KBC Season is on and the enthusiam continues to remain as high as at the first season despite the various factors remaining the same – the host, the format, the set, and the prize money. Wait did I say prize money is the same? Not truly as the money today is not equal to what it was in the past. Lets explore how.
As my daughter eagerly awaits the airing of KBC tonight where one of the contestant is slated to reach the magical number of Rs. 1 crore, I wonder if the financial impact felt by the contestant today would be similar to that on the first crorepati of the show way back in 2000. Well, I truly understand that some joys are beyond money particularly when its about being declared a crorepati in front of a national audience – ofcourse its an entralling experience comparable to none. But as these emotions subside, the analyst in me screams that winnings of Rs.1 crore 20 years back were much better and would be equivalent to Rs.3.5 crore today on an inflation adjusted (pre-tax) basis. Ceteris paribus, meaning everything else being equal, monetary joy definitely would have been better in those days. And as years go by, this would weaken further unless ofcourse the sponsors decide to increase the prize money to make up for this : )
This brings back memory of a joke that used to be floating in earlier days of KBC. While Mr. Bachchan continues to be the major pull factor for the continuing popularity of the show, undisputedly he has gained handsomely from the show as well.
A quick search through some public sources suggest that Mr. Bachchan earned 25-30 lakh per episode when the show began which has consitently risen to about 5 crore per epsiode in the current season – thats a massive 20 fold jump against a rate of inflation of about 4 times over the same period. Wish most of us could negotiate such pay hikes!
But since our managers and HR folks are too smart giving us only inflation adjusted hikes, we need to plan for inflationary trends in wake of dwindling income as we grow old. Inflation is a demon that eats into our savings and makes us poorer in future. And the brahmastra to beat this demon is a well balanced portfolio which can consistently generate returns higher than the inflation over long term time horizons to take care of both limited income and rising costs. During the youth when we have earning capacity and decently long runway, its prudent to start deploying a part of the these earnings in stable return generating instruments for the time when the income takes a hit while expenses remain sticky and continue to increase due to inflation. Afterall, there can only be limited superstars who can still command a price at ” do kam 80″ !!
A simple graphical representation hopefully can make things clearer thus I attempted it.
Creating a safety net through savings and balanced investments which grow at a rate faster than inflation to cover the growing expenses in future is what one should aim for. And if you get stuck here, dont hesitate to take expert opinion but the final decision should be yours. So, are you game on?
#expensesneverstop #inflationdemon #financialplanning #safetynet