The statistics are not in favour of financial reform in India, as 1.21 billion people live below the poverty line. While the number seems dismal and hardly something to build a foundation of wealth on, there is hope in this emerging market. There are those who managed to break through the poverty line and are slowly building wealth and this is how they do it.
Avoid the long line of credit offered by financial institutions
A remarkable trait of financial institutions in India is that they offer a loan product for almost any financial need. Furthermore, the line of credit is often extended to those in rural communities as well. While it may help some out of their financial difficulties, it’s hard to build wealth when bills are mounting up. Instead, focus on the equally long line of savings products offered by these institutions in order to build up emergency and other savings. When this happens, savings will be to go-to instead of debt when financial difficulties loom.
Don’t overlook a personal budget
Although this may seem like basic advice, it’s surprising to learn how many households try to make it through the month without a personal budget. A personal budget sets financial goalposts that guide the finances towards the needs and wants of the household. They also provide the household with a clear picture of where they are and what is needed to get to the next level. With this information, households can also determine where they can trim some of the fat in order to create some space for savings.
Only dabble in investments when it’s the right time
It’s a tragedy when households lose their life savings to unscrupulous brokers and schemes. But it seems even worse when this happens through reputable organizations as was the case in 2008 when mortgage-backed investments caused many economies to suffer when the consumers defaulted on their loans. Seemingly safe investments, millions were lost by investors and even those putting funds away for retirement. The rule of thumb with investments is that it should only include surplus funds, never emergency funds.
Mutual Funds For Beginners
Investors who are still hesitant to stick their toes in the water, but want to try their hand at investing should do some research on mutual funds. These types of investments provide investors with a selection of funds bundled into a streamlined product. These funds are managed by fund managers which means they take on all the hard work, the investor merely needs to sit back and wait for their statements. As with all other investments, these take time to build up and while the risk of these investments is significantly lower than other investment products, there is still risk. The best way to choose a good mutual fund is to go through a reputable institution. Although this may not guarantee the capital or the potential of return, the risk is far lower. Investors can expect to pay a small management fee and withdrawals from these types of investments are usually discouraged in order for it to build up effectively.
Alternative Investment Options
Alternative investments options such as stock markets and cryptocurrency may appear lucrative, however, those who are still starting out on their journey of building wealth need to approach these with caution. The promise of a high return may seem impressive, but there is the risk of losing a substantial amount of capital, if not all if the markets change. Investing in a business may also seem like a good option as there is the potential for profit, but it can take a number of years to break even, let alone generate a profit. It may even require additional funding. Instead, look for safer alternatives such as properties or commodities. Although these may also fluctuate and pose risk, they are not as prone to change drastically as market conditions change. They may dip slightly but it takes a serious market condition to affect these substantially. Also, these offer a useful asset to the investor even when there is a dip in the market.
It takes some research and discipline to get off the mark and start building wealth. The key to a successful wealth journey is to practice patience in order to get the best results. That and some help from a certified financial advisor will go a long way.