5 Things to Start Doing as Soon as You Start Earning for a Wealthy Future
Starting with the first job, most of us wish to be wealthy. Every day, as we wake up and get ready for the grind, we keep pushing ourselves, thinking that one day we might be able to turn ourselves into millionaires. In reality, however, wealth building is about starting when you're young because then you would have more time and potential to compound your savings and amass a fortune.
That being said, life for many young adults isn't without its challenges. You might have a tenuous career, student debt and many other factors that keep you from building your wealth faster. While there is no straightforward way to guarantee a prosperous future, but these five strategies might help you do it.
The fear of missing out has a way of driving most young adults in their 20s and 30s nowadays. As a result, most of us end up spending money we don't have, only to rack up a significant debt by the time reality checks-in.
Another factor that makes us postpone any "boring" or "unnecessary" responsibilities such as saving and investing for the future is comparisons with friends and family.
You may have globe trotting friends, who might look like they have it all. However, it is entirely possible that their flamboyant lifestyles don't include any significant savings for retirement. Probably, their foreign trips were financed with a credit card.
Therefore, you need to postpone or avoid spending big on things such as foreign trips or convertibles, as you would only increase your debt and hinder your chances of building wealth. You can, however, come back to fulfil your desires and go on that week-long trip to Europe, once you have accumulated sufficient finances to sponsor the journey without relying much on a credit card or personal loan.
You may have started saving early, but will you be able to save enough to buy a house 15 years hence? Initially, many young people begin to save aggressively, but without giving much thought to their life goals. This is a common mistake among investors, irrespective of the age group.
To make sure that you aren't repeating the same mistake yourself, it is essential that you frame your goals first. Thus, you need to write these down in detail, segregating each goal into three categories of short, medium and long-term.
After that, mention the approximate amount you will need along with the number of years you would need to achieve each one of your goals. Meanwhile, it is also vital to factor in the rate of inflation in your calculation of the amount required to fulfil each purpose.
The primary objective of buying insurance is to protect yourself and your family from the uncertainties of life, and not expect any returns on the investment. Still, most individuals confuse insurance with investment, thinking that they're both one of the same things.
You must understand that life insurance, especially term insurance doesn't get you any returns, apart from tax benefits. However, it offers you a significantly high cover amount for a minimum premium payment, especially when you buy a term plan in your 20s.
Health insurance, on the other hand, offers to pay a large amount to help cover any significant expenses arising from unexpected medical emergencies and associated treatment costs.
Thus, even if purchasing an online term plan or health insurance doesn't offer any monetary returns on investments, they are essential instruments to help protect your health and your family's financial future, in case of any eventualities. Also, the corpus from a term plan can help your family settle any large debts including pending home
loan or an education loan, in your absence.
Once you have jotted down your goals and calculated the approximate amount of money required to fulfil them, the next logical step is to start investing towards realising them. You can start simple with least-risk instruments such as a recurring or fixed deposit. After that, you can proceed to prioritise your goals and convert your savings into investments.
Key here is to choose an investment tool, which is in line with your goals and time horizon. For a short-term goal, hence, you can go for debt fund investments. On the other hand, you must invest in equities for the fulfilment of your long-term goals. You can opt for a mix of debt and equity, to fulfil your medium-term goals.
This is because equities have historically given the highest returns for long-term investments, while debt funds offer the much-coveted safety of capital, for short-term investments. Overall, you can opt for recurring deposits, liquid funds, short-term debt funds or fixed deposits for near-term goals. For the medium-term, however, it is advisable to go for balanced funds and Equity-Linked Saving Schemes (ELSS).
Further, you must consider instruments such as equity mutual funds, NPS, ULIPs, PPF and EPF for the long-term goals.
In theory, budgeting is the simple exercise of matching your expenses with your income. Since you have just started your career, it is crucial that you begin with noting down your monthly spending.
You can use an excel sheet, mobile app, your desktop or even a simple diary, to separate your expenses into three broad categories of essential, discretionary and entertainment. This will help you identify expenses those are mandatory and discretionary while ensuring that you don't overspend.
Dreams, these days, often come with a high price tag. Even, seemingly simple needs have now been elevated to the stature of dreams because of the high cost associated with them. As a result, you would require a strategic plan to maximise your earnings and meet these life goals.
It doesn't matter whether you have a large amount to invest in the first place or not.
You can easily leverage the benefits of compounding on your savings to create a significantly large fortune, especially if you begin early. Make a comprehensive financial plan up front to avoid any last-minute hassle to fund each aspiration.
Subsequently, choose instruments that are in line with your goals and invest in them. And lastly, protect your goals through a term insurance plan. Term insurance, these days, is offered by various reputable insurers such as Max Life Insurance and carries more than one benefits.
To make sure that you opt for the best term plan, however, it is crucial that you do your research, evaluate the key aspects of each plan on offer, and buy one as soon as possible.
By doing all this, there is ample chance that you end up with a large fortune by the time you reach the end of your working years.
Medical Dialogues Bureau consists of a team of passionate medical/scientific writers, led by doctors and healthcare researchers. Our team efforts to bring you updated and timely news about the important happenings of the medical and healthcare sector. Our editorial team can be reached at email@example.com. Check out more about our bureau/team here