On financial prudence: Lessons from my low-income barber’s journey

Meet my barber – a guy in his 50s who changes his hairstyle and beard style every month, taking full advantage of his profession.

I have been going to his barbershop for a couple of years. And we have developed a pretty good camaraderie, probably because we both hate the same political party.

On Financial Prudence: Lessons from my low-income barber's journey

While he is cutting my hair or trimming my beard, we talk about a lot of stuff including politics, local developments, real estate, movies, and money.

The guy has never gone to college. He had to quit education after 8th standard to put food on the table. And he has been running the same barbershop (Full AC Hair Dresser Salon, as he has named it) for decades.

What amazes me about him is his financial prudence. He is a living example that you don’t need to go to Harvard to learn how to be responsible with your money.

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His monthly income varies between ₹30,000 and ₹50,000 ($420 – $700). It’s pretty common in India to ask people how much they earn, and I’m an Indian. He earns around ₹900 – ₹1,000 per day on working days and ₹1,500 – ₹1,800 per day on weekends.

His income is barely enough to cover the living expenses of a lower middle-class family. It takes a high degree of financial prudence for anyone earning ₹30k-₹50k a month to save at least half of their income for the future while taking care of the current living expenses.

Even if you factor in the low cost of living in India, his income is barely lower middle-class level. And it has been a lot lower in the previous years.

With that kind of income, he built a house for himself, covered the wedding expenses of two daughters and two sons, opened ‘premium’ salons for two sons that they are running successfully (the third son works with his father), bought a small piece of land as an investment, made down payments on the plots purchased by each of his three sons (the sons are bearing the monthly installments), and is planning to buy another piece of land for himself.

On Financial Prudence: Lessons from my low-income barber's journey

Guess what? He has done all this without ever getting into heavy debt or investing in the stock market, cryptocurrencies, or hot tech startups!

Contrast that with a well-paid MBA – let’s call him Roy, a friend of mine – living in Mumbai. Roy has been working for the last five years, and earns at least four times as much as my barber.

But instead of being wise with his money, Roy buys the latest iPhones on EMI, spends money on branded expensive clothes, dines at expensive restaurants, has almost maxed out both of his credit cards, is paying exorbitant interest on credit card balance, and has savings that won’t cover even two months of his living expenses in the event of a job loss.

Did I mention that Roy holds an MBA in finance and works in the financial services industry?

Of course, Roy is about 25 years younger than my barber. He has plenty of time to change his money habits and get his house in order. He’s already earning a high income.

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But once you get used to the consumerist lifestyle, it’s incredibly difficult to cut down the lifestyle expenses. On the other hand, my barber is the guy who has done well for himself with whatever little income he has.

So, how did my barber do it? He came from a poor family living in a remote village of Uttar Pradesh. Since his early days, he had seen his parents saving every penny they could for emergencies and future expenses. He grew up learning and experiencing the importance of saving money.

When he came to Lucknow at the age of 14 and started cutting hair on the roadside for money, he would save some money and send some to his parents.

It was his aggressive savings rate – he still saves more than half of his monthly income – that helped him cover the wedding expenses of two daughters and two sons (the youngest son isn’t married yet) and fulfill all other responsibilities in life.

Day after day, month after month, year after year, he kept saving obsessively. Unlike modern millennials, he didn’t borrow money to buy meaningless and overpriced things.

Lesson #1: Always save a portion of your income…the more the better. Make a list of all the financial responsibilities you’ve to fulfill, and set money aside for each of them.

By the age of 21, he had saved enough to buy a 1200 sq.ft. plot of land outside the city at dirt cheap prices.

Over the years, he had seen Lucknow expand rapidly in every dimension. He told me he was sure that his plot would become part of the expanding city in the years to come, which it is now. He holds that plot as an investment to date. He has no intention of selling it, even though real estate prices have skyrocketed over the last three decades.

Lesson #2: Make sure you understand the investment you are making…and its growth prospects. Then hold it for as long as possible.

On Financial Prudence: Lessons from my low-income barber's journey

At 32, he bought another plot on the outskirts of Lucknow and built a house on it. He still lives in the same house. He couldn’t afford to send five children to a private school. So, he sent them to affordable public schools.

He didn’t upgrade his lifestyle every time his income went up. Instead, he would put the additional income into savings.

Over the years, many people – including some of his friendly customers – suggested him to start investing in mutual funds and stocks. But he never invested in those assets. Why? Because he didn’t understand them well enough.

He chose to keep his money in fixed deposits and real estate – the two things he understands. Stocks and mutual funds could have given him better returns than fixed deposits, but he didn’t chase higher returns. He chose to ensure that he didn’t lose his hard-earned money. So, he stuck to things he understood.

Lesson #3: Don’t chase sky-high returns, especially when you don’t fully understand all aspects of the investment.

On Financial Prudence: Lessons from my low-income barber's journey

The man has zero debt on his head. His three sons have taken loans to buy pieces of land, but all three of them are earning well enough to pay off the loans comfortably. He has reached all his financial goals. Selling the plot he purchased more than 30 years ago would yield enough money to cover his retirement expenses, especially considering his low cost of living.

I once asked him when he plans to retire and what he would do after retirement. He said he would keep working for as long as his hands and eyes allowed him to.

Notice something missing from the story? The importance of luck

He was lucky. He had a large family consisting of his parents, his homemaker wife, the barber himself, and five children. None of them has suffered a major medical emergency. A single big-ticket medical emergency could have crushed him financially. He and his family didn’t have health insurance until a few years ago.

Though it was his hard work and financial prudence that helped him navigate life, luck did play its part in his journey. You can buy health and term insurance to protect yourself and your family. It won’t cost a lot.

He came from a family living below the poverty line, worked hard all his life, lived frugally, and tackled all the major life expenses one by one. He acted as a bridge between the poverty of his parents and the potential prosperity of his children. In my view, he is a real winner. What do you think?

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