Almost each and every person in this world desires to build wealth. But this can often seem like quite an overwhelming endeavor. As Kavan Choksi mentions, time, effort and discipline are extremely important to build wealth. People should not get lured by get-rich-quick schemes that come with high risk. Rather, they should try to follow principles and strategies to build and preserve wealth over the long term.
Kavan Choksi marks some of the most important principles of building wealth
The build wealth and become financially independent over time, one needs to maintain a smart and systematic approach. They should be proactive about managing debt, saving and investing, understanding the impact of taxes, as well as building a strong credit history. The most important principles of building wealth include:
- Earning money: To build wealth one must obviously have to start making money. While this step might seem pretty elementary but it is the most fundamental one for people who are just starting out. There are two basic ways of making money. People can either enjoy an earned income or a passive income. The former comes from what a person does for living, while the latter is derived from investments. One may not have any passive income as such unless they have started to earn enough money to begin investing.
- Set goals and develop a plan: One must be careful about how they use their wealth. Some may want to save up for their life post-retirement, while others may aim at accumulating funds to pay for their kid’s higher education. Buying a second home and making donations to a charity can also be important financial goals for some people. Setting goals is an important first step in building wealth. When people have a clear vision of what they want to achieve, they can create a plan that will help them to reach their goals. People should also be specific about the amount of money they need to achieve each goal and the time frame within which they hope to achieve it. Once the goals have been set; strategies have to be created to achieve them. This might involve creating a well-defined budget to help save more money, increase income through education or career advancement, as well as invest in assets that will appreciate in value over time. The financial plans created by people must be realistic, flexible, and focused on the long term.
- Save and invest: Simply making money will not help people to build wealth if they just keep spending it all. One must always have enough money saved up for near-term obligations like mortgage, rent or bills. After a person has managed to set aside enough money, they should focus on investing the funds smartly so that it can grow. While having enough money in the savings account is important, these accounts have very low interest rates. One should rather try to spread their money among different types of investments like stocks, bonds, real estate, and gold, as investments perform differently at different times.
As Kavan Choksi says, building wealth through the strategies discussed above goes a long way in establishing a solid foundation of financial stability. It allows people to create a buffer against unexpected expenses, emergencies, or economic downturns.