Making Money: 6 Habits Of Wealthy People
There’s only one secret to making money—find out now
What is the formula for a long life? The likely answer will be a healthy lifestyle and good fitness and nutrition habits. This is true for your financial health too. We financial planners are bombarded by questions on quick money-making formulae from our clients, but if there was a secret formula, we’d be the wealthiest people on the planet. Making money and creating wealth is simply a function of good habit—habits that need to be developed and nurtured over a period of time until it becomes part of us.
There are some popular notions that abound. A life-insurance coverage that is 10 times your annual income is one. Another is spreading your investment portfolio across equity (shares) and debt (bonds, debentures or fixed deposits) and splitting them according to your age. There is a view that if you are 38 years old, 62 per cent (your age subtracted from 100) of your investments should be in equity and the rest in debt instruments. However, I would steer clear of such a formulaic approach. There are some steps, that should become habits, to take you towards a more robust financial health.
1. You must get insurance, depending on your age, wealth and commitments.
2. Diversify your investment portfolio across debt (debt mutual fund, fixed deposits, bonds, debentures, etc.) and equity, wisely. However, it needs to be tailored to your individual needs.
3. Identify and review your financial goals at regular intervals. These are responsibilities and dreams for which we earn, save, invest and sometimes even borrow.
4. Make it a point to create a family budget at the beginning of every month. “The term ‘budget’ can seem intimidating,” one of my clients once said. “Call it your spending list instead,” I advised. A budget is nothing but the amount of money we are planning to spend on our various needs and wants. At the end of each month, you will know exactly how much money you are spending and, more importantly, if you are overspending.
5. Keep your family members abreast of all long-term financial transactions and also keep updating your wealth documents. It is very common for financial planners to meet clients without an updated KYC (Know Your Customer) with banks or other financial institutions. This leads to various problems sooner or later—for instance, old addresses and other personal information remain on record or investments stay linked to dormant or closed bank accounts. I suggest that couples go on a ‘financial date’, where they spend at least two hours every three months to evaluate their financial situation, documents and goals.
6. Making a will, updating nominations and re-evaluating health-insurance needs are a few other habits that go a long way in wealth creation.
If you want to become a master of your money, forget magic formulae—start by developing money-making and -managing habits through small, consistent, baby steps until they become a lifelong practice, and watch your wallet grow.