10 steps that can make you richer in personal finance front

All right, not make you rich, but what a mathematician would say are ‘necessary conditions to get rich, but not sufficient conditions’.
For representational purposes (File | Reuters)
For representational purposes (File | Reuters)

Let us look at a few things that will make you rich. All right, not make you rich, but what a mathematician would say are ‘necessary conditions to get rich, but not sufficient conditions’. Some business learning applied to personal finance:

● Spend less: Only a Public Sector Undertaking or a lucky company funded by indulgent shareholders can run at loss permanently, you cannot operate at a cash loss. Spend lesser than you earn. Much lesser, because you need money for more than just day-to-day living. Living beyond your means is suicidal. The bad habit often stays.

● Save a small amount every month: If your taxes went up by an ‘X’ amount, you will find a way to pay it somehow. Find a similar small amount that you can set aside. When it comes to saving money, people constantly find ways to rationalise their inability to save/invest `4,000 each month. Set up an automatic bank DEBIT, so that as soon as you receive your salary, a small portion of it immediately goes into your SIP account. You should pretend that money never came in. A few years from now, you’ll thank yourself for doing this.

● Open a PPF account: Yes, keep it small. Invest `2,000 a year. If you can put away money for 15 years, you are just teaching yourself the pleasures of postponing the access to money. Let the money grow and start contributing `1,000 more every year. So, your contribution is `2,000, `3,000, `4,000, every year till you get to a stage when you can contribute, say `1,50,000 a year. 

● Open an SIP account: If you have never invested before, start with an Equity-Linked Saving Scheme. And start saving, say `3,000 a month. Remember the Public Provident Fund was `2,000 a ‘year’. Here we are talking of a ‘monthly’ saving of `3,000. Keep growing the amount by doing a step up of `500 every year. Again, in 10 years, you will thank yourself.

● Do not ‘play’ the stock market: The stock exchange is not a game that you can go and play. It is a serious place where fortunes are made and fortunes are lost. Do not waste your time and money if you are not willing to invest in educating yourself about how markets work. Learn about the stock markets and then become an investor.

● Pay credit cards bills on time: It doesn’t matter how much you spend, but pay off your bill on a monthly basis. Try paying it off the day the bill comes. There is no point in postponing it for the last date especially if you are a forgetful kinda person. Make sure you do not put big purchases like refrigerator or air conditioners on your card. For big purchases, start a Recurring Deposit and as soon as you accumulate the necessary amount, make a full-cash down payment. No credit purchases. Never! 

● Set goals: Set long-term, short-term, medium-term, 90-day goals, six-monthly goals and, of course, annual goals. 

● Keep good company: Be in the company of people who are financially free and financially responsible and make sure that you learn from them.

● Live for yourself: Do not bother about what others think. This will mean you will buy things for YOUR goals.

● Review: Monitor your promises versus how much you are investing on a yearly, monthly, or weekly basis. 

Do these and you come out with more money than what you have now. 

(The writer is a chartered accountant and financial trainer, who has authored several books on personal finance)

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