Who doesn’t like to hear the evergreen rags-to-riches story where the protagonist’s life of abject poverty is transformed into a life of wealth in the blink of an eye? While this theme is very popular in books, films, and even real life, it does not mean wealth creation is only a matter of sheer luck or extraordinary skills. If you have the patience, discipline, and a focused approach to managing your money, you can consider yourself on the right path in your wealth creation journey.
Need for Wealth Creation
An anonymous investor once said, “If you don't find a way to make money while you sleep, you will work until you die.” This means that while having a regular income or even multiple streams of income is the first step towards wealth creation, it also becomes important to generate wealth passively by investing the money you have earned. This will help you grow your money and enable you to build your wealth.
Creating wealth is necessary if you aspire to live a comfortable life, provide for your family, purchase your dream home, secure your children’s future, and have enough left to lead a stress-free retired life.
Top Habits for Wealth Creation
Listed below are some essential habits that you can consider inculcating in your journey toward wealth creation:
Setting financial goals
It is always good to have a plan for money and investing. Since you are likely to have a fair idea of your monthly income as well as the assets you wish to create (for example, property) and some essential big-ticket expenses you want to make (for example, children’s education, marriage, etc.), it makes sense to outline an overall financial goal so that you know what you need to do to meet your target
Pay yourself first
One of the foremost tenets of wealth creation is to pay yourself. This means that out of the monthly income you receive, keep aside some amount as savings. These savings are nothing but payments to yourself before you pay others.
Investyour money
Consider investing the amount you set aside as savings in mutual funds. Investments help to grow your money over time. There is also much truth to the wisdom of starting your investment journey as early as you can. The sooner you begin, the higher your chances of wealth creation through the power of compounding.
Benefits of diversification
Do not put all your eggs in one basket, it is said. The idea is to diversify across asset classes in your investment journey to minimise the chances of risk. Not all asset classes may perform well simultaneously, and a healthy performance of another asset class can compensate for the bad performance of one asset class. Hence, having an
investment portfolio exposed to various asset classes can be a good strategy.
Reduce your debt
Debt is a big burden that can weigh heavily on your finances. Some debt is unavoidable and even necessary, such as taking a home loan to buy your house. Since this is a type of debt that creates an asset, it could be called good debt. However, it would be best if you considered curtailing the debt taken to finance expenditures such as credit card debt and other forms of unnecessary debt. Try to pay off these debts as soon as possible to reduce the interest payments that can affect your savings.
Curtailing unnecessary expenditure
Try as far as possible to reduce unnecessary expenditure. It does not mean that you must lead a frugal lifestyle, but the idea is to live within your means,giving you the flexibility to invest and grow your money.
To conclude
At the end of the day, wealth creation is a personal journey that varies from individual to individual. However, the principles listed above, broadly speaking, can go a long way in helping you build your wealth over the long term.
Disclaimer:
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their affiliates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
Mutual Fund Investments are subject to market risks, read all the scheme related documents carefully.
