The shocking truth is that the rich are getting richer and the poor are right where they are. If you haven’t been paying attention to your investments, this should wake you up. #richpoordivide #investments #wealth #savings
You may have read a recent survey on income inequality that was in the papers. This survey by Oxfam revealed some appalling facts. One of them was that last year, the richest 1% of the population in India generated 73% of all the wealth! That’s not all. The wealth of close to 70 crore Indians, who were the poorest in the country, rose by a mere 1%. The global figures are no better. 1% of the world’s population created 82% of all the wealth. And what about the global poor? 3.7 billion of them had no increase in their wealth. Another disturbing fact is that 42 people own the same wealth as these 3.7 billion people.
Doesn’t all this make you wonder if you are creating enough wealth for you and your family? With interest rates at 6% and inflation at 4%, you are hardly making any real returns by investing in Fixed Deposits. Not investing right could mean not having enough money for achieving goals such as buying a house and educating your children. Yet to start creating any real wealth? Here’s how to go about it.
Well begun is half-done
When is the ideal time to start investing? As soon as you start earning, of course! One can have multiple sources of income, but you should aim at having at least two. One is your income such as salary, professional income, or business profits. Second is the income that you will earn from your investments. This will include interest income from deposits, dividend income from shares, and rental income from real estate. Ideally, your second source of income should be as good as your first. When this happens, you can actually retire. So, when you start investing, look at how you can do this.
Additional Reading: 5 Ways That Can Help Women Create Wealth
Nothing is too much
If you want to retire today with a yearly income of Rs. 10 lakhs, you should have invested at least Rs. 1 crore in assets that give you 10% returns. And the biggest question is will this be enough? This might all depend on your lifestyle, health conditions, and whether you have Health Insurance policies in place.
The biggest mistake people make is that they think about accumulating a crore so that they can become crorepatis. Given the inflation and increase in standard of living, you should aim for much more than that and that’s not going to be easy. Here’s an example. If you are able to save Rs. 25,000 every month and have already got a wealth of about Rs. 5 lakhs, you will have Rs. 1.2 crore by 2033. This is assuming that your investments earn you an average of 10% per year. That’s right! 15 years. That’s why you need to have a plan in place.
So, get a wealth accumulation calculator (it’s available online) and check if you are making enough wealth with your current savings and investments. This will be a reality check and will tell you where you stand and what you will need to do to achieve the wealth that you want. Based on the calculations, you can decide where you want to invest. Little savings but big dreams? You might have to go for riskier investments like stocks or equity Mutual Funds. As long as you have a high-risk appetite, this is okay.
Additional Reading: 5 Investment Ideas That Can Help You Create Wealth In 2018
Pay yourself
The best way to save is to invest as soon as you get your salary and spend later. Start by investing at least 10% of your salary. You can step it up as you go along. You also need to be smart when it comes to investing. Review your portfolio often and kick out the duds. Your equity investments gave stellar returns? Book some profits and put them in safer avenues. Got a windfall or bonus? Invest some before splurging.
As long as you have a plan for creating wealth, it will be easy to achieve those financial dreams. If you have no clue about money, it’s wise to get the help of a financial planner.
This article was originally published on LinkedIn.