Everybody wants to be Rich, Richer, Richest! Doesn’t matters whether the income is less or more, or is it employer’s salary or business profits. Once the studies are over, few people start working for job satisfaction, some work for their enlightenment, some work for themselves, some work just for money. Even those who do not work with money as the end goal, still end up needing more and more money as their life progresses. This need can be for family support, research expansion or for better lifestyle. Whatever be the need, the most important underlying thought here is that as life progresses everybody needs more money. But not everybody becomes rich, doesn’t matters how hard they try. Earning enough money to be called rich is so tough that even the business tycoons born with a silver spoon may end up bankrupt. In such a competitive world, how can an individual from the middle-class salaried income group become a rich person?
But What Exactly is Being Rich?
If 10 random people were asked whether if they would like to be rich, all the 10 people would answer, Yes. But if those 10 people were asked the exact meaning of being rich, they would have a wide variety of answer, all pointing to the amount of wealth and assets; wealth from INR 10 million to INR 100 million and above and assets like big house and costly cars etc. But none would be able to define exactly what it means to be rich.
The truth is “rich” means different things to different people and hence there is no one fits all answer. Becoming “rich” can mean either of these for a majority of the people:
- Rich means being Wealthy, i.e. Very High Income
- Rich means having more Net Worth
- Rich means having a Luxurious Life
- Rich means having Life Satisfaction
If becoming “rich” means acquiring more wealth to you, you need to have a clearly idea about your dream wealth and how are you going to reach there. If your idea of being rich is to have more net worth, then your focus should be on acquiring more and more valuable assets, price of which is only going to appreciate with time. If Luxurious Lifestyle defines your idea of being rich then you have a thing for flashy lifestyle with finest clothes, cars, gadgets, food and other ‘bling’ accessories. But if being rich means having a satisfactory life with the freedom to do whatever you want to do and choose whatever you want to, you just need the enough amounts to meet your needs.
In the end, being rich means having enough. Having enough through high income! Having enough to buy valuable assets! Having enough to live a luxurious life! Having enough to meet all your needs!
But, How can a Salaried Employee Be Rich?
Now that you know that to be rich means to have enough money to meet all your needs, with your limited income you should either limit your needs or increase your income. There is no single one fits all approach as it all depends on the financial and social conditions of an individual. However there are few tips and tricks which can be used to turn your situations to your advantage. Let us have a look at some of these in detail.
- Financial Discipline
Discipline is needed in each and every aspect of life including finance. A disciplined personal finance is the key to financial freedom. A disciplined finance is nothing but a correct balance between income, expenditure and investments. When a person maintains the same since the beginning of his/her earning life, he would not need to be worried about being rich at the later period of life.
- Well Defined Goals
A goal is the factor which makes you measure your success. One needs to have a well-defined goal to choose the right investment instrument at the right age. Some of the financial goals of a person can be buying a home at a certain age, a specific car at a certain point of life or a certain amount of investment at some other age. As said above, being rich means different things to different people; hence you should know what being rich means to you. This will help you define the end goals. When you will have end goals you would be able to make plans accordingly and then can work to achieve the same.
- Diversified Investments
The renowned American businessman cum philanthropist Mr Warren Buffet has quoted ‘Don’t keep all your eggs in one basket’. This quote makes it clear that all your investments should not be in just one channel. When invest in different platforms, the risk factor of investment is minimised. A diversified investment portfolio always brings highest return for least risk. An ideal diversified investment includes stocks, fixed income and commodities and assets like real estate.
- Emergency Funds & Insurances
If you want to have freedom with your money to do whatever you want, first thing that you need to have is a cover for your bad days of life. The lower your risks are and greater your cover is, more you would be able to enjoy with your money with greater freedom. Your emergency fund and your insurances (life, health, home and vehicle) all will give you freedom to enjoy the money you have in your hand. Job loss, severe illness and diseases and debt are unpredictable in life and managing them on a fixed monthly income can be a lot. Hence as soon as you start earning, you should start building your emergency fund and start investing in different insurance policies such as health, life and term insurances. These will give you a peace of mind right from the time you start earning.
- Early Start
Starting early is the key to achieve success in any walk of life, especially when it comes to fitness, be it physical fitness or financial fitness. Becoming financially disciplined early in life even before the start of the career will pave the road to success for the entire life. Financial discipline with investments, savings and controlled expenses through a strict budget with a clear defined end goal since the start of the career will give you an edge over rest of the population who started their career alongside you. The process of wealth creation is a very slow and long one especially if you have a limited income. Investments started early in life will start giving benefits only in the long run. Your contributions in your emergency funds don’t matters how small; will need few years to become a significant amount of savings. Should you remain invested for long; your investments will compound to become a very significant amount. Hence if you want to be rich later in life, you need to start early and you need to start now.