Baby steps to wealth creation..
Many people think creating wealth is a very difficult process. Actually, it is not so! Being Indians we love to complicate things..so we do…here…
Let us look at some simple / baby steps:
1. Stop procrastination! The best definition of procrastination that I know is unfortunately not printable! But it is easily one of the most important reasons why wealth does not get built. So start today. If you do not know in which mutual fund to invest, invest in Goldman Sachs (uff what is the name of that Benchmark??) Nifty bees. Once you decide on which fund to invest remove it from there and invest in a place you deem fit. Savings bank account is not a sensible place to keep your “waiting” money. It is perhaps the worst.
2. Incur only legitimate expenses: Many of us let leakages be! If there is some leakage, plug it. It could be your son, daughter, brother …somebody sucking you off your good money. Keep vigil.
3. Your own spending habits: Most people know where their big money is going – emi, house rent, school fees. Actually these do not hurt. What hurts is the small amounts that you spend regularly. As an experiment track your income and expenditure – a software (as simple as an excel sheet or as complex as a portfolio tracker – cum- Income tax return filer ) can be used.
4. Inflation: the least understood of the drains on your money. It is a killer – because it takes away a little every day without you even realizing it. So ensure that your portfolio gets a ‘REAL RETURN’.
More tips on wealth creation will follow….keep reading.
Sanjay Singhaniya
I did not understand point 3. After regular monthly expenses and investments, only 10% of salary is left. How can that become huge drain on wealth creation process.
Also, consider that I invest 40% of salary.
Rajesh
@Sanjay, Your ‘regular’ monthly expenses may contain multiple expenses that you can avoid. These may be non-significant to worry you today or be quite small to pass under the radar. It could be an unused subscription or a costly and underused internet plan, eating out or small shopping on ecommerce sites….whatever is your poison 🙂 . Tracking ones expenses helps you to weed out such unnecessary spending. Even a 1% or 2% saved from this helps and more than that adds to building a discipline which would give you incremental returns. You can use any tool (excel/app etc….. I use a simple notepad because I get them free and my wifey can note down expense when I’m not home 🙂 ).
I was also skeptical about tracking my expenses early on but since I’ve started doing it, I’ve raised my combined investments and saving from 25% to 45% of take-home salary in about 1.5 yrs time (lesser investing allocation and more for saving a contingency fund. Will reverse that very soon). It helped me to understand my spending patterns; I was not spending much on veggies and fruits and more on snacks. So I planned and allocated more to these items and lesser towards leisure eatting and over a few months, my indigestion and lesser gastric issues subsided to only a couple of minor easily explainable occurances. I save on medicines and obvious discomfort.
Sorry for the long comment but just sharing how I was benefitted.
subra
excellent reply Rajesh. We tend to ignore simple advice. My blog is just a kick in the butt to make people think. I REFUSE TO GIVE ANSWERS – I am more on the Plato mold of saying ‘all learning happens by questoning’…so my job is to ask…YOU HAVE TO ANSWER THEM yourself.
SAM
Subra,
Some of us require a kick in the stomach or even worse teeth!!! Seriously.. I have seen couples with 2 kids proud of their europe vacations and living month to month..!!!