Making resolutions to become wealthy is a good
thing to do at any time of year, it is better if you do it at the early stage
of life. However, regardless of when you begin, the basics remain the same.
Here are the top ten keys to become wealthy.
1. Spend less than you
earn and get paid what you're worth
It's easier to spend less than to earn more and cautious
efforts in a number of areas can result in big savings. Make sure you know what
your job is worth. Evaluating your skills, productivity, job tasks and making contribution
to the company will identify your worth for that job. It sounds simple, but
many people struggle with this rule of thumb. Being underpaid can have a significant compounding
effect over the course of your working life. On the other hand, no matter how
much or how little you're paid, you'll never get ahead if you spend more than
you earn.
2. Stick to a budget
Based on your lifestyle you have to prepare financial
budget and stick to that when spending. Staying within your budget means forced
savings. An individual with a budget in place has more control over finances;
he is in a better position to handle his cash flow to pay immediate dues and
also make provisions for other goals. From your income, if you first save
money, then spend on non-discretionary necessities and finally indulge in
discretionary expenses. You will have no trouble meeting your financial needs
even with small sums. This practice, if developed early, can make you wealthy.
3. Plan early for your
Retirement
The earlier you start and remain invested; your
savings will have more time and potential to grow for your retirement planning.
Rule of compounding plays a vital role in retirement planning. Any delay in
retirement planning can have a major impact on your retirement corpus. One of
the best ways to grow your retirement savings is to make a plan for regular
contributions towards a retirement plan. For instance, PPF, NPS or retirement
specific life insurance plans. They also bring in the much required discipline.
4. Controlled use of credit
card debt
You can save some additional cash every month just
by paying your credit card dues on time. Reducing credit card debt will add to
your monthly expenses, but will eventually give you more money to work with
each month. Credit card debt is the number one hindrance to getting ahead
financially.
5. Review your insurance
coverage
Buying a term policy makes immense sense to protect
your dependents and your income in the case of untimely death or disability. However,
purchasing life insurance requires a periodic review, preferably once a year
likes most other long term financial instruments. While planning for insurance
consider for medical as well as general insurance for others and review your
coverage over the period of time.
6. Idle savings is the
devils workshop
Do not let your income remain idle in savings
accounts. As a matter of fact, money stacked away in savings bank account only
depletes over a period of time since interest amounts provided by banks never
seem to match up with inflation rates. Else you can avail auto swap facility to
your saving account, if bank provides.
7. Plan for
emergencies / set up a contingency fund
A contingency fund is a pool of money usually
invested in liquid investments from where money can be quickly converted into
cash. Keeping some money in reserve for financial emergencies is a sound
practice. The general rule for emergency savings is to have enough funds to
repay today’s bills plus living expenses for 3 to 6 months.
8. Shorten lag time between
investment cycles
There may be times when you are between investment
cycles. Between maturity of one instrument and re-investment into another try
to reduce if not eliminate time gap. Do your own research on investment
instruments. Do not blindly rely on intermediaries.
9. Update your will
A will is a
gift you leave your family or loved ones. A Will's importance is clear
regardless of your personal situation. Without a Will, you have no input about
the distribution of your property after your death or the persons involved in
administering the estate. If you have dependents, you need to register a will
no matter how little or how much you own. It's important to review your current
Will every five years to ensure that it's up to date and still reflective of
your future wishes.
10. Keep good financial records
You need good records to monitor the progress of
your finance. Records can show whether your wealth is improving, which investment
requires selling, or what changes you need to make. Good records can
increase the likelihood of financial success. Also if you don't keep good
records, you're probably not claiming all permissible income tax deductions and
credits. Set up a system now and use it through the year. It's much easier than
scrambling to find everything when it is time to pay taxes and missing items
that may have saved you money.
