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How Wealthy Do You Want To Be In The Next Ten Years?
It’s quite rare to find any person who claims of not harboring the pressing desire to accumulate a reasonable quantum of wealth in their life.
You’ll surely agree that being wealthy results in a reinvented feeling of being secured. In every way, wealth is as an enabling force that helps you to enjoy a comfortable, luxurious, and relatively stress-free life.
Additionally, wealthy people are almost always seen to be privy to a greater sense of negotiating ability, social recognition, and power, which is desirable to all in every sense of the word.
However, as a fact, like most of the things that appear to be desirable in life, wealth is another one that doesn’t automatically appear.
There can never be a meaningful demarcation as such to the upper limit of wealth any person including you would want to enjoy, after crossing the threshold of meeting the basic needs and wants with a decently comfortable lifestyle.
Whatever be the level of wealth you desire, acquiring it does demand some conscious action on your end.
The question, instead of being about how wealthy you want to be, is more meaningful when looked at as – how wealthy are you willing to become with whatever you have now?
The answer to that lies hidden in the key factors that go behind building wealth.
The Equation of Wealth
Turning wealthy at a broad level can be described as a function of 3 main variables, namely, returns, time, and investment. In other words, how wealthy you depend on the amount of money you have invested and the profits it pays you over time.
Future Wealth = Invested Money x (1+ Annual Return)^(No. of Years of Investment)
In the wealth equation, the only thing in your control is the invested money. Since, you can’t control the returns in the market or start investing from 2009, given that you were already in 2018.
Therefore, the only thing left for you to play around in your wealth plan is ‘Invested Money.’
Now this invested money has its equation, one which all of us are aware of:
Invested Money = Income – Expenses
Once again, income is something which depends on external factors, most of which are out of your control. Thus, do whatever you can to increase your income, but what you can control from day one is ‘Expenses.’
Or, in other words, budget your household expenses to increase your savings.
It’s About Your Choices
If the only factor you can control for is your investment, then in a certain sense, your goal of wealth is dependent on the conscious decisions you can make.
If you study the behavior of the wealthy and take up the right action at the right time, the chances are that you’ll be much more likely to end up as wealthy.
Buying a House vs. Paying Rent
As a small example, consider the purchase of your first home. If you save some money for the down payment and can buy your house on loan. With an amount not very high to your rental mortgages, you’ll be securing an asset for yourself that appreciates by the time you complete the installment payment.
On the other hand, spending most of your money otherwise will only deplete the probability of the wealth that you can build for yourself, with all your rental payment losing its chances of redemption.
Moreover, if you have been someone who has savings, but you defer investing for later stages, your hoarded money will forgo the opportunity cost of lucrative investment and significant capital gain over time.
Another pertinent choice involves protecting your saved money and your acquired assets. With the unpredictability element in life, you can never know what happens when.
Preserving Family Wealth
There are two ways to protect the wealth you have built over time:
- Buy good insurance plans to safeguard the wealth from situations that are beyond your control
- Invest in instruments like ULIP funds to maintain a tax-efficient and flexible portfolio
ULIP investments can be the most tax-efficient and flexible investments for regular investors. Since your invested money and maturity value both are tax exempt, there is no worry of returns taking a hit because of a tax deduction.
Also, you can switch between different ULIP funds as your situation changes, without extra cost or tax incident.
Never Let Your Savings Rest with Wealth Plan
Years from now, if all you have is objects that depreciate, or money lying in your bank, your goal of turning wealthy may take a back seat.
Even worse, you lose what you’ve saved and invested because of turning out to be a victim of circumstances coupled with careless behavior in protecting yourself.
Then, you’ll only regret losing out on the number of years that could transform your net worth with some timely action at the relevant hour. Invest wisely, protect what you gather, and healthily grow your net worth.
The amount of wealth you desire is ultimately equal to how much of your income you’re willing to channelize meaningfully to complete your Wealth Plan.