While it is true that getting rich overnight is impractical, there are also some proven methods that would help you accumulate the wealth you desire over a period of time. The tips shared in this article are based on a study conducted by the research team at IndianMoney.com. We took into consideration various parameters on wealth generation and weighed it against each other to analyze the suitability for different income categories.
There are some commonly known methods such as ‘early investment’ and ‘conscious spending habits’ that would help you stabilize your financial conditions. You’d also have come across Ponzi Schemes that will empty your pockets under the pretext of making you rich. However, the effectiveness of the points we’ll discuss in this article is something I’d like to guarantee, although success rates may vary from person to person.
If you can simply follow these tips, you are almost there. Then all you need is to maintain the wealth generation pattern you have created for your long term success.
It’s a known fact that financial growth is the outcome of a failsafe action plan. So if you desire to become rich, the first step you must take is to come up with a plan underscoring your monthly expenses. To keep your excessive spends at bay, you must have a smart budget that doesn’t cut down heavily on your necessities.
Now, let’s try to understand the meaning of the term ‘necessities’ in the present world conditions. At school you’d have learnt that our basic necessities are food, shelter and clothing, but does this definition of necessities sound relevant in today’s world? It doesn’t.
According to a survey, for every five in ten people, the bare minimums have changed with age. Around 35% of the people surveyed claimed that they can perform their daily functions without a smartphone or laptop while the remaining 65% found it impossible to live without smartphones and social media. Although age and lifestyle changes are the key parameters for deriving the present day meaning of necessities, income too has a major role to play.
Let’s consider this example. Ryan lives in Bangalore and works as a C-level executive in a multinational company while Shaun runs a stationary shop in Shillong. Now here’s a question for you – among the two, who would consider laptop and smartphone a necessity and for whom are these devices a need or a want? Without a second thought you’d say it’s a necessity for Ryan because of the nature of his work.
A lifestyle upgrade is every man's desire but it must be accomplished gradually. Which means, a sudden spike in the spending pattern without any considerable change in income would have adverse effects on both your long term and short term financial goals. So the key here is, always have a budget plan and map it against your necessities, needs and wants. Now let’s move on to the second important tip when it comes to wealth generation.
You see, wealth is something that most people like to think about. However, when it comes to fulfilling the dream, most of us tread a hazy path or end up with obstacles. The solution to this problem is that you should start thinking of money as tool to help you turn your dreams into reality. Therefore, you should stop glossing over the problems and start thinking of the positive outcomes you can bring about just by making this minor change in your thought process. Now the list of dreams you have could be really big but once you associate them to your savings and set aside a portion of your monthly income towards achieving them, the process of wealth generation becomes much more simple and interesting. Initially, you could start investing a small percentage of your income in recurring deposits. Once you are confident you’ve saved enough, you could start investing in financial instruments which offer higher returns.
You’d have heard this a hundred times and we repeat it once gain in a fresh tone. The single most crucial decision you can make to secure your financial future is to start saving early. We have enough evidence to back this claim; right from successful entrepreneurs to early retirees, there are many who have tasted success just by following this one principle. For example, if you invest in mutual funds through SIPs, you enjoy the compounding benefit of return on return. If you can simply stay invested from 2019 to 2048, here’s how your wealth graph will look like.
That’s right. By investing Rs. 5,000 per month in mutual funds through SIPs for 30 years, you’d be a millionaire.
[Note that we have taken an estimate of 10% return a year for the purpose of this calculation]
Conscious spending doesn’t mean ultra frugality or cutting down on things that make you happy. What we recommend here is being mindful of your expenses. ‘Mindful spending’ means carefully assessing your spending pattern and identifying the areas from where you derive the most enjoyment while spending. By doing so, you can better utilize every Rupee you earn. We tracked the monthly expenses of professionals aged between 22 and 25 and observed that most of them were spending a sizeable amount of their income on fast food. Instead of completely slashing their expense on fast food, we recommended they become conscious about this for a month. By end of the month, they were able to establish a new spending pattern while not feeling disturbed for skipping those food orders they’d have otherwise made. This clearly shows that just by becoming aware of your cash flows, you can develop smart spending habits.
We hope this article has helped you understand some of the simple yet crucial factors that would pave way for wealth generation without demanding extreme changes in your lifestyle.
Do you have ideas that would help others spend wisely? Visit our Facebook page and post your suggestions or simply tag us in your posts with the hashtag #BeWiseGetRich.
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