We all are fueled by our desire for a better tomorrow. A tomorrow that brings in stability and offers a secured environment for us and our dear ones. We strive to save our earnings with a hope that the money will work wonders for us. But are we doing so the right way? Are we taking the right path to be financially healthy? We are focussed on creating wealth but lack of knowledge or determination to go about it leaves us feeling perpelexed. So how to start & build a financially stable life, let's find out:
What Is Wealth Creation?
when we say wealth creation, it means a process described by a few essential laws of money. If you only follow or abide by these rules, you can save or create wealth for your future. Yet, there are times when people struggle financially as they go through life. They earn but aren't able to save and then begins the financial downfall. Its natural that you have a desire to make more money and fulfill your dreams but if you don't get or understand the process of wealth creation, you may not be successful in attaining your goals.
You have to begin the process of creating wealth somehow and somewhere. Now the first step of where, how and when-is the most difficult one to take but once when you identify the essentials it becomes very easy from there onwards.
Hence, one is advised to take the help of an expert in the field. In this case, a Financial Planner can make tasks simpler for you and is in a better position to help you create wealth as they are well acquainted with the functioning of the market & investments.
Process of Wealth creation
- The cardinal rule that you, by now, have read or heard multiple times is - begin early. Even if you are late, don't waste more time and start your investment now
- Wealth creation begins with one basic rule- using your surplus money to invest or buy income generating assets
- That extra or spare amount in your account after catering to all your expenses. Your expenses may include insurance policies, taxes, food, monthly household expenses, traveling, etc.
- You must critically analyze your spending pattern in order to save a major chunk of your income. You must assess and spend on the things you want as opposed to the things you need. Wants can be counted but needs are unlimited. The idea is to limit your spending behavior
- Think of ways to adding to your existing income. It may include looking out for a new job with higher pay scale. Be it your existing income or a new one, keep aside a certain percentage of it for your wealth building activities
- You CFP will guide you to invest your money in right avenues after assessing your current financial health and depending upon your life goals & objectives
Importance of Building Wealth
- Wealth building process takes time, it isn't going to double up your cash reserves overnight. But steady and dedicated approach, will ensure that you have a financially secured future to fall back on when you plan to retire
- It helps you build up reserve for your retirement when there is no regular income
- It helps you to prepare for rise in inflation rate in the near future
- The cost and standard of living is going to increase as the years pass by. What you pay today may double up in years to come. So your accumulated wealth will help you live the lifestyle that you are used to
- With retirement, there will be no source of regular income, and there will be mounting expenses to handle. So it is important to build a corpus that will help you live and maintain the lifestyle that you are used to
Prepare A Roadmap Towards Building Wealth
With preparing a roadmap towards building wealth means to develop and include strategies to create wealth. Said in simpler words, its more like preparing budget for finance and forecast of your life.Why to prepare a blueprint you may ask. Let's go through that to clear the concept:
- Preparing a blueprint or budget helps your CFA get a clearer picture of your current financial standing to help give you a starting point
- You may list out various expectations like a house, dream vacation, steady income flow after retirement. But have you really given thought to the numbers in terms of wealth & assets you would require to support your dreams? So when you your CFP prepares a blueprint, this is exactly what he/she will be doing
- Once the numbers are there, you are in a better position to handle & find ways that will help realize your goals. Your CFP will help you plan out your investments & debts. Talking of debts, it is not always a bad thing but a proper planning will ensure that it doesn't spiral out of control
- Your budgeting will help you plan your taxes well. Your CFP will help in reducing the amount of taxes you pay by planning investments in tax saving instruments
Wealth Creation For Retirement And Other Goals
- Though its important to save for retirement, you need to plan out for other goals too
- Diverting maximum savings towards your retirement is a great way to build a solid financial foundation. But the reality is that you need to invest in short-term & long-term goals
- Children's higher education, home renovation, health insurance policies and much more constitute your short & long term goals
- To maximise your wealth creation potential, your CFP will review the your overall financial structure which includes cash flow management, taxes, asset allocation, potential risks, etc.
- Begin early. The more years you wait to build wealth or plan your investment journey, the more you stand to loose out from your corpus