Becoming a Crorepati is a Pure Maths
Importance of financial literacy
Compound Interest is the Eighth Wonder of the World-Albert Einstein
As per latest research shows, more than 70% Indians are badly financial managed, almost 60% having no clue about financial literacy. The shocking truth is that nowhere in our education systems or society tries to educate us on such important aspects of our life. We maximum have no idea regarding cash flow, Personal financial budget, Demonetization, inflation, deflation, GDP, growth rate etc.
But you are agreeing with the statement “Money earns Money”, but how & how much is based on knowledge of money management. Where to invest and when? A Risk factor associated with an investment, higher return, insurance etc all these parameters are plunge under the category of financial literacy.
Saving: How much we save in one time is not so important for becoming Crorepati, how regularly we save money is much better way to getting Crorepati. The myth is that for saving money, we have to earn more. If you have a desire to save some percentage of your hard earn money for your future expenses, like marriage, children’s education, buying home, retirement plan etc. then you have manage to save at least 30% of your monthly income, when your salary is credited, first invest, then only spends rest for your daily needs. Please never postpone to start saving in next month; the next month will never come…100% true, Choice is yours.
Poor vs. Middle Class vs. Rich: Poor people earn less money and all money gone to their monthly expenses. In the case of actual rich and middle class (appear rich-not actually rich), there are two ways to flow your money either you spend it or invest it. There is a small distinction between rich vs. middle class, rich people always looking for assets and middle class looking for liabilities, assets pay you and liabilities cost you.
If you want to become Crorepati as earliest look for assets, not liabilities. Your Smartphone is your liabilities, if it does not pay you or if you buy a home for yourself by taking a loan, then your monthly EMI is a super liability for you, your loan is assets for the bank, where you have taken the loan. Only buy the liabilities, when it is an utmost necessity, otherwise go for assets (anything which pays you), most important your education is your assets, it pays you in near future.
Types of Saving: When you decided to go to save 30% of your monthly income, and then should know about the following insurance and investment. I just urged you to go for 30% only (you have still 70% to spends for your day to day activities), if you can more, you will a Crorepati as sooner and one note please never ever put all saving in the same basket (one scheme).
Term Insurance: This is not an investment, it is a pure insurance. Before investment, you should have one term insurance. Please go for online term insurance and for the longer term, roughly 3-5K annual premiums for 50-100 Lac cover. Please go for as early as possible (as the premium amount depends on your current age). You should also have one good health insurance plan which should cover your family members also. If some unfortunate event happens in your case, then term insurance will provide sufficient financial help to your family members.
Always keep in mind, never mixed up the insurance with investment.
Mutual Fund: When we heard about Mutual Fund, one statement comes in our mind “Mutual Fund investment is subject to Market Risk”. Please don’t panic, go for some good fund company, check the past return rate and ranking of the respective mutual fund, choose the monthly SIP (Systematic Investment Plan). Yes definitely its return depends on the market, but for good fund in long-term; the risk factor is almost nil. It will give you 13-20% return, but not guaranteed. If you are looking for tax saving option, go for ELSS fund, having 3 years lock in the period.
NSC (Post Office): National Saving Certificates (NSC) which provides the maximum guaranteed return 8.5% with a lock-in period of 6 years; this is one of best secure investment for your retirement life. Please contact the local post office, till today; this is available in offline mode only.
PPF (Public Provident Fund)-Tax Saving Purpose: PPF is a good way to invest with the return of 8-8.5% (varies), but the lock-in period is 15 years. You can easily open the PPF account through internet banking.
LIC: We middle class only know about LIC, however, LIC is neither a good insurance nor good investment; it’s just in between. As you already covered by term insurance, you need not think about insurance, but if you can afford, go for some money back policies (your or family members) depends on own financial goals.
FD (Fixed Deposit) /RD: Advised to keep some portion of the investment in fixed deposit for emergency purpose, which gives the minimum return among all type of investment, approx 6-6.5% (after tax deduction).
Land or real State: It is the top priority of any type of investment, but you require too much lump sum amount. Now a day, if you are able to buy a land in any good location, then you are already Crorepati, why you are wasting your time to read this article “How to becoming a Crorepati”…Hehe...
Crorepati Formula: Here it is- Mr. Sanjay Monthly Investment and Total Return-
- Before invest, please examine your financial goals and prepare personal Budget, never trust on agents, first understand yourself, then only invest (Go for online, quite cheaper).Apart from NSC, all other having auto debit facility from your bank account, no need to remember or worry about premium payment.
- If you want getting rich faster or at an early age, then you have to earn more to save more or start saving as early as possible. The magic of money multiplication happens in a longer term.
Now the decision is yours, at what age you will be Crorepati is depended on how early you start saving and the amount of monthly investment for that purpose. In the magic of compounding, the time frame has a crucial role, that’s why I am telling you to start saving from today onwards and if you can afford, increase the percentage of the investment amount.
Poor people, they don’t have remaining money (after expenses) to invest, and in the middle class (appear Rich, but not actually rich) spends the maximum money in their liabilities and super Rich people invest money for assets, which generates cash flow.
For getting Crorepati, you need not have too much money; just you have to understand the magic of power of compounding and regular investment habit. This is the guaranteed path towards being a Crorepati, it takes time but you will achieve.
Observe the following two graph (Sources), you will understand the magic of compounding-
If you thinking the other way to becoming Crorepati as faster as possible with the small amount of investment, the share market is there. Be careful it not the surely guaranteed path, you can lose your capital also, and maximum people lose the money in share market.
Wait for my upcoming next article "How to start in Share Market, Do,s and Don’t before you start."
Understand the cash flow and earn more money, having more money you not only achieve the financial stability; also you will gain the social respects by providing jobs and charity to the society.
How much you invest is not so important, how long and regularly invest is the MANTRA of becoming Crorepati.
Wish you Good luck..!
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