No matter how great the talent or efforts, some things just take time—Warren Buffett, legendary American investor. Building wealth is one such thing that takes time. Everyone desires of a life with financial stability. Everyone is wishful of a life in which the financial goals are easily met and you can retire early. Everyone dreams of amassing wealth in the distant future. They all try to do this in their own way. However, should building wealth be such a difficult task?
Building wealth can be broken down to some simple financial habits. Let’s look at 5 of them–
1. Save and invest
It is often said that saving is the first step towards becoming wealthy. Thus, it is advisable that you start saving as soon as you start earning. As tempting as it might look, don’t splurge all your income. Don’t take too much time to go on to the next step—Invest. This is because savings lying idle in the bank are the wealth. But they don’t add up, investments do this for you.
2. Start early
Time and tide wait for no man. By the time you realize that you want to be wealthy, time would’ve slipped out of your hand. So, start early. Savings started early help in earning good returns and build a substantial corpus using the power of compounding. Also, starting early inculcates a discipline that is necessary to build wealth.
3. Be disciplined
We don’t have to be smarter than the rest, we have to be more disciplined than the rest—again, Warren Buffett. Building wealth is a marathon and not a sprint. Discipline could be the deciding factor between the winner and first runner-up. Don’t invest sporadically. Be regular. Just as timely meals are necessary for survival, timely investments are also necessary for building wealth. Be disciplined in your saving habit. Review your financial portfolio for any changes and adopt a systematic and disciplined approach to your financial planning process.
4. Think long-term
A tree doesn’t grow in a day. It needs time and effort to bud from a sapling and then into a full-grown tree. Only then can you reap the fruits. If you cut the tree for its leaves when it is small, there won’t be any fruits in the future. Similarly, when aiming to build wealth, don’t think short term. In fact, your investments grow exponentially in the final few years once you are invested for sufficiently long term. This is because almost all investment instruments promise compound interest. For instance, if you invest Rs.10, 000 every month for 10 years and the interest rate is assumed to be 8%, your corpus would be Rs.18.30 lakhs. However, if you increase the tenure by 5 years, the corpus would become Rs.34.60 lakhs. Just a 50% increase in the tenure almost doubles up the corpus! This is the magic of compounding that can be witnessed only if the tenure is sufficiently long.
5. Learn before you earn
During your childhood, you never attempted an exam without preparation. You would learn all the chapters before giving an exam. Why do something different when investing. Let’s not be overconfident and do our bit of the research. If there is something that you do not know about, it would be better to know about it from the experts, rather than failing at it miserably. When investing, ensure that you know everything there is to know about the product before you invest in it.
Aren’t the tips really easy to follow? These tips are all it takes to build your wealth over time. So, know these tricks, learn them and use them in your financial planning process.