You can start off with tiny
investments and gradually upgrade to larger ones by leveraging the corpus
created.
Regardless of what age you have
the urge to retire at, asset creation is one of the building blocks of managing
personal finances. Since the thought of creating an asset can be quite
daunting, most of us begin earning decide to leave that for later. Why make
costly mistakes and lose hard-earned money at this initial stage, they reason.
Ironically, this is precisely the stage when you can take risks. Moreover,
there is a substantial difference between blindly throwing money at any
investment opportunity that comes along and taking informed decisions. Rather
than go for the big investments right off, it is possible to start of small and
gradually leverage what you create to move upwards, using the power of
compounding (Did you know it’s almost impossible to for us to mentally gauge
the compounded interest one can earn over the long term? Try calculating and
see). Here are five pointers to get you started.
1. Begin ASAP
The
sooner you begin, the better your chances of amassing bigger assets in future.
The rationale behind this is a little thing called compounding. Don’t save,
invest. Even if it’s for a few months in a liquid fund, put your money to work.
Don’t let it idle in a saving account. If you want to play extra safe, put it
in fixed deposits at least, but start creating a corpus that you can build on
in future. Do not liquidate your investments, reinvest and let the interest
grow on a compounded basis. Remember that you have to hold on to any profitable
assets for a very long time to benefit from this.
2. Practice frugality
There’s
a simple rule that needs to be followed. Do not increase your expenses in
tandem with periodic rises in income. Sure, you will need to upgrade your
attire to a certain extent as you advance up the corporate ladder. However, one
should avoid buying a new ensemble every month just because you get a few
appreciative comments. Similarly, ensure that you get a tiffin box from hoe
instead of ordering takeaways (Your CFO clearly earns way more than you do but
if you notice, he brings his lunch along and he definitely understand money
management better than you do!) This way, you will not only save money but also
remain healthier, which means move unused leaves to encash.
3. Upgrade yourself
Normal
salary rises are fine, but why not jump a few steps ahead? Do part-time courses
and learn a new task that enables you to take on additional responsibilities.
Better still, if you have fixed working hours or a five-day week, take on
non-conflicting freelance work. Its better to work more while young and ease
off as age catches up. Invest the extra money that you earn, don’t spend it.
4. Pay cash
Its
amazing how easy it becomes to control your spending when cash is the only
medium of payment. Keep credit cards away and pay cash everywhere you go. This
way you avoid taking on extra debt that might force you to liquidate
investments in a crisis scenario later on. Follow strict financial discipline
when it comes to amount allotted for necessities and never divert it for
luxuries like an extra show at the multiplex or dinner at a fancy restaurant.
5.Invest regularly
So you
already invested the planned amount this fiscal and your employer decided to
reward your performance with a bonus. Don’t waste time figuring out what new
gadget you can buy, just invest it straight off. Use every possible opportunity
to invest rather than spend. Before you know it, there will be sufficient funds
in hand to take the next step forward.
