A high income will not make you RICH!!

All our lives we have been taught to get into a high paying vocation so that we will get “rich and settled”.

Nothing is farther from the truth. A high income will not make us rich. Worse, it cannot even prevent us from going broke.

Look at the below names.

Michael Jackson – He ruled the pop music world for more than a quarter of a century. Approximate lifetime earnings around Rs.7590 crores. Debt at the time of his death in 2009 was Rs.3300 crores. (7 years after his death, his stake in Sony/ATV has turned things around).

Mike Tyson – Boxing legend in 80s and 90s. Lifetime earnings of Rs.1320 crores. Filed for bankruptcy in 2003 with unpaid debt of Rs.152 crores. Now living paycheck to paycheck.

Boris Becker – Tennis legend. The youngest Wimbledon champion at the age of 17 in year 1985. Ranked 7th in the list of all time highest paid tennis stars. Declared bankrupt in June 2017.

The above stories might be extreme examples.  But take an honest look at your own finances. Irrespective of our income levels, a lot of us live not very different lives.  We live paycheck to paycheck. If we don’t work for a month, we will struggle to pay our bills. We are stuck in the “Rat Race”.

Why has this happened to us? Because we were only taught how to make money. And not the habits needed to handle money.

And don’t let the odd insurance policy, mutual fund or fixed deposit which we have bought make us believe that weare an exception to the above. We just happened to be sold a “Lifebuoy” or “Dettol” without first making us aware as to why it was important to take bath; and what to do with the “Lifebouy” or “Dettol” which we have been sold.

The first step in cultivating sound financial habit is to understand how money is spent. Everybody, whether it is Bill Gates or the roadside beggar can spend money in only 4 ways. The sooner a person understands these 4 types of spending, the faster he will become financially independent.

You can only spend your money in any one of the 4 quadrants below:

Expense Quadrant
Quadrant I – “Roti, Kapda aur Makan” expenses. They are Urgent & Important. Quadrant II – “Onida” Expenses.  They look Urgent but actually not Important.
Quadrant III – “Devdas” Expenses.They are neither Urgent nor Important. Quadrant IV – “Your real salary”. They are most Important but never look Urgent.


Let’s look at these Quadrants in a little detail:

Quadrant 1 – “Roti, Kapda aur Makan” type of expenses

These are your basic living expenses. Example – Rent, clothing, groceries, child schooling, routine medicines, commuting, Gas, water, electricity, telephone etc.

Absence of any of these severely impacts the quality and dignity of your life. Hence, it is important.

Almost all of these are to be paid every month. Hence, it is also urgent.

When the price of things in this Quadrant increases, we crib of rising cost of living.

Interestingly, you don’t need to push yourselves to spend in this Quadrant. Others will automatically push you to pay. Like, if you don’t pay rent you will have the landlord ringing the bell. If you don’t pay the fees, your child will be sent back from school.

The expenses in this quadrant are very important and urgent. However, keep in mind that you will never again see the money which you pay in this Quadrant. It is gone forever into some other person’s pocket.

Quadrant 2 – “Onida” type of expenses

Remember the Onida TV ads of 80s and 90s where the devil asked you to buy the TV which will become neighbors’ envy and Owner’s pride. Well, the devil was stroking that part of your mind which deals with peer pressure, ego pampering, impulsive buying etc. The Ad and the TV became a huge success in those times.

You can find new avatars of the same psychology in the all too familiar scenarios below.

  • Do you feel ashamed to pull out your “desi” phone when in the company of your colleagues who all flaunt Iphones?
  • Do you park your old car a long way off so that you don’t feel small in front of your luxury sedan/SUV driving friends?
  • Every year, 2 or 3 months after getting your bonus, do you wonder where it has all gone and ultimately trace it to the 48 inch curved HD LED TV adorning your living room?
  • During your weekend shopping visits, do you feel the strong urge to buy a branded dress or a gadget and end up calculating the cost if converted into an 18 month EMI on your credit card?
  • Have you taken a higher than required home loan to build a bigger than required home which forced you into a high and long EMI bondage leaving out little cash for anything else?

If you can relate to the above, you know the “Onida” type of expenses which I am talking about.

These expenses look very urgent to you. You will not have peace of mind till you match your neighbour‘s flashier car. You will not sleep till you get that gadget which you saw in the mall.

But the hard truth is – they are not at all important. They only pamper your own ego and nothing else. They make you feel good – Only till you see your next “Object of desire”.

While you hate spending in the Urgent and Important Quadrant 1,spending into the Not Important Quadrant 2 is highly tempting. It requires all your will power to avoid the temptation of giving into theQuadrant 2 expenses.

While you crib privately and publicly at the slightest increase in Quadrant 1 bills, a high Quadrant 2 bill though privately cribbed is publicly bragged about. You wouldn’t remove the price tag if you could help it!!

Similar to Quadrant 1, the money which you pay in this Quadrant also goes into somebody else’s pocket. You may argue that now you own that flashy car which is an asset. Reality – The moment you drive your asset out of the showroom, 30% has immediately evaporated from its value. Quite an asset!!

Majority of the high income earning population never become financially independent because they spend most of their lives paying into this Quadrant. Having said that, spending in this Quadrant is not by itself bad. We will see later as to when it is bad and when it is acceptable.

Quadrant 3 – “Devdas” type of expenses

This is a no-brainer. This Quadrant consists of spends on all your vices – smoking, drinking, drugging, gambling and others..

You have seen several examples of people around you from various social strata ruining their financial, professional and physical lives due to an addiction.

Even those who are not addicts but have only a moderate indulgence in this Quadrant, fail to have a correct perspective in relation to more purposeful spending. Example below:

One pack of cigarette or couple of drinks per day can total upwards of Rs.4500/- per month. You don’t think twice before spending this. But you will not spend Rs.1000/- to provide financial education to your child which will save her a lifetime of trial and errors with money management (Conflict of interest alert – I conduct Financial Education Workshops,  among other things). You will not spend Rs.1250/- p.m to take a Term Insurance Policy of Rs.1 crore which will ensure that you don’t compound the emotional trauma for your family with a daunting financial trauma as well (Disclaimer – I don’t sell financial products. If you buy, you gain; I don’t).

If you don’t spend in Quadrant 1 – The quality and dignity of your living will be affected.

If you spend in Quadrant 3 – The quality and dignity of your living will be affected.

To state the obvious – Any spending in this Quadrant is neither Urgent nor Important.

Quadrant 4 – “Your real salary”

Regardless of whether you are an employee who earns salary, a professional who earns fees or a businessman who earns profit – The spending in this Quadrant is the real salary which you pay yourselves. This is the only type of spending where you will get to see your money again.

The spending in all the other 3 quadrants was for somebody else’s salary, fees or profit.

The most common and basic goals in this quadrant are:

  • Saving for child’s education
  • Saving for Child’s marriage
  • Saving for a financially free and dignified retirement

Other than this, there may be other goals which may differ from person to person such as Home, Car, second home, Family holiday, setting up own business, Supporting parents, Supporting a charity, Leaving a legacy etc.

Everyone agrees that these are the most important. However, everything in this Quadrant appears far away in a distant future and never looks Urgent. And because it never looks urgent, the deceptively urgent looking Quadrant 2 hijacks the money leaving little for Quadrant 4. And as a result, you are left with little when the really important juncture of Childs’s education, marriage or your retirement comes.

Every time you see the warning on your rearview mirror, keep in mind that it applies to your Quadrant 4 also – “Objects appearing in the rearview mirror are closer than they appear”.

Because this Quadrant is the most important but never Urgent, it requires a lot of discipline and motivation to effectively spend money here.

End note:

The above post will help you to identify and classify each of your expenses into the four Quadrants. I suggest you do this exercise which will be a revelation. Involve your family in the process so that the entire family starts becoming financially savvy and responsible.



While creating the above Quadrant concept, I have been inspired by the “Eisenhower Box” which is used in Time Management. However, other than the broad concept, the thoughts that have gone into the above post are firsthand (or so I believe).

7 comments on “A high income will not make you RICH!!

  1. Surendran on

    Hi Briji,

    As you liked to be called:)

    Good day!!!

    while reading the particular post whici i had tried to relate with my real life, somewhere felt that if am not having the chase of going behind the 2,&3 Qs.. Whether i Would be pushed behind in the so called Rat Race…
    Like if am having a small car & my peers have SUV does it effect my moral or make me feel tat havent i made anything till now in my life.. Basically felt and had heard frm elders & also from our common mentors tat if u compare urself with others ur insulting urself.. Hopefully it depends…and sometimes ys if u r not attained upto which ur are comparing.. Q3 when i spend something in so called Cig/Alcohol where am nt at all bothered abt the cost is a pure example of spending for myself.. Tat selfish me would nt stop me in doing so..
    But yes having described by you its all person to person and the article is in a wide perception as one would take..

    However thank you to give such an important input which i had never thought and even now am involved into same Rat Race for. Roti (Pizza or burger)/Kapada( Branded)/ Makkan( 3 BHK)..one more to this traditional kitty could be gadi( SUV)…

  2. Balakrishnan S on

    Really superb… I will also start bucketing my expenses in these four Quadrant…..Its sure that financial stability is much more important than the buying some thing for the sake of pride/ego. I still cant figure out what happen to my bonus!!!!!!!!!!!


    Very powerful and thought provoking article-intelligent use of the 4 quadrant approach and Eisenhover Box.
    I am a retired CA , developed a passion for Personal Financial Management , cleared NISM IA both levels ( not planning to register as RIA- as my goal is to educate people on the need to save and invest smartly )
    I have been giving lectures for over 2 years now to Corporate Executives- targetting 4 groups-young Executives ( age 25-30) , Managers( 30-45), Senior Managers( 45-55) Top executives ( above 55). Your article has given me excellant inputs -particularly for the first 2 groups. I am sure many of them will shift significant amounts from the “ONIDA” and ” Devadass” boxes to the 4th Q.
    Hats off and Thank you- Hope to keep in touch with and derive more knowledge.
    God Bless you.


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