We all work hard, round the clock for one thing, “To earn Money”! Money helps us to fulfill our basic needs, our goals, lifestyle & wishes.
They say, ‘Money is a terrible master but an obedient servant’!
That’s true in many senses!
Everyone makes more & more money as one progresses in respective profession, business or a job.
A desire to have more money never satisfies the one who is after it all the time.
In our society, many people so become ‘rich’ but some are ‘wealthy’ too!
Well, being rich & being wealthy is all the same?
There is a thin line difference between these two which we all should understand!
Who is rich?
Earns more money:
Rich definitely has more money & earns it well. They have sources of income which are prominent enough to get more income.
Spends money on cash poor assets:
Rich people are those who spend money on buying assets which are flashy, come with high price but may not necessarily be cash rich. This means many a times when people possess assets like cars, spend on furniture & interior work which they keep on changing every 4-5 years, & things like these, they are not adding any ‘value’ to their portfolio.
Such assets may gain them attention of others, or can fulfill their desires but they do not add any value to their wealth.
Focus on lifestyle:
People who are rich, focus more on lifestyle. As they keep on earning more income, they gradually upgrade their standard of living with upgrading their lifestyle.
Here, people buy things of high cost & brands. This makes them spend more money on them.
Has focus on increasing income:
Rich always focuses on earning more & more money. For this, one may diversify own income streams or innovate new ways in the same business or profession to get more money.
Who is wealthy?
Earns more but invests thoughtfully:
A wealthy person not only invests more but also invests money thoughtfully. Wealthy person believes in own ability to generate profit or income but acknowledge the importance of making money work for him/her too.
That’s why he/she invests since the beginning & continues investing thoughtfully in suitable options.
Possess many cash rich assets:
Wealthy person buys assets which are cash rich which have ability to appreciate in value in long term. Such assets like real estate, gold etc add value to their portfolio.
Invests in liquid investments suitably:
It’s true that our money should come back to us when we need it & also should pay off for our goals we set.
For this, a person invests in liquid investment options like mutual funds, bank FD, bonds etc as per goals.
Knows & handles behavior:
It’s difficult to earn more money than others but it’s even more difficult to manage & handle it well.
For this, a person must know & manage behavior & perspective towards money & investments.
Our thoughts, approach & perspectives along with our beliefs have huge impact on the way we earn, invest, rebalance & handle our investments.
So, to become ‘rich’, one puts all the efforts in ‘earning more money’ but to become ‘wealthy’, a person puts more efforts in earning more money, investing it suitably, following discipline & maintaining financial independence & standard of living always!!
How one can become not only rich but wealthy?
Money when we earn more, need right direction where it can lead us for achieving our goals. To give our money right direction, we must know our goals.
Our short, medium & long term goals are important to select right investment option for us.
When you start earning income, start investing too from your ‘first pay cheque’! Earlier your start investing, longer your investments can serve you with best possible returns & goals achievements.
We have many ways & means on which we can spend it but it’s important to start investing first.
Today, we have many options available where we can invest our money suitably.
Our money & income must be utilized to achieve our goals, fulfill our needs & provide us independence throughout our life.
To enjoy our money, we must first be insured!
We must have ‘term insurance’. Not for us but for our family & dependents. This will make them assured of ‘financial independence’ throughout their life.
‘Health insurance’ is another one which we should have. Inflation in medical sector is one of the highest.
Our hard-earned money & investments should not be used to pay off the hefty medical bills when the need arises.
Health insurance helps us to pay off the cost so that we can fully concentrate on the recovery & good health.
Have Emergency corpus ready:
Emergencies never come knocking on the door. In such situations, we must focus on finding the solution instead of worrying about monthly expenses.
Emergency fund is such corpus which can take care of our monthly bills like grocery expenses, medical bills, utility bills etc.
One should have emergency fund equivalent to at least 12 months of monthly expenses.
This money can be invested in very liquid options like debt liquid funds, short term FDs etc.
Review & rebalance your personal finance elements:
Investing in right & suitable option is crucial but reviewing & rebalancing our portfolio & investments is equally important.
Our set goals may undergo a change in priority, market performance keep on changing, micro & macro situations may change year on year. For this, our investments must be reviewed & rebalanced regularly.
Along with investments, one must review & rebalance insurance policies, their sum assured, amount of emergency corpus etc.
All the elements of our personal finance need a regular review & rebalancing to mitigate the risks.
Never get carried away with others lifestyle & success:
Today, everyone tries to show-off their achievements, lifestyle & success. But, please remember everyone has different personality, income streams, needs & goals, aspirations.
We must appreciate others success & achievements but never try to copy them.
‘Feeling content’ with what we have & possess can lead us with happy & healthy living.
Money spent on upgrading lifestyle may not last but money invested thoughtfully may last for life.
Have passive source of income:
Whatever profession or a business you are into, you must have a passive source of income where you can earn money with little more efforts, which can give your happiness & reduce the burden of single income stream.
You can choose any of your hobby or skill, learn more into it & materialize them to earn money.
Having dual source of income gives us confidence, surplus money to spend & invest.
Please remember, ethics, values, principles, discipline, feeling of being content are highly important than merely earning more ‘Money’.
When we acknowledge this, know that we are already on the path of becoming ‘wealthy’!