You can’t travel the road to wealth only on the back of wishful thinking. A traveler on that path should possess courage and discipline- two important traits that every wealth builders should have. We know that to reach somewhere fast, we need to start our journey early. Similarly, to create wealth faster in life to enjoy it while we are still young, we need to start planning for it earlier.
Sadly, most of us procrastinate the wealth creation process. Initially, when we earn our first income, we want to buy the entire world. Soon we get married and start our family, we purchase a home and car and slowly, other expenses start piling up. Our income rises but our expenses increase at a much higher rate. These are the most crucial times for wealth creation. But still we delay the process and wait for the next year, next increment and next bonus. But that ‘next’ will never come and in this, the only thing that will happen is a delay in our wealth creation process.
Wealth creation requires a disciplined and systematic approach. It is a combination of growing your saving and protecting what you already have accumulated. Growing and protection of your wealth put you in a win-win financial situation.
As an individual, you are different from others around you, and therefore, you should maintain your own wealth creation strategy by keeping in mind factors, such as age, current income, liabilities, and risk appetite.
Here are five simple ‘doable’ strategies to achieve this win-win situation.
Wealth Creation Strategies
1. Create a Financial Blueprint
Just like every commercial organization spends time on establishing their long-term goals and then carefully budgeting and forecasting their income and expenditure accordingly, an individual must also take a structured route to wealth creation. Identify your goals, which will typically include buying a house, children’s education & marriage, relaxed retirement, among a few others. Assign a specific number to your goals by estimating your financial needs against them. Assess your present income, contemplate the gap and explore ways to bridge it. All these factors will help you create a formal blueprint for your wealth creation activity.
2. Keep a Long Term Perspective
Wealth creation requires a long-term horizon. It is built gradually over a period of time. When you give your money time to grow, you can leverage the benefits of interest compounding and rupee cost averaging and set-off market fluctuations to create a sizeable corpus.
3. Steer Clear of Debt Trap
Avoiding debt does not mean not availing it at all, but following some basic rules when taking a loan:
• Never take a debt that would continue until or after your retirement age;
• Choose a mode that provides you with tax benefits;
• Never touch your retirement corpus or savings to pay off your debts;
• Avoid credit for regular spending. The loan is meant for creating assets not funding your holidays!
• Spend wisely and avoid excesses if they are eating out of your assigned budget repeatedly.
4. Allocate Your Portfolio Wisely
You must have heard of the famous financial advice, “Don’t put all your eggs in one basket.” Your investment kitty should be a healthy mix of equity and debt. This percentage will vary according to your age, personal circumstances, financial goals and risk appetite. When you are young, you can opt for an aggressive investment through investing a higher proportion of your funds in equity. As you grow old, you can tilt this proportion towards debt. A part of your investment should also go towards life cover to secure your family’s future.
You should consider taking a wealth plan for your investment purpose. Financial institutions like ICICI Prudential offer wealth plans which grow your money and protect your wealth in the right direction. They encourage you to keep a long-term horizon and invest regularly over a period of time. You can customize your portfolio through investment in equity and debt to optimize returns and mitigate risks. You also get life insurance and tax benefits on these wealth plans.
5. Be Emergency ready
Savings are important but do not lock up all your savings in a way that it arrests your liquidity severely. You should always have a rainy day fund that you can use in case of unforeseen circumstances like loss of job, medical emergency or expensive repairs. Such reserves can be maintained in a separate bank account so that you withdraw money from it without touching your existing wealth corpus.
6. Protect What You Have
In the unfortunate event of your death, your family members will have to depend on the wealth you have accumulated till you were alive. But, this wealth may soon erode, assuming that there is no other source of income for your family. To avoid such a situation, you should consider protecting your life. There is nothing bigger and more important wealth than your life. You should take an insurance cover which will give adequate financial support to your family after you are not around. At the same time, the wealth you had created will continue to grow as your family’ expenses will be taken care by the insurance coverage amount.
You can create your wealth as you desire if you plan your financial goals and strategies well. Track and monitor your investments at regular intervals. Keep an eye on the markets to identify right opportunities of investing and withdrawing. This way you will not only grow your wealth but also protect it.