Let’s face it; we all don’t make crores of rupees a year, and the odds are that most of us won’t receive a large windfall inheritance either. However, that doesn’t mean that we can’t build sizeable wealth – it’ll just take some time. If you’re young, time is on your side and retiring a crorepati is achievable. Every journey begins with a small step…….but a series of small, consistent steps can take you a long way.
Read on for some tips on how to increase your savings and work toward this goal.
Step 1: Stop Senseless Spending
Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don’t need. Even relatively small expenses can really add up. Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This doesn’t mean that you shouldn’t go out and have fun, but you should try to do things in moderation – and set a budget if you hope to save money.
Step 2: Fund Retirement Plans ASAP
Unfortunately, retirement planning is an afterthought for many young people. Here’s why it shouldn’t be: funding a retirement plan early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later. If you deposit Rs.1,50,000 per year(12,500/- p.m) from the age of 23 to 65, say in an investment that may give 8% post tax returns, you will have more than 4.50 Crores! But if you wait 10 years and even contribute Rs. 2,50,000 per year (approx. 21,000/- p.m.), this number will be still reduced at about 3.5 Crores. Even higher contributions can’t make up for the lost time.
Step 3: Improve Tax Awareness
Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them. Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return.
Step 3: Own Your Home
At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren’t sure where we want to live for the longer term. And that’s fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity. Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.)
Step 4: Avoid New Luxury Wheels
Individuals who buy new vehicles (without affordability / heavy car loan) are doing themselves a disservice – especially since this asset depreciates in value so rapidly. Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year-old car will be worth around 70% of its purchase price. Consider buying something practical and dependable that has low monthly payments – or that you can pay for in cash. In the long run, this will mean you’ll have more money to put toward your savings – an asset that will appreciate, rather than depreciate like your car.
Step 5: Don’t Sell Yourself Short
Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving. Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.
Step 6: Don’t Rely On Luck
You don’t have to win the lottery to see eight figures in your bank account. For most people, the only way to achieve this is to save it. You don’t have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your crorepati dreams are well within reach.