5 Pillars of Building Wealth and Preserving for Long Term

Pillars of Building Wealth and Preserving for Long Term5 Pillars of Building Wealth and Preserving for Long Term

One can’t turn wealthy without a good income stream. However, enjoying a good income doesn’t always convert into turning wealthy. That’s because these two closely related objectives presuppose slightly different approaches when examined fundamentally. The first step towards building wealth is income. However, turning wealthy is an equation involving how that income is utilized and channelized over the long term. Building and preserving real wealth is more than just saving out of one’s regular or growing income. It also involves building an asset profile that covers all the crucial aspects contributing to one’s comfort and security and keeps pace with the changing times. In this article we would provide 5 Pillars of building wealth and preserving for Long Term.

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5 Pillars of Building Wealth and Preserving for Long Term

Here are some crucial pillars, one must follow to build and accumulate long term wealth:

#1 – Realize Your Worth

Every successful individual experience a struggle through their life’s realities. Not all are blessed to enjoy a start close to what they desired. While that might not be particularly motivating, it always helps to take the first step somewhere. However, it’s important to recognize one’s own capabilities in time and work towards better jobs that come with a higher pay scale and security level.

It’s important to have ambitions and act on them wisely and systematically. It might take years to earn the desired income and achieve stability. However, it can only come at the time the person consciously recognizes their potential and channelizes their experience and skill set to their advantage.

#2 – Watch Your Expenses

It’s important to start out with the wealth building process by outlining one’s financial goals and systematically work towards building it to the targeted level.

A key step in this direction is to keep a check on the spending through careful budgeting. To that resort, recording and measuring the cash flows helps to save effectively. Recording allows ascertaining the expenses that deserve priority.

This way, it helps to curtail the unimportant expenses and increase saving little-by-little every month, even as one’s income rises. Ideally, if one earns an adequate salary, they must attempt to build an emergency corpus up to six months of their expenses.

#3 – Avoid Unnecessary Debt Exposure

Debt with its end outcomes often comes in the way of building and preserving long-term wealth. As a fact, it’s very easy to spend more than one’s financial situation allows and land up in a debt cycle.

The hard part is paying back and servicing the resulting accruing interest. Hence, undertaking loans or going for borrowed finances for reasons other than necessary requirements is never advisable for those seeking to turn and remain wealthy.

If one’s situation or business does require them to undertake debt, there must be a sincere endeavor to maintain the correct ratio depending on the nature of the business or their income status.

One must also attempt to pay it back on priority to avoid the mounting interest costs that eat up one’s capital. While paying off debt, it makes sense to eliminate the inefficient or non-tax-deductible debt first, for example, the credit cards, auto loans and personal loans.

That’s because they are simply ongoing costs and do not provide any kind of tax benefits.

#4 – Plan Your Investments

Investing your savings helps you to grow your existing income and turn it into sizeable wealth. It’s important to invest it in a disciplined and structured manner right from the start. Planning your investments will achieve just that for you.

Getting wealthy is a long-term exercise and one’s asset allocation while investing must take care of that. In that sense, for the long term, one must include decent exposure to well diversified equity. There must be debt components too, to mitigate the risk factor.

Few investments offer as much flexibility as a ULIP plan on this front. You can invest in equity or safer debt funds or a mix of both as per your risk appetite in ULIPs. Not only that, but ULIP plans also offer the best tax savings on your invested money.

You can avail deduction under section 80C on the invested amount. Any withdrawals after the 5-year lock-in period are also exempt from tax.

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#5 – Protect with Insurance

To enjoy continued wealth, it’s also important to preserve the accumulated with an insurance cover. One’s real estate, finances, vehicles and health are all assets in different forms. The building, repairing these assets takes money and time, and insurance can help you rebuild without destroying your wealth.

In that situation, to not lose out on all achieved, it’s a must to be covered by insurance on time. Insurance, besides providing coverage in case of unfortunate situations, also returns lump sum amounts that add to one’s stock of wealth. If the right options are chosen, they can be tax friendly too.

As mundane as these fundamentals sound, it takes time to implement them, build on them and gain in the process. To secure a wealthy future, base your financials on these pillars.

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5 Pillars of Building Wealth and Preserving for Long Term

Suresh KP

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