7 Key Principles for Generating Wealth
Everyone wants to generate wealth and at the same time most believe that only few people are able to generate enough wealth.
But there are some simple guidelines and principles that we can all follow to increase our personal wealth:
1. Start each month by saving 10% of your income. In other words, pay yourself first. Don’t think you’ll have more money left over in the future just because you’re earning more. Most of the individuals have an empty account at the end of the month, regardless of the volume of their income. The only way to create wealth is to create a step-by-step capital base.
2. Buying your own home is the best long-term investment you can make. The fact that you can take out a loan for the investment makes the return on your own investment greater than the rise in the value of the property.
3. Compound interest is the eighth wonder of the world and makes long-term savings yield very high returns. Think that for every unit of percentage in saved costs or a higher return has very big long-term consequences.
4. Long-term savings are made through buying and maintaining investments in stocks or investment funds and letting them grow just like planting a tree in the forest. From time to time, investments will need to be reviewed. But investing should be boring, if you want excitement better play the lottery or the betting game.
5. Be careful when listening to the advice of brokers or finance specialists. Transactions are mother’s milk and most advisors are really sellers.
6. Study the different forms of savings that you have available and discard those that have high costs or that are complex. The financial industry is very good at making simple things complicated and even better at charging for their advice. Invest in fixed income, repay loans, buy shares or invest in investment funds that have low costs.
7. At least once a year check your “total” wealth. Take a look at the costs of the different forms of savings and guess what their real profitability has been.
This article has been written by Chandra Mehta.
Chandra is a seasoned banker with 35+ years of experience in banking and financial services industry. He’s a retired banker and has served as Chief Manager and Assistant Vice President in State Bank of India/or its subsidiaries.
He has authored many articles on this site (allonmoney.com).