1. Create a Budget: First foremost important step in building wealth is creating a monthly budget and stick to it. The monthly budget should include all your utility bills, fees, rent, EMI, food, shopping et. A simple rule is 50:30:20; 50%: for needs like Rent, fees, EMI, Bills ; 30%: for wants like mobile, laptop, shopping, dining out; 20% for savings.
2. Emergency Fund: Emergency can occur at any time it may be a medical emergency or a job loss. Recent pandemic has taught us the need to keep an emergency fund. It's advisable to keep 6 months of monthly income as emergency fund. It can be saved in your savings account, FD or Liquid funds which can be accessed easily.
3. Insurance: Always take a medical to cover up any medical emergency and plain term insurance to support the family in your absence if any unforeseen events. Having an emergency fund and adequate insurance cover will avoid you dipping into savings and thereby allowing it to compound.
4.Investing: Next most important step in wealth creation is start investing as early as possible and stay as long as possible to have maximum compounding effect to take. Decide your goals like car, home, child education or retirement. Depending on the goal and your duration choose your financial instruments (Debt & Equity) wisely and stick to it.
5. Upskill: It is always good to upskill and thereby increasing your salary & move ahead in your career as well.
6. Clear your debts: It is always good to clear all your high interest debts like credit cards, personal loans first. The amount you spend on interest can be used for better purpose.
7. Spend Wisely: It is always wise to control your impulsive purchases and avoid discretionary products you don't use much.
8. Credit cards: Definitely plastic cards are good, they have made life more easier. They can help you manage your cash flow and budget. But remember spend within your limit. Never spend money which you actually don't need or money which you don't have
Wealth creation is a difficult task to start with. But it is possible even if your income is low try creating a good budget, stick to it avoid discretionary spendings. Start investing early even how small you can save. Also try using fixed income instruments with good credit rating of AAA as it can provide you with regular payout and improve your cashflows.
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