Your Road to Wealth Creation

When you know the rules of the game, you have a higher chance of winning or at least playing even.

So you want to know the rules of wealth building? Remember the road to wealth can’t be traveled only on the back of wishful thinking. A traveler on that road must possess discipline and courage – two attributes that great wealth-builders have in copious quantities.

As an individual, you are entirely different from everyone else around you, and hence you must set your own wealth-creation plan, keeping in mind relevant factors like your age, objectives and risk appetite.

Determine your Life Stage

A keen understanding of your life-stage is a pre-requisite of sorts. It will clearly define where do you stand in terms of obligations, responsibilities and duties both in relation to yourself and to others in your family?

Appropriate life-stage planning, indeed, can make all the difference to a wealth creation exercise. Risk-taking abilities keep on altering in line with changes in life-stage.
Here are a few broad life-stage classifications:

  • Early life: Typically single, a student or entry-stage professional in business or service. You have a relatively low income but have limited responsibilities to match.
  • Change in marital status: Higher responsibilities; need to fortify income from employment or business; change in life style; increase in expenses; risk-taking ability is on the high side
  • Mid life: Typically with child/children; increase in work pressure; high level of obligations, often towards dependent parents; lower risk taking ability
  • Pre-retirement: Need to round off plans; exercise options; perhaps with lower responsibilities towards children; personal health issues are likely to crop up
  • Retirement: Lower income; possibility of taking up post-retirement assignment; higher dependence on earlier savings; higher dependence on children

Personal Financial Statement

Once you determine your life-stage the next is to ascertaining the current financial status. A personal financial statement serves, reflecting one’s assets and liabilities, as the very foundation of the strategy. Such a statement can capture the very essence of an individual’s status, needs and expectations.

The risky part

A successful creator of wealth knows his risks – just as he knows that it is critical to start early and invest regularly. Risks come across as a probable loss, damage or threat. These are often spawned by events, decisions, economic factors.

In this context, the following points are worth considering:

  • It is impossible to correctly predict market conditions
  • Adverse economic conditions and corporate sentiments, may impact your wealth creation exercise
  • Medical emergencies and revision of legislations may also have its effect