Know the 4 Key Principles of Wealth Creation
Wealth Creation is a very critical in everyone’s lives. You are no exception. However, we somehow find ways to make what is an easier process, look very tough. That’s why it’s crucial to understand the 4 key principles plan work effectively for you.
Principle 1: Evaluating your existing financial situation
You begin the financial planning process by evaluating your current financial situation. This is done by reviewing all key areas of your financial life. This is where you evaluate your current protection or insurance cover you have got. In fact, it is vital to know your life insurance cover simply because it tells you whether it is enough to cover your family’s needs if a tragic event unfolds. Next, you need to evaluate your current financial situation as against plans to buy a home in the long term. This is where you need to start planning for gathering the down payment right away, if you are contemplating taking a home loan. Further, you need to evaluate how much corpus you have as emergency funds to cover for contingencies.
Principle 2: Creating your financial goals
This is a crucial phase where you identify all your long-term, medium-term, and short-term goals. These include retirement, children’s education, and marriage. This is where you make a positive beginning in this direction. You need to sit quietly and reflect on how you want your life to pan out. This includes planning your investment goals to help you maintain your desired lifestyle now and in the future after your retirement. Give increasing inflation, you need to have clear plans in place for funding your children’s education. Started today is the only way you can set money aside for tomorrow to meet all these goals. Given the significance of these goals in your life, you are best advised to write them down on a piece of paper. This is one of the best ways to reaffirm your goals in your mind. Further, you will have something for future reference.
Principle 3: It’s time to take relevant actions
Now that you have evaluated your existing financial situation and jotted down your financial goals, it’s time to take all possible actions to help you achieve those goals. You might have identified gaps between existing and future financial requirements in phase 1 and 2 already. Thus, in this phase, you need to take actions to fill in those gaps. If you identified short cover for life insurance, you need to increase the cover. Moreover, you would want to set some funds aside as monthly savings for meeting
your retirement goals. Thus, for this, you need to invest these funds in diversified asset classes. This includes mutual fund SIPs, direct equity, gold, NFS, bank FDs, savings bank account, bonds, and other good instruments. This will help you maximize your savings.
Principle 4: Monitor & Review the performance of your plans
Having goals in place and investing to achieve goals will not just be enough. You will have to monitor the progress of your plans and make relevant changes, where required. This is very crucial for achieving your goals successfully. Tracking your actions is the best way to monitor your plan’s progress. Ask yourself whether your actions are good enough to help you achieve your financial plans. If the answer is yes, you don’t need to make any changes to the current plan. However, in case it is no, then you will have to tweak your plans to ensure your plan is on track. In case you have two SIPs of Rs.2500 each for yourself and your wife and are planning to have a baby, then you are advised to open an additional SIP of Rs.5000.
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