When we dream? we usually dream big! A beach house, a BMW, or a piece of land in the moon? there are so many things we want to buy/achieve in life. But, then we think, it’s impossible to create such kind of wealth in our lifetime and slowly start compromising with our dreams.
Now, it is true wealth can’t be created in one day, but it’s not impossible to create wealth over time if one is regular and disciplined with one’s investments.
Here are the 4 steps that you should follow to create wealth over time:
Step 1: Save Smartly
Saving is the first step toward wealth creation. Now when we say? save smartly’, it does not mean saving whatever you are left with at the end of the month; it is more about learning to manage your expenses in a way so that you can save the amount that you want to save every month. Now, the easiest way to do this is by putting away the money you want to save every month as soon as you receive your salary. And, you manage your monthly expenses with the rest of the amount.
Step 2: Turn your monthly saving into investment through SIPs
Saving is not enough; based on your financial needs channelize your monthly savings into investments.
Now, your investments have to have an objective and accordingly, you should define its tenure and then select the right investment tool for it. This is not an impossible task, but you have to do it right. Here is what you should do.
1. You should define your financial goal, whether you want it to save money for a trip, a car, or retirement, etc.
2. As per your goals, decide the investment tenure for each of the goals.
3. Third, now select the right mutual fund as per the investment tenure of your goal and keep investing in it through a SIP every month.
Since we usually have multiple financial goals with different objectives and timeframes, there should be different SIP investments meant for achieving each of these goals in time.
Step 3: Increase your investment periodically
Your salary increases every year, so your investments should also increase every year. And your investments should increase in the same proportion as the rise in your level of income.
Step 4: Invest lumpsum when possible
Whenever you receive a lump sum in hand? like when you receive a bonus or a maturity amount for investment? instead of splurging the entire amount, invest a part of it in your existing mutual fund. This way, your money will also grow faster helping you in two ways. Either, you can achieve the goal before time; or if you want to keep the tenure fixed, then at the time of maturity, the amount that you will receive will be more than the target amount.
