Don’t we all aspire to work until we reach a point when we have enough money saved that we can live off our investment returns and monthly pension instalments? Better still, build a corpus large enough to sustain our retirement dreams without compromising on a decent living, children education, life insurance and yearly gratification goals.
Unlike the existing money masters of the world, all of us may not have been gifted with the wisdom to make money and multiply it beating inflation and expenses. However, if we try to learn and absorb the pattern of the mavericks that have attained financial independence we can also convert a few snowflakes into a snowball of money.
Here are some of the time-tested money-making attributes towards a road of financial independence through wealth creation:-
1) Learning the power of compounding
The riches from the very start have known the immense power of compounding. Billionaire Warren Buffett’s wisdom in his biography by Alice Schroeder reveals that he was captivated with “the way the numbers (invested amount) exploded as they grew at a constant rate over time was how a small sum could turn into a fortune”. Compound interest is an interest calculated on the initial principal amount as well as the accumulated interest of the previous period. It is basically an “interest on interest”. Moreover, the more the frequency of compounding, the greater will be the compound interest. An amount of Rs 1000 compounded 10% annually will be lower than the amount on Rs 1000 compounded 5% semi-annually over the same period of time. Sounds magical, right?
ALSO READ: 3 money making lessons from FIFA world cup
2) Living a minimal life
The money-masters know that there is no virtue in cluttering. If our life cycle is indicative of work-paycheck-purchase-consume-work, then it needs a serious cosmetic surgery. A research reveals that we only use 40% of the clothes in our wardrobes; we spend most of our disposable income in buying assets with no intrinsic value and later on regret our poverty. The conscious decision of living a minimal life involves purchasing things of indispensable needs and resisting the temptation of upgrading smartphones, laptops and our wardrobes.
ALSO READ: What is a passive investment and why should you invest passively?
3) Frugality is a new virtue
According to a report by consulting firm Deloitte, millennials don’t save money. Mostly those who come to metro cities with big dreams and extra small budgets owing to young careers, spend 35% of the money left after paying rent and food for eating out and relaxation. 60% is spent on purchasing new items every month. It is imperative to advise people struggling to strike a balance between saving and spending by adopting a frugal lifestyle.
ALSO READ: 4 money rituals to follow in order to manage your money
4) Power of delayed gratification
Our forefathers and two generation before our generation were much happier. The very reason for their happiness lies in practising a superpower named as “patience”. They knew that there is no shortcut in life. Also, seeing the economic and political instability pre-liberal era of Indian economy and the great depression of 1929, they knew how important it was to suppress instant desires for a better gratification in future. We can also learn to adopt this financial strategy by simply letting go of 100, Rs. 200 coffee at Starbucks in order to buy a high-quality Rs 20,000 coffee-machine.