“Buy things you don’t need, sell things you need”

Recently, several tabloids were filled with reports that a legendary international tennis player - a young sensation of the 80s – would be auctioning some of his hard-earned trophies and medals to clear his bank loans. The champion who had a fair amount of accumulated debt was declared bankrupt in 2017.

The move comes months after the tennis superstar, once worth £30 million (approximately Rs 300 crore), was declared bankrupt over a staggering amount of £3 million (approximately Rs 30 crore) that he owed a bank.

This player at just 17 years of age was the youngest ever Grand Slam tennis singles champion in 1985, when he won the Wimbledon singles title not once, but 2 times in a row! For the unaware, an unseeded player winning Wimbledon is extremely rare.

Since July 2019, a British firm has been auctioning around 82 items belonging to him, including medals, cups, watches and photographs, to partially clear the bankrupt champion’s debts. Some of the trophies up for grabs include a replica of a Cup awarded to him following one of his Wimbledon wins, and a replica of the Cup presented to him after he became the youngest ever Grand Slam singles champion. Reports, however, suggest that even an auction will not help him get rid of his debt.

The six-time Grand Slam winner has won 49 titles and more than 20 million euros (Rs 160 crore) in prize money during his career. He now focuses on his tennis activities, particularly commentating, as he attempts to use his fame to wipe out his debts.

All it takes are a couple of unfortunate scenarios for one’s career to take a 180-degree turn. The celebrities who went through this ordeal all seem to be characterized by a few common traits – a lavish lifestyle, not saving enough, constant desire of living for the moment and directing their money into buying materialistic possessions as status symbols.

Make no mistake, bankruptcies may impact not just famous personalities, but also ordinary mortals. There are cases where hefty bonuses are spent on buying expensive cars as the new status symbol. However, in subsequent years, if the business plummets, they may end up losing not just their bonus but also their job. The expensive cars may be disposed at a loss if they cannot afford the upkeep. They may learn their lesson a bit late, but the moot question remains - Was all this necessary? The answer is a BIG NO, Not at all!

Lessons to be learnt - We aim to remain fit with our health, but very few people care about remaining fit with their wealth. We eat less to maintain our desired calorie count, regularly go to the gym, practice yoga and other wellness activities, but sadly, do exactly the opposite with our wealth.

We may tend to be aspirational and prefer to enjoy the luxuries of life even if we need to buy them on credit. In today’s social media-driven age, it is either the “FOMO” (Fear of Missing Out) factor or our self - image we want to display to our peers. The question is - whether we can continue to afford our current lifestyle forever. If the answer is ‘NO’, there is a dire need to reconsider our finances and tone down our lifestyle.

Warren Buffet says this through a beautiful quote, “If you buy things you don’t need, you will soon sell things you need.”

The concept of Minimalism is something that we should imbibe and implement in our daily lives. Always focus on reducing the variable component of your expenses. Sit down, take a moment and think about the bare necessities and amenities you require in life. Luxuries can certainly be deferred or purged. We must realize that life cannot be the same always and we must always work with a buffer for uncertain times. Here are some ground rules one may follow, to take charge and drive their financial journey in a successful manner –

Use windfalls for repaying loans - Many a times, home loans are prolonged for claiming tax benefits. This may not be financially prudent in the lamentable scenario that your career hits a bad patch. It is good to part-pay loans at regular intervals and have a clean slate on the loan front.

High-cost loans are a strict NO - Credit card borrowings are one of the costliest forms of debt and need to be repaid at the earliest. It is advisable to opt for a debit card instead of a credit card.

Except for a house, there is no need to borrow - ‘Spend what is left after saving instead of saving what is left after spending’ is the guiding mantra. Except for a house, try to meet all other aspirations/goals by saving and investing. You can save through debt mutual funds for short term goals like buying a bike, car, travel sojourns, etc. and through equity funds for long term goals like child’s education, marriage, retirement, etc.

Seek the help of a financial planner - You avail the services of a dietician, a fitness trainer, a yoga instructor, a sports coach, and a medical practitioner among others to take care of your health and remain fit. Why not use a financial planner to stay fit with your wealth as well? Remember, financial issues can cause stress and impact your health. Just as a fitness trainer helps you take care of your health; a financial planner can help you create wealth.

Following the above 5 step process can help you in your endeavor towards smart financial planning. In conclusion, here is a famous quote from Benjamin Franklin, “If you fail to plan, you are planning to fail.”

(The writer is National Sales Director, Franklin Templeton)