Born in Wayanad district of Kerala, Joy Arakkal was running the Dubai-based Innova Group of Companies. His companies were engaged in petrochemical trading, oil refineries, and shipping services. Arakkal had even received the Lifetime Achievement Award from Kerala’s Chief Minister Pinarayi Vijayan.

By all counts he was a successful businessman.

But he committed suicide in April 2020 by jumping from the 14th floor of a building in Dubai. According to the Dubai Police, Arakkal took his own life “over financial problems.”

“Financial problems” have driven many wealthy individuals to kill themselves over the years.

In 2009, German billionaire Adolf Merckle committed suicide after suffering huge losses on a short trade on Volkswagen shares. Merckle had a net worth of $9.2 billion! But after facing a liquidity shortage he felt his very survival was threatened. And decided to end his life.

I’m not trying to be insensitive to their tragic deaths. But I’m not a billionaire. I can’t feel the pain they experienced after losing a considerable amount of money or finding themselves crushed under a massive pile of debt.

They are in a different league…looking at everything through a different lens. From where I stand, I believe that even if Merckle lost 99% of his net worth ($9.2 billion), he would still have millions of dollars left to live happily ever after. Or he could easily have gotten a job with a fat paycheck.

There are seven different classes of people based on their net worth, each with their own worldview and ways of dealing with situations. The word “survival” means entirely different things to someone who owns a private jet and someone who will never be able to afford a second-hand car in his life.

Seven different classes:

  • General Class: Travels general class in train
  • Sleeper Class: Travels sleeper class
  • 3rd AC Class: Travels 3rd AC
  • Airplane Class: Travels by air
  • Smart Water Class: Doesn’t mind buying ridiculously expensive Smart Water at airports despite knowing that there is a water cooler just a few feet away.
  • Ferrari Class: The person who owns a Ferrari (or another super-luxury car) without having to worry about the EMIs.
  • Private Jet Class: Not the Instagram influencers who rent a private jet on the runway for 10 minutes to click photos. The people who actually own or can easily afford private jets.

Someone in the Airplane Class can choose to live like a Sleeper Class guy, but the important phrase here is “choose to live.” If both of them face the same financial setback, the Sleeper Class guy would feel strained but the Airplane Class guy might not even notice it.

I was born in a General Class family. Spent the first 20 years of my life as a General Class kid. Fortunately, things have improved over the last decade. We have upgraded from General to Sleeper and 3rd AC Class. Now I’m probably in the Airplane Class. I still don’t spend Rs.125 for a 300ml water bottle at airports.

A “relative” measure

Someone who has spent all his life in the Ferrari Class will call himself “poor” if he slips to the Sleeper or 3rd AC Class due to a stroke of misfortune. He would be devastated, even though the 3rd AC Class is definitely not “poor.”

Meanwhile, a General Class person who got a nice job and upgraded to the Sleeper or 3rd AC Class would feel blessed.

We gauge our own well-being relative to those around us. Whether you feel rich or poor doesn’t depend on how much you have. It depends on the gap between what you have and what you expect. Managing our expectations is as important as managing our finances.

We often compare ourselves with others. And we crib that “others” are living a wonderful life (Thanks, Instagram) while we are stuck in a miserable routine.

The reality is that our definition of “others” depends on which class we belong to. We have a tendency to compare ourselves with people in a higher class. Because that’s what we aspire for.

An Airplane Class person rarely compares his financial situation or lifestyle choices with that of the General Class. Instead, he would compare himself with the Smart Water or Ferrari Class. Even if you are in the Private Jet Class, you’ll find someone who’s better than you.

That brings discontent.

Numerous scientific studies have shown that comparing ourselves with our past self or people who are in a lower class than us makes us feel grateful and happier.

Two rules to get (and stay) wealthy

Rule No.1

Our long-term financial well-being depends on making sure our expenses are in sync with the class we belong to…or a class lower. That’s how we create and widen the gap between our income and expenses, leading to healthy savings.

If your net worth puts you in the Airplane Class, you’ll do well as long as your expenses are in the Airplane or 3rd AC Class.

Pushing your expenses even lower to Sleeper or General Class is not a good idea. You’ve done something – went to college, worked your ass off, built a business, etc. – to deserve the Airplane Class. You have earned the right to enjoy the rewards – at least some of them. It’s necessary for life satisfaction.

Your financial well-being takes a terrible hit when your expenses are a class or two higher than where you are. If you belong in the Sleeper Class but spend like an Airplane Class guy, sooner or later you are going to get in trouble.

Rule No.2

Why does a super-rich person need to borrow heavily or do dumb sh*t that pushes them to the brink of disaster? Ambition. Aspirations. Competition. Thrill. Ego. Could be anything. I don’t know.

But I do know that almost everything in the world has a price. And in their attempt to achieve the desired outcome, the price they pay leaves them with little room for error.

Room for error or “margin of safety” is one of the most underrated things when dealing with money.

We don’t like having a room for error because we believe things in the real world would transpire exactly how we visualized in our heads. Sometimes they do. Sometimes they don’t.

Some people don’t like the idea of the margin of safety. They think it’s for the weak, risk-averse, and under-confident people. The bold, visionary, and confident people don’t need a margin of safety. They can pull through the challenges to get the reward they want. If they succeed, they are hailed as the visionary heroes! If they don’t, we hear the stories of bankruptcy, suicide, and other troubles.

In contrast, someone who has enough room for error can endure the unexpected setbacks and challenges instead of getting wiped out.

On the other side when the dust has settled, you want to be the last man standing. For that, you need some room for error. There’s nothing wrong in being a bold, confident, and visionary person who likes to have a margin of safety.

Signing off. But do subscribe to my newsletter.

– Vik

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