How to Create Wealth that gives you FINANCIAL FREEDOM? I am sure you all looking for the answer to this question. Wealth creation is actually easy than we think. It just needs patience, your regular savings, and consistency in your investment. Surprised…? Let’s find out 5 steps, that will lead us to create wealth for financial freedom.
Just Saving Money is Not Enough for Wealth Creation
To become wealthy financially the most important thing you need is money. I am sure you must be saving it. If not then start saving money from today itself. But just saving money (in form of Bank savings, FD, PPF, Insurance) is not enough in order to create wealth. Now, you will say my money is SAFE there. Let me tell you it is not safe there, since inflation is eating your money.
For example, you put Rs. 100 in a bank FD, since it is safe and gives you a 4% return end of the year. So after a year, you will get Rs. 104. But now the problem is things that used to cost you Rs. 100 a year ago, are now of Rs 107 since inflation is 7% after a year. So you are at a loss of Rs. 3. If you take it a larger scale amount is going to be very big. In this case, ‘SAFE’ money in your bank saving accounts or FD is not going to serve a purpose after a year or 5 years time.
The bank saving accounts, FD, or PPF are good instruments to hold your money for a shorter period of time, and they are convenient as well, but they are not going to make you wealthy. You can keep some percentage of your income in a bank saving account or FD to easily liquidate your money whenever you need it. But some percentage of your income must go towards wealth creation. Now, big question is, How can you create wealth? To create wealth, you have to MAKE YOUR MONEY WORK FOR YOU. Read on to get an answer on How to make your money work for you?
To get a detailed understanding of the concept of saving money and investing it in right place, read my article on 3 key takeaway from book – The Richest Man in Babylon
Start Investing Early to Create Wealth
To begin early investing is a key to creating wealth. Since it will give you the power of compounding. Mr. Warren Buffet is one of the most successful investors in America. He started investing at age of 11, and his net worth is over $101.1 billion as of October 2021. He is considered one of the wealthiest people. The secret to his wealth is his early investing.
Let’s take an example to learn this point, Mr. X started investing at age of 25, and Mr. Y started investing at age of 40. They both want a good return on their investment at age of their retirement i.e. at age of 60.
|Mr. X Investment||Mr. Y Investment|
|Investment started at the age of||25 (years old)||40 (years old)|
|Amount Invested Per Month||Rs. 4,000/- (for 35 years)||Rs. 10,000/- (for 20 years)|
|Total Amount Invested||Rs. 16,80,000/-||Rs. 24,00,000/-|
|Rate of Return||10 %||10 %|
|At age of 60||Rs. 1,51,86,552/-||Rs. 75,93,688/-|
From the above table, you can see that in spite of investing less amount monthly Mr. X is getting more money than Mr. Y, at age 60. More time you will give to your investment to grow, the magic of compounding works better.
Invest For Long Term, And Have Patience
As you saw in the earlier example investing in the long term will help your money compound. Once you start investing, stay invested for the long term like 5 years or 10 years or more than that. First, you have to make a habit of investing by regularly investing for 3 years. Then you can make some goals for your investment, like kids’ education, house, foreign vacation, retirement, etc. This way you have a clear vision of how much to invest and for how long.
Invest in Mutual Funds(MF) through SIP
For investment, it is said that “Don’t put your all eggs in one basket”. Invest in different sectors. Choose top companies of those sectors for your investments. Invest in top companies of different sectors. A mutual fund makes this task easy for us by doing all these basic analyses for top companies.
The good part of Mutual funds is that you don’t need a lot of money to invest in these top companies. You can start with as low as Rs. 500 to Rs. 1000 a month through SIP(Systematic Investment Plan). SIP is the best option since when the market is down you will get more units of Mutual Funds and when the market is high you will get fewer units. This way you can average the price.
Pay Yourself First
For investment, you have to become a bit selfish and continue investing irrespective of any situation. If you don’t give priority to your investment SIPs then you will keep missing on monthly investments. Try to pay your SIPs first once you get your monthly income, so other expenses don’t make you lose on your investment.
These were some useful tips to become wealthy and financially independent. Hope this helps to get started on your wealth creation journey. Trust me, the journey is not going to be easy at all. Your patience will get tested throughout. But you have to be firm on your investment in trying times.
The knowledge that I have presented here is valuable to anyone specifically for youngsters who are now in their 20’s. Please share this article maximum, so that it can reach to many people and specifically youngster who is in their 20’s can get benefited to become wealthy. If you have found this article useful then, do give your valuable feedback and consider subscribing to my blog.Subscribe To This Blog
There are many websites that will help you create your Mutual Fund account:
Disclaimer: Please note that the knowledge presented here on wealth creation and on financial freedom is based on my research and analyses on the subject. I am not an expert in the field but just a beginner learner. So I advise you to do proper research before investing your money in any instrument.