Your 4 Lifelines To Becoming A Crorepati
Amar is a CFA Charterholder and CFP, having over 20 years of experience in IT and Financial Services. He is very passionate about spreading financial literacy and has authored four bestselling books on Personal Finance.
27 Aug, 2018
Thomas Stanley in his book The Millionaire Next Door wrote: “Save and become rich.”
Napolean Hill said: “Think and grow rich.”
Amitabh Bachchan says: “Kaun Banega Crorepati? Kheliye aur crorepati baniye.”
With the new season of Kaun Banega Crorepati coming up next week, amidst rampant advertising people believe that getting rich is a game and simply a few messages and phone calls away. The truth is everyone wants to become rich and is looking for different ways to become rich. For most people, there are five ways of becoming rich; some of these might be faster than the other. I have arranged the five in the descending order, starting from the fastest and probably the easiest.
- Inherit it
- Marry it
- Save and Invest
- Become an owner (own equity) and not a loaner
- Win a lottery
However, ‘Save and Invest’ is one strategy, or should I call it a ‘principle’, that is relevant for most people, right from a daily wage earner to a corporate executive. By keeping your strategy simple, you are likely to implement it, and achieve results. Thus, the simple principle of saving and investing keeping in mind your financial goals is the key to leading a happy life. A by-product of this is you take time out to spend with your family, friends and in pursuing creative pursuits and fulfilling dreams.
So, here are your 4 lifelines that will ensure you become a crorepati –
1. Follow a Savings budget instead of an Expense budget. Savings are the building blocks of wealth creation and you should ensure that you are able to save at least 20% of your gross income and invest this money every month in a investment instruments suiting your requirements and risk appetite.
2. Start investing your money NOW as there is no better time than today to start investing your money. The longer your money stays invested, the more time it has to grow and compound. Waiting for the golden moment will not help in any manner. We all know that tax-planning investments can be done right from the start of the financial year in April, but how many of us actually do it?
3. Transfer all risks such as death, disability, critical illness, accident, health and property to the insurance company. Understand the consequences of risks and do not think of insurance as an expense.
4. Ensure that you have addressed the issues of wealth transfer by having a simple document such as a WILL.
Having addressed all the above, the next step is to simply invest a fixed amount every month and whenever you can in debt and equity.
Finally refrain from these 6 mistakes that most equity and mutual fund investors make:
- Having irrational expectations.
- Selling out in bad markets.
- Investing short-term money in equity and long-term money in debt.
- Being affected by news, interest rates, oil prices and losing confidence too soon.
- Trying to time the market and waiting for the best time to buy or sell.
- Getting greedy and opting for derivatives, commodities, trading without understanding the risks associated.
Even if you come close to following the above four steps and not committing the six mistakes, I am confident that “Aap Crorepati Banenge.”