses will be about Rs 3.25 lakh per month. The retirement corpus should be large enough to bear such monthly expenses as well as an additional 7 per cent each subsequent year due to in-flation. Such retirement corpus should be approximately Rs 8.6 crore. He has 30 years to accumulate that and three options. Firstly, equity option (growth rate 14 per cent). Here, he needs to in-vest Rs 16,000 per month. Then fixed deposit (growth rate 8 per cent). Here, he needs to invest Rs 58,000 per month. Lastly, insurance (growth rate 4 per cent). Here, he needs to invest Rs 125,000 per month. The above op-tions will only fund his post-retirement days, what would happen to his chil-dren’s education, their wedding? Amit is blissfully unaware of all this.advertisementVikram Kapoor too feels every-thing will work out fine. He is 40 and head of operations at an MNC. He earns about Rs 48 lakh per annum. His assets include a bank balance of Rs 6 lakh and an ancestral home about 50 km from Kanpur. He has no life insur-ance cover, no investment in stocks, mutual funds. A huge portion of his in-come goes into paying home loan EMIs. Now, his expenses. He wears Armani suits, sports a Movado watch and uses the latest gadgets. His family has three cars, travels only business class, dines at five-star hotels.There are more people like him. Karsan Patel also has a similar lifestyle. The 40-year-old business-man earns about Rs 48 lakh per an-num and his assets include a cash balance of Rs 6 lakh, life insurance policies worth Rs 4 crore, Rs 5 lakh in stocks, no mutual funds, few plots of land worth Rs 10 lakh and an ances-tral home worth Rs 2 crore. However, the ancestral house has little invest-ment value for him since he lives in it. He has a few recurring deposits as well as fixed deposit accounts.While Amit’s case is that of ‘igno-rance is bliss’, Vikram is being com-pletely reckless and Karsan is just giving away his hard-earned money. What is common among them is that they are all enjoying the 100 ml of disaster potion.The point to ponder upon is why prosperous families go bust over time. Why is it that money does not last for more than two to three generations? The truth is, you need everything to have the right potion of financial pros-perity. Everything has a time and pur-pose. Life insurance is necessary and so is a loan. Deposits are needed to provide stability and equities are needed to fulfil dreams. For every ru-pee that you want to invest into real estate, be sure that you have Rs 2 of your money in liquid wealth. That will save you from distress sales. Get good ideas and opinions. Do not try and do everything yourself unless you are willing to quit your work and do wealth management full-time.