Two personal finance lessons from Psy’s ‘Gangnam Style’ !

I must admit. I must have watched Psy’s ‘Gangnam Style’ video over 50 times. Also, I am unashamed to say that I must have listened to the song around 100 times. After having satiated my wanting need to hear and see the pot belly dude jumping up and down, I hopped over to the Internet curious to find out how Psy had managed to beak Justin’s Bieber’s Baby to enter the Guinness Book of World Records for the maximum likes on YouTube.

What I read let me here to this article. Hidden in Psy’s ‘Gangnam Style’ video and lyrics are two personal finance lessons that have been very closer to my heart and I wanted to make sure I refresh those concepts for you.

Cut your cloth according to your means

Psy’s ‘Gangnam Style’ video mentions a place called Gangnam where the rich and the uber cool get together. Among all the people in Gangnam, there are women who choose to eat street food because it is cheap. However, the very same women buy expensive coffee as the world can see them sipping something expensive and it will boost their image.

Now, how naive is that ! If you cannot afford something, why spend on it. However, this trait is not which the women of Gangnam only showcase – we desis are not far behind. I have many close friends who have a very high standard of living but their affordability does not allow them to be so.

So for example, Deepak (name changed) is around 35 years of age and both he and his wife work with corporates. They bring home a good amount of dough but they do not have any savings. Both the spouses poured in all their savings into a huge apartment they did not necessarily need to buy now and on top of that, they decked up every room. Having literally gone bankrupt post the house purchase, they still continue to love the ‘have 2 cars and let’s dine out every night’ lifestyle.

I am certain the folks are sitting on a ticking time-bomb and they don’t even have an emergency corpus but despite my many attempts to drive sanity, I have failed. Deepak and his wife are examples of the Gangnam women who want to maintain their high standard of living when actually they don’t need to.

It is human nature to be led astray to procure things which are beyond their means. I recently had a client who I talked out of buying a plot of land as he was already drowning himself in real estate but he dis regarded my advice and went ahead with the deal. The result is that he was left with no emergency corpus and with a non consistent salary inflow, he is in big trouble trying to create his emergency corpus and make the down-payment of his plot. And not to mention his spendthrift lifestyle and his own inability to differentiate between needs and wants.

Simplicity is the key

If you read about Psy, you will realize that he has been at this job for sometime but was banned for producing objectionable content. However he never gave up. In fact, the video is about a person who tried very had and fails.

The lyrics  of the song are Korean and you cannot make anything of it as Korean is all Greek to Indians (lol !). However, the video is very American-ish and you can to a great extent make out what Psy is rapping away. The video is almost self explanatory and the lyrics are some words repeated over and over again. And the lesser said about the dance, the better. It is so amazingly funny and easy to copy – like a horse thumping the air !

And there is where lies the success of Psy’s Gangnam Style. Simplicity of content.

Your success with personal finance also lies with the simplicity of things you do. I keep screaming from this blog – Personal Finance is simple. Keep it simple.

What the hell are products like Futures and Options, day trading, Unit Linked Insurance Plans, endowment and moneyback plans doing in your portfolio ? You have 50 stocks ? Vow ! 10 life insurnace policies ? More vow !

Look folks, I will lay it very plain and simple for you.

All you need in your personal finance life is :

• 1 house to stay in
• a good mix of equity and debt mutual funds to a maximum of 8 – 10 of them
• a gold ETF
• some fixed income instruments and not all of them please
• adequate life insurance though term policies only
• a good health insurance, personal accident insurance, house holder insurance and critical illness policy

Follow goal based investing concepts and learn about long term investing in systematic investment planning of mutual funds.

The rest is all noise generated by people who want to make their own killing. Keep them out of your personal finance life and you will hop and dance like Psy. And sorry, I can’t help attaching another photo. !