Grow Your Wealth in 5 Reliable Steps

Many people do not want to increase their wealth, but to survive. People are used to seeing a secure job as a great gift to a person. They sacrifice their whole life for a salary and few other privileges.

They think that is the highest earning they can get. And, they depend on that job itself. They don’t try to do anything else beyond that.

They think that they are getting a good salary, a car from the company, a house from the company and that is enough. But they don’t think that all those things belong to them only until they are engaged in that job.

It’s really like catching a big fish with a small bait. Gives a little, but the company extorts more from them. But employees don’t see it. Because they are addicted to the drug called salary.

Also, companies have built an attitude in their minds that without the company, those people cannot exist alone. So those employees spend their whole life working under the company.

But here the companies cannot be blamed. Because not everyone in the society can be an entrepreneur. Large-scale companies are built by a very limited number of entrepreneurs, creating jobs for a huge workforce.

It is not something that everyone can do. The rest of the majority are there to engage in the jobs created by those large-scale companies.

Not everyone can be an entrepreneur, not everyone can build large-scale business networks. But you can increase your wealth.

What is Wealth?

Many people think that just because they make a lot of money, that person is wealthy. But that’s wrong. Earning a lot of money can make you rich not wealthy.

Wealth is a higher level of financial stability than rich. The wealth of wealthy people is preserved and it grows more and more. But the richness of the rich disappears as soon as the money is gone. That is why it is said that a wealthy person will always be wealthy.

A wealthy person has diversified assets, investment schemes and many streams of income. And he has something more precious than all this. That is the time.

A wealthy person has plenty of money, cars, houses, and time to live a comfortable life. The rich man also has these things, but he doesn’t have enough time to enjoy his life.

Also, the vehicles and houses he has may not be stable. Sometimes he may have to sell those things due to various financial crises. But not so for the rich person.

Is Money an Asset?

In accounting, money is considered as a current asset, but in economics, money is known as a medium of exchange. You can use cash (money) as a means of payment to purchase assets.

That’s how wealthy people spend money. They use the money for things like investing and buying new assets. Due to the increase in their assets, their wealth also increases.

Also, by investing money, their income limits also increase.As the income rises, more and more money comes into their hands. In this way their wealth, assets, cash balances etc. gradually increase in a cyclical manner.

If you want to become wealthy, you also have to invest your money and put it on long-term fixed assets.

Grow Your Wealth in 5 Reliable Steps

01. Pay Off All Debts

Borrowing can be done for two purposes. One is borrowing money for investment, two is borrowing money for consumption expenditure.

Among these, there are several ways to justify getting money for investment. If the money is taken for such a purpose, the investment should have the potential to generate a higher return than the interest rate you are paying on the loan.

Otherwise, getting that loan is pointless. However, it makes handling your finances much easier if you are not in debt. If you currently have a loan, pay off that loan. Keeping up with debt is a headache.

After spending a large amount of your income on loan repayments, there is very little left over. People are tired of various loans like education loan, home loan, car leasing etc.

Don’t go into debt for any reason. The fact that you are in debt means that you have no financial stability. So the first step to building your wealth is to pay off all your current debt and make a no-debt policy.

This article is important for someone who already has an income. So free your income from debt. Read the article “4 Steps Strategy to Manage Your Income Wisely” to know how to manage your income.

02. Create a Major Goal

The second step to growing your wealth is to have a major goal in life. (Ignore the literal meaning of the words purpose, intention, goal)

This means deciding where you will be after 20-25 years of life. A person who steps towards success definitely has an idea of where they want to be in five years, ten years, twenty years.

So make a long-term goal now. Dream about your net worth in twenty years. If so, it will be easier for you to deal with it.

03. Create an Investment Plan

You don’t need an MBA to create an investment plan. You will learn how to do it very simply. First, decide what kind of investments you will invest in. You can use various investment methods.

For example, you can invest in the stock market, treasury bonds, equity mutual funds, public provident fund or gold, gems, diamonds, land, houses, commercial buildings, arable land, etc. You can choose any method or several methods.

In an investment, you should focus on its return. It is called ROI or Return on Investment. This is very easy to calculate. This can be calculated using a simple equation.

First the net increase in investment should be calculated. It is done by subtracting the investment cost from the present value of the investment.

If the resulting value is positive, then it is a net profit. If it becomes negative, it is a net loss. Then the net profit or loss should be divided by the cost of investment. Then multiply it by 100.

ROI = [(Current Value of Investment – Investment Cost) ÷ Investment Cost] × 100

This gives you a percentage value (Ex. 25%). If this comes to a large positive value, you can simply determine that you have a high return on that investment.

04. Risk Management

Risk management is one of the most important factors to focus on when creating an investment plan. This simply means how much money you can afford to lose.

There is a lot of risk involved in making an investment. That is, whether the investment will be profitable or loss-making. It is for this reason that many people are reluctant to invest.

But what a smart investor does is manage this risk well. There is a very famous saying with this. That is, don’t put all your eggs in one basket.

Imagine if that basket falls, all your eggs will break. But if you put those eggs in a few baskets, you might be able to protect a few.

This means the portfolio investment method. Or it can also be called diversification of investment. This means that all your money is not invested in one investment method, but in several investment methods. Even if one investment is a loss, other investments can be profitable.

Diversification is a good way to reduce investment risk. Also, don’t make the amount you are going to invest too high for you to afford. Make sure you invest an amount that you can afford to lose even if the investment results in a loss.

05. Reinvest and Accumulation

You can use the return on investment for two things. One for the enjoyment of your worldly life. That means, things like buying huge mansions, buying super cars, buying private jets, traveling around the world.

This is the procedure of rich people. That is why their wealth is not stable. But wealthy people do something different. That is they invest these returns over and over again.

Then what happens is that the amount of assets they own accumulates and increases. That is how they bring their income to a very high level. After that, they spend money to buy big mansions, super cars and jets.