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5 mantras for building wealth
The pandemic has revealed that many of us are financially unprepared to deal with economic shocks, in contrast to western countries where the government provides for most of our fundamental needs like as food, education, and healthcare. However, as citizens of a developing country, we do not have the luxury of obtaining adequate government protection. To future-proof ourselves and our loved ones from any unforeseen economic shocks like COVID, it is critical to consciously think of and plan our finances well.
The five mantras below can assist you in charting a course to financial security and well-being. Examine where you are on each of these and how you may improve.
1. Begin early & Compound
The present pandemic has shown us the value of having an emergency fund, particularly for those of us who are self-employed or work in industries that have been severely impacted by the COVID disruption. While the concept of saving is commonly established, many of us wait until our late 30s or 40s to begin actively saving. While the potential for saving at this age is greater in absolute terms, it takes longer to save enough. However, because of the power of compounding, starting modest and early can help you build wealth. The table below shows how much money you'll need to save each month to generate a range of retirement corpus.
*assuming annual returns of 10% compounded monthly. Target investing your savings in assets that deliver returns of 10% or more.
The Sooner you save and invest, the sooner you can benefit from the power of compounding.
2. Investing in yourself
We all hear about the necessity of saving from our elders and professionals, but the most overlooked component of saving is investing in our skills/competence. Skills and competence (also known as human capital) will increase one's ability to earn and, as a result, save and invest more. If you can't save or expand your funds, invest in learning the skills that will help you make more money.
3. Patience and frugality
It is tough for us to postpone or avoid spending on items we don't need in this day of instant gratification and easy credit, purchase in a few clicks.
While fast gratification may make us happy for a short period of time, it will leave us with unwanted items, unnecessary spending, and most importantly, undesirable debt. As a result, we've taken two steps behind in our quest to build a retirement fund.
Being patient is easier said than done; the prospect of having to wait years for the fruits of your labour is not appealing. However, the key to accumulating riches is to develop patience in order to postpone or avoid unneeded upgrades. Remember that if you spend like a millionaire, you could not end up having any.
4. Invest your savings
Savings are difficult to come by, but they can increase in value if you stay invested in the correct asset classes for a long time (power of compounding). Spend some time actively considering and setting clear financial goals, and then assess the least dangerous strategies, i.e. the least hazardous investments, to meet or exceed them.
5. Protect your saving
Remember the old proverb, "Don't put all your eggs in one basket?" This is especially true in today's dynamic age, where change is accelerating at an exponential rate. For years and decades to come, traditional investment methods don't always work. Diversification is the only strategy to secure wealth over a lengthy period of time. IndiaP2P introduces a new asset class with risk and return characteristics that are uncorrelated with any other existing asset class, allowing individual investors to diversify their portfolios. Invest up to 20% of your assets in alternative investments such as IndiaP2P.
Protection against income and cost shocks is just as important as investment protection. Insuring yourself and your loved ones against such personal and global disasters is the greatest method to safeguard yourself and your loved ones. A sufficient amount of life insurance, automobile insurance, health insurance, and accidental insurance can protect you from all of these shocks while also providing you with the peace of mind you need to focus on your other objectives (financial and otherwise)
Physical investment assets, such as gold, automobiles, and buildings, must be safeguarded against accidents, natural disasters, and man-made calamities. To address such risks, insurance companies provide ready-made solutions. Please choose your insurance company wisely.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any significant financial decisions.
Author: Ravinder Voomidisingh
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