Steps to wealth creation

All of us want to have wealth, but we find it very difficult to create wealth. It’s not that difficult if you just follow some rules. First of all, when we speak of wealth, we should know what it means. Wealth is the amount of assets in surplus. What we earn is not wealth, but the amount we set aside, is wealth. This wealth might be small when we start, but as we invest it properly, it starts growing. Whatever we intend doing with this wealth, it should grow big enough to make a difference. Now that we know what wealth is, let us try creating an asset out of it, so that it grows. We are no magicians to know which class of asset would give us good returns, in such a situation it is best to spread our wealth over all class of assets. This way there will be growth. You could start with equity, gold or real estate and then build them. Ensure that all your money is not in only one asset class.

As I said earlier, amount kept aside is wealth, but if you do not keep anything aside, wealth will never be created. So make it a point to keep aside some amount. Wealth creation takes time, so do not expect the money to grow overnight. Give it time, longer you keep the money invested, the faster it will grow. Now that we know we have to diversify, and be invested for a long time, the next step would be to take care of contingencies. Keep money aside for contingencies and also get yourself insured for health and home insurance. So that in case of an contingency, your wealth is not touched. Last but not the least, do a financial review on a yearly basis. Check if you are being paid as per the market, check if your investments are giving the expected returns, check if your expenses are in line with your income.

As your wealth is growing, ensure your health is intact to help you create your wealth. As they always say Health is wealth. Do your yearly medical checkup, prevention is better than cure. Follow the steps above and grow your wealth.

Investing for your child's future

The birth of a child is a cause of joy for the whole family, especially for the parents. However along with this joy comes responsibility. For the joy, we have celebrations, but for responsibility we let things happen. When it came to a celebration, we sat down and planned, whom to call, where to call, what is our budget etc. But for the responsibility, we say we have time. Yes, you have the time, so utilize it. Plan for your child’s education, marriage and secure future. If you have planned well, not only your child’s future, but even your future would be smooth. So what do we need to do? First create a fund or an account and contribute to it, in such a way that there is not too much pressure on the family. Next plan for uncertainties i.e. in case something happens to the bread winner or to the house you stay in or to someone in the family. In such circumstances, your child’s future should not be jeopardized.

For the first part estimate the costs, inflation and expected returns after tax and start contributing to the fund. For the second part, you would need a good term policy, home insurance and a health insurance. With this most of your major risks would be taken care of.  So do not waste time, start early and see the power of compounding work for you, while creating a corpus and good insurance policies would ensure financial security in for your family and child’s future.

Income from Safe Investments

RBI did not reduce interest rates this month, during its review, but warned banks that they would have to reduce and reduce they did. If you notice every bank has started advertising that they have reduced the interest rates on loans. If the banks have reduced interest rates on the loans they are giving, they would also reduce interest rates on fixed deposits they are taking. This is natural, as the banks make money on the spread between interest rate given and taken. At the same time Corporates feel even with the reduced rates being given by the bank, the banks are charging higher interest rates. So they are coming directly to us, with interest rates higher that what banks give us, but lesser than what they would pay the banks.

This gives us an opportunity to make higher income. But are all corporates safe? We need to be careful before investing in corporate bonds or Fixed Deposits. It is mandatory for all corporates to get their fixed deposits or bonds rated. If there is no credit rating do not invest. So if the rating is good, then you have safe fixed deposits as good as banks. Go for AAA or AA rated fixed deposits. Yes, there would be a risk, but that would be marginal. We should lock in on the high interest rates being offered by these corporates as these too would keep coming down, but slowly. Do not invest just based on interest rates. If you find this a bit difficult, then just invest in a good debt mutual fund which invests in long term bonds as these too will appreciate as the interest rates come down.

Persons behind a good cricket team

IPL has just started and half of us are just waiting to home and watch the cricket match. You must be wondering why a financial planner is talking about cricket. Both cricket and Money has a lots on common. Yes, you can see it, most of the players are paid handsomely for it. But how did they reach that stage, it is not only because of their individual performance but also because of the team performance. If a player plays well but the team does not, the player hardly gets recognized.

The team just does not win by the players going and playing, they have a full-fledged coaching staff. The coaching staff works with the team to get the best out of the team to ensure the team wins. To win with money too, you have to have the right people around you to get the best for you and caution you when your money is not performing.

Let us look at each of the coaches and see how they help the team.

Head Coach – You are the head coach, it is your money and you need to call the shots. You have to take the decisions, so if you make the money you get credit, but if you lose you have nobody else but yourself to blame. All games are first played on the drawing board in the dressing room first. Therefore you need to have a good game plan for your money.

Batting Coach – He would be your financial planner, who helps you decide when, what and where to invest. If you have a weakness, i.e. debt, how to take care of debt. Whatever the situation or goal, saving for a contingency or investing for retirement, he helps you to handle your finances.

Bowling Coach – Here insurance agent would be helping you, to take care of all your risks, i.e. health, car, home and life. Once you have a strong bowling coach, half your worries would be over. As all your eventualities would be taken care of.

Fielding Coach – These are the same players who do either bowling or batting, but then they need to field well as well and they need to be trained. This person should be more like a counsellor or priest, who would help you get through emotionally. As money is more of an emotional subject for a lot of people, there are problems when you have it and even when you don’t have it. Markets keep going up and down, in such circumstances you would either feel high or low, talk to your financial advisor.

Fitness Coach – This person’s job is to ensure that you are fit to get your job done. In finance, this person is more of the financial product distributor. He does all your investments as per the plan.

If you notice that in some teams one person takes care of all the above jobs with the help of assistance, in other cases, you need multiple specialist. So depending on what you want and what if your aim, choose the right persons to achieve your financial goals.

Choose your coaches properly, just as you spend time choosing players (just as you choose your job or business) and ensure financial success. Enjoy IPL.