If you want to know How to Become Rich, I can just help you to learn the right mindset you need to have and the path you need to follow. If you want to join the rich men’s club, mere savings and pay hike doesn’t make you rich. You need to invest your savings in one or the other asset class so as to beat the inflation.
Inflation can you make you poor if you don’t handle it well. Let’s suppose you are earning Rs.50000 every month. If you save 25% of your earnings, you could save Rs.12,500. If you deposit this into Bank RD, it will return 7% or even less. After 1 year, even though you have saved Rs.1.5 Lakh, your real return would be the same i.e., Rs.1.5 Lakh because of 7% inflation rate.
Here, my point is that to become rich, your investments should provide some percentage of real returns. Otherwise, you will be poor when you retire. Let me explain this – Suppose, you have saved Rs.40 Lakhs for your retirement and deposited in a fixed deposit scheme of X Bank. Bank interest rate on FD will be 7%. At the same time inflation is 7%. So your money after 1 year is same as previous year. But you need to spend Rs.2.8 Lakh per year. Now, you have just Rs.47 Lakhs. What would happen after 10 years, Your FD will become ‘Zero’. So, in order to beat the inflation and stay rich even after retirement, you need to invest your money in an investment vehicle that could give inflation-beating returns.
So, Whats the Plan to Become Rich?
Irrespective of the kind of earning you have each year if you want to join the rich men’s club then you ought to put a lot of things besides mere saving and a pay raise. We all know that doctors, engineers, and lawyers are the highest paid individuals. If these guys can invest properly, they can retire in 10 to 15 years of service. But we have seen people working even after 60 years not because of they love their work, but because of their financial status.
The straightforward answer to the above question is rather than just saving money, investments in mutual funds, stocks, and even gold are the ways to become rich. It is important to learn when and how much to invest in each asset class. This is not so simple job, but you must learn it to achieve financial independence.
Let’s dive deeper into the subject and let me help you to understand How to Become Rich
1. How much you can afford to invest: Investing more money can help you to become rich much before than you anticipate. One can invest 40% of their income. Some can even save up to 60%. It’s purely dependent upon your lifestyle and the amount of salary you receive. So, calculate your expenditure and write down the percentage of your salary that you can invest. I will write about how to save more and control your expenditure in my upcoming posts.
2. How much you can invest without touching it for 10 years: Investment in asset classes like stocks and mutual funds are risky bets. They are very much volatile. If you want to take out the investment you make in stocks and mutual funds within 3 years from the time of investment, you should not invest that amount in these asset classes. Even gold cannot be considered for investment for short-term plans. Even though gold is not that much volatile like stocks, it will be stagnant for many years before making a big move. So, avoid gold as an investment for short-term plans.
3. Choose the Investment Vehicle: This is the most important ingredient to become rich. Traditional old-fashioned investments like bank deposits, postal RDs, life insurance money back policies cannot make you rich. They are just better than keeping your savings in a locker. Direct Stock buying or Mutual funds are the way to go. If you really know and you have experience in stock analysis, you can buy direct stocks. Please don’t ask others for stock tips. It will badly hurt your financial position. There are some stock investment advisory services which we can really trust and depend upon. I will write about the stock investment advisory services in my upcoming posts. If you cant handle direct stock investments, you can choose the mutual funds path. You can read more about How to Start Investing in Mutual Funds here. Mutual fund investment is the better way to go and become rich.
4. Best Time to Invest: Start investing now. Nobody knows how to time the market. Even if some claim they can predict the market moments, consider them as spammy. So, there is no best time but there is the best way i.e., SIP (Systematic Investment Plan). People around you will tell you to buy on market dips. But my advice is to do SIP all the time. Even if you have lump sum amount to invest in mutual funds, invest it in SIP the way. So that you could average the cost. Split it into 12 parts and invest the same amount for 12 months.
So, this is the plan to become rich and having right attitude and belief are important to become rich. To develop right mindset and attitude, you can read some books available in the market. I recommend you to read Rich Dad, Poor Dad Book to think like a rich man. This book is available on Amazon.in.
I hope, I have explained to you how to become rich and provided some tools to achieve your goal.
If you need any other details or clarifications, please do comment below. I will try to reply ASAP. Happy Investing…
Disclaimer: The views expressed in this article are just my views and the returns mentioned in this article are taken from my personal experience and few resources available online. This is for educational purpose but not any recommendation to invest in any particular asset or plan. Do your own research before taking your investment decisions. Thank You…