How to become rich: Seven money habits to accumulate wealth

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Updated: November 26, 2019 9:43 AM

Here are seven everlasting money habits that will help you accumulate wealth in the long run.

how to become rich, how to become rich in India, spending, budgeting, Financial planning, money habits, stock markets, pay bills, Living within meansIllustration: Rohnit Phore

Leading your life within your means is one of the most important financial concepts to understand. There are a number of habits worth forming, especially when it comes to money and finance. Here are seven everlasting money habits that will help you accumulate wealth in the long run.

Living within your means

One should understand this correctly. This does not necessarily mean the same as spending less than you earn. Sometimes, you need to spend money on your education and skill-upgradation to increase your earning potential. As such, spending less than what you earn will not build your wealth always. It is how you invest your surplus money and what returns you get that will determine your future wealth.

Track your spending

Often people claim that budgeting is beyond their capacity. The habit of record keeping, finding out the details of the fees and charges levied on your credit card, bank charges on your bank account, offers, terms and conditions on your postpaid mobile connection, etc., are all part of the process of budgeting. Eventually, this forms part of your daily life.

Pay your bills before time

Develop a habit of paying your outstanding bills well ahead of time, especially credit card dues and loan repayments. Try to pay more than the minimum amount required whenever possible. This will help you to reduce the amount outstanding sooner and reduce the amount of interest that you pay over a time. Paying ahead of time will also alleviate the stress of having to make last minute payments. Furthermore, advance payments will allow you to be well prepared for other unexpected and emergency expenses that you might face.

Say ‘no’ to your children sometimes

Even if you can afford to buy, it is good to deny your children what they want once in a while. Children need to learn and understand the value of money. Have age-appropriate discussions with your children, ensuring that all conversation about money are framed positively.

Practise delayed gratification

Delaying gratification can have important consequences, especially when making financial decisions because every purchase you make today is actually a withdrawal from your future financial security. Research has proved that the ability to delay gratification is a major factor in determining one’s financial success. The ability to purchase anything online creates a real challenge for those who are prone to impulse buying but online shopping provides you ample scope to practise the art of delayed gratification.

Ignore short-term market noises

Whether it is the US trade war with China, arguments about the central bank’s rate cut or unexpected turn on Brexit negotiations, fluctuations owing to economic and political instability—both locally and globally— are part of life. Since you are investing for the long term, contrary to speculating on short-term gains in the equity markets, daily, weekly or even monthly market fluctuations are not a matter of concern. One of the traits of a successful investor is riding out volatility while waiting for the markets to rise.

No hide and seek with spouse

Talk to your spouse about your personal finances. Be open with your loved ones about your financial goals and seek their help to achieve the same. Do not keep financial secrets from your life partner; instead embark on a joint financial planning journey together.

(The writer is a professor of finance & accounting, IIM Tiruchirappalli)

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