Jun 28, 2021 11:35 AM EDT
Wealth creation is something that everyone aspires to do. Every budget made or financial planning done aims to create wealth using different strategies such as cutting cost to save more, investing in instruments which has higher returns, investing for a longer duration and much more.
Creating wealth is not any rocket science but a lot of dedication, discipline and planning is required to successfully create wealth. Now, wealth creation does not only mean creation of new wealth. It is also the maintenance of the wealth or funds that is already in hand! So, here comes financial planning and strategizing to ensure that what is in hand is retained while more returns is generated using it.
Here we present the top 9 easy yet sure shot ways of wealth creation that can be followed by all.
Early Start: Starting early is one advise that all financial advisors give to their clients. Starting financial planning and goal setting early in life provides more time in hand to create more wealth. It is crucial that one starts investing at the right age. With more number of years in hand, one can optimize their returns and create more wealth not just with more interest earned but also with the time aspect. This is because, more duration of the investment means more returns and more created wealth! In today's world, young people are no longer uninformed or not mature enough to take financial decisions, especially with the availability of newer apps and tools, which help them to make the correct decision after doing preliminary checks on their financial goals, risk appetite and risk score.
Diversified Portfolio: Parking all funds in one investment instrument is one mistake that a lot of people make. Just as the idiom, "Don't Put All Your Eggs in One Basket", parking all investments in one instrument is a grave mistake as if the instrument fails to generate the required returns, the entire fund amount might be at risk! Additionally, the financial plans will go for a toss. So, to prevent such losses, one should go for a diversified portfolio wherein investments are made in diverse investment instruments. One should choose the instruments after analysis and then decide how much risk and return combination they aim and then build a portfolio to optimize the returns on their investments.
Expert's Help: Wealth creation is not that difficult as it is assumed to be by many! It is just proper planning and implementation of the financial plan to see the returns coming in. However, a lot of analysis goes into a proper plan to optimize the returns by choosing the right instruments. Additionally, it is important to understand that a proper financial goal is a personalized strategy developed based on individual requirements and targets. So, following someone else's footsteps will surely not be a good way to start. So, it is best to seek an expert's advice who will analyze an individual's risk appetite, derive the risk score and help to identify the financial goals, set clear benchmarks as milestones to achieve, and provide strategies on how the financial goals can be achieved.
Set the Goals: Setting the goal gives a sort of direction as to why the wealth is being created. And with the direction and the target set, things become clear and so does the planning. This is because, long term goals means that there is more time and so appropriate instruments can be chosen based on the returns and the time aspect considered together. However, if the goal is a short term goal, then the choice of instrument will be different to optimize the returns and meet the goal on time.
Excess Liabilities: With easier access to loans and credit card facilities, one is more tempted to spend more than one's capacity and even before realizing where it is heading, excess liability is already added which can jeopardize the entire financial plan or deplete the wealth created. So, it is best to steer clear from additional liabilities by doing proper planning and not falling for lucrative offers from different institutions offering loans and credit cards. Additionally, the lucrative offers mostly come with higher interest charges or hidden cost which needs to be clarified before making any decisions.
Credit Score: Credit score plays an important role in wealth creation as a good credit score can lead to better interests on mortgages and loans. However, additional liability can impact one's credit score if there is any failure to repay it. So, it is best to steer clear from the cycle of credit cards or the debt trap.
Stable Income Flow: An important step for creating wealth is maintaining a stable flow of income. So, one needs to have a stable career with a decent salary. Switching too many jobs not just destabilizes the income flow but also leaves a bad mark on the resume. So, too frequent switches and that too at the cost of stability should be avoided in all circumstances.
Additional Source of Income: Along with proper investment plans, one can check for additional income sources to supplement their regular income. One can check if there is any possibility to utilize their after work hours to earn more. This will surely require proper time management and dedication to complete the tasks along with allocating time to spend with their family and friends. With higher monthly income, one can choose to invest more and earn more returns on their investments. This will lead to greater wealth creation!
Management of wealth: Wealth creation is not just the creation of new wealth, but also maintenance of what is in hand. So utmost care should be taken to manage the finances well and practice financial disciplines. Additional incomes, say for example, an hike in salary is an opportunity to invest more, rather than adding to expenditure. So, care should be taken that uncalled for expenses are not made to be on track towards wealth creation.
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