“Born with a Silver Spoon in Mouth” is not only the proverb but also is the dark thinking mode of a large population. People say that becoming rich depends on fortune. But the reality is Fortune favors the brave. That doesn’t mean that The Braves become rich. Here, brave means fighting against his poverty, against his laziness, and with his thoughts that make him poor. Now, the question is what should we do to be rich? Maybe these “10 Ways to Wealth” can help you too. And now what are these ways so, here we go
Make a Monthly Budget
Every trip starts with the first step, and Budget is that first step in a way to get wealth. Making a Monthly Budget helps to measure your expenses and also increase your savings and that sounds quite good if you want to get financially healthy.
But you need to think practically while making a budget. Making unrealistic goals to decreasing expenses or increasing savings can make it impossible to stick with your budget. This can harm all of your financial goals in a short or long time period.
For example, You are spending 80% of your monthly income on expenses and you are making a budget to save 50% of your income. Unfortunately, decreasing your expenses up to 30% is an unrealistic goal and this will be quite hard for you to achieve.
Decide Your Investment Goals
Setting your desired investment goals can help you to ensure your financial health. You can’t achieve a goal if you have not decided your goal in your mind and also you can’t find a way to reach it. Driving a car without choosing a destination is a perfect example of this.
Find your goals smartly and practically. Your goals should be realistic, measurable, achievable, and time-bound.
A good example of this would be, saving Rs X monthly for Y years to buy Z. This goal is much easier than just hoping that I will save Rs X monthly.
Must-Have An Emergency Fund-
You should have an extra fund for the unfortunate or unknown emergency that may occur suddenly.
An emergency can come in different ways such as damage in your home or a vehicle, replacement of expensive home appliances, and having a job loss.
If you do not have any extra funds for these emergencies then this can deplete your savings. Even worse, you have to take out a loan and then have to give extra cost to bear the EMI.
You might wonder how much emergency funds I should have. This should be a minimum 6 times of your monthly income. Your total emergency fund doesn't need to be spent in one go.
Should Have A Insurance
An emergency fund helps you to deal with unexpected expenses. Having Insurance also helps you to deal with unexpected emergencies like medical or health-related problems that require hospitalization. Health insurance can help you in this, you will not have to pay a single rupee from your pocket when a health emergency comes out.
Also, having Term Life Insurance can ensure that your family will be financially secured even after your death. Having a life insurance policy is recommended to everyone who is the only Bread Earner for his family.
Invest To Grow Your Saving
So, now you have a budget and you have started saving according to that. But putting all your savings in a savings account and just earning 3%-4% of return is not suitable for your financial goals.
One way to grow your savings is an investment. Choosing the right investment depends on your unique requirements and this demands a lot of effort.
Duration of Investment and your risk profile are the key points that can help you to make decisions.
For example, if you are saving for the downpayment of a new car you are willing to buy next year, in this case, you should choose a debt-oriented investment. Such as Debt-Oriented Mutual Funds and F.D will be more good than Equity-Oriented investment.
But, if you are saving for a long time period then Equity Mutual Funds will be more suitable for your financial goals.
Don’t change investment for high returns
After starting an investment you will meet your friends and family members who will claim that they have earned amazing returns on their investments. Maybe then you will change your current investment to get the same return. This can negatively affect your investment portfolio.
One of the reasons for this is that an investment currently performing amazingly can change in the future. Some investments like Equity Oriented Mutual Funds don’t perform well in the short term but can beat inflation in the long term.
To ensure that your current investment has a lot of time to grow you should choose a suitable investment and stick to that.
Asset Allocation-
This means spreading your investment in different assets to reduce your risk. Spread your investment in multiple assets like Equity, Debt, Gold, etc.
The target of this is to maximize return at minimum risk irrespective of current market conditions.
To decide which asset you should invest more or less, you should consider your age, risk profile, current liabilities, and current investment.
And you should ensure that your assets do not affect each other’s performance. So that if one of your investments is not worthing then maybe others are giving you returns.
Asset Allocation ensures that your investment will grow perfectly irrespective of current market conditions.
Diversify Your Portfolio
Even spreading your all investment can reduce maximum risks of your investment portfolio. Still, you have other scopes.
After choosing an asset class for your investments just diversify your investment in those classes. Your investment portfolio risks will be reduced by doing this.
For example, in the case of Equity-Oriented investment, you can diversify your investment into key categories like Flexi-Cap Equity Funds, Large-Cap Equity Funds, Mid Cap Equity Funds.
Know What You Are Investing In
This is the common mistake that most investors choose their investment assets class without any research.
If you invest blindly, you will put your hard-earned money at risk. This will directly affect your Financial health negatively.
For example, a large number of people have been investing in cryptocurrency for some time. Just A few of them are making good money and a large no. of crypto investors are losing their earnings.
The biggest reason for this is that most investors don’t know how this investment works.
Doing good research can prevent you from losing your money. You will reduce the risk of your investment even if there are small mistakes in your research.
Check Your Portfolio
Not checking investments is as harmful as Changing your investment in the middle. You should check your investment to know if they are working well and make changes while needed.
But remember not to check your investment too often. Ideally, you should check your investment once a year.
The risk of Changing your portfolio will increase If you check too often. This can harm your performance.
Well, thanks for reading this and I hope you will remember these steps while investing your assets.
Investment is not a one-time exercise. Investment is a process that we should follow every second of our life.
