Becoming rich is, undoubtedly, a universal wish. If you too fall in the millionaire-aspirants category, presented below are some important financial tips that will surely help you achieve your dream.
1. If your friends determine your worth by what phone you own, it’s time to get better friends, not better phones.
Smartphones have many features. But they also cost much more than a basic phone. It wouldn’t be ‘financially’ wise to buy a smartphone, if you don’t need to run advanced applications. When a simple phone serves your purpose, why waste money on the ‘needless’ features. (By the way, I have observed that, forget about using them, many people aren’t even aware of the various features in their phone.)
Instead, save this money and invest it wisely. Many, however, won’t think so. They are of the opinion that their prestige comes from the type of phone they own…and hence needless outflow of money.
This is just one example of money pointlessly draining out from your pockets. What about the costly branded products with little or no additional utility excepting the ‘tag’; the luxury cars or gadgets to display; or the frequent dinners at expensive restaurants?
Of course, this doesn’t mean that you should stop spending. Spending, by itself, is not the issue. The issue is how you spend your money – thoughtlessly or rationally; intelligently or foolishly; regularly or sparingly. Choice is yours!
2. Budget is like flying a kite. The purpose of the thread is not to prevent the kite from flying. In fact, without the thread the kite will not fly far or fly high or fly for too long.
Many tend to live from salary to salary, without giving a serious thought to either balancing their budgets or planning their finances.
Some try to put it off for tomorrow; but the tomorrow never comes. Some do a half-hearted attempt; it serves no real purpose.
Some start enthusiastically; but within a few months are back to square one. Some don’t fool themselves; they never even start.
In fact, budgeting is normally considered to be nothing but trying to balance the cash inflows and outflows; prioritizing so as to fulfill as many needs and desires as possible within the constraints of a given income. This, however, is a narrow perspective about budgets.
Budgeting is lot more than that. In fact, I use the word BUDGET as an acronym for B (Beacon or guide), U (checks Unnecessary spending), D (helps manage Debt), G (promotes Goal setting), E (prepares for Emergencies) and T (Taste financial success).
Budget gives you a defined economic freedom; it is not a financial restriction. Instead of wandering aimlessly (and wasting money) you give ‘purposeful’ direction to your money.
3. Avoid safety. Protect Risk.
Most of us have aversion to risk. It evokes fear of loss. Therefore, the natural tendency is to look for safety. However, there is a trade-off between safety and returns. If you prefer safety, you have to be content with nominal returns.
Without risk, there’s going to be no riches.
In fact, 100% safety is also a myth. Keeping the money under your mattress or in a bank may appear safe. But don’t forget – inflation will erode its value day-by day. Isn’t this also a form of risk? Therefore, there is no such thing as ‘no risk’ or ‘zero risk’.
Besides, just as a coin has two sides to it, risk too has two sides i.e. threat and opportunity. But there is one key difference between them. Unlike the coin, risk doesn’t always have to be a 50:50 game of chance. You can suitably ‘control’ risk to get more wins than losses.
Instead of hiding behind safe investments, you have to hide behind risk-protection tools. Just as you have safeguards against fire when cooking, you have to build safeguards for risk too when investing; to keep the losses to minimum should the things go wrong.
4. Hope won’t make you money…only your acumen will do so.
You are nowadays witness to the unpredictable twists and turns of the equity markets from minute to minute, thanks to 24*7 tickers on the umpteen business channels, internet and SMSs. One moment ago you are sitting on a huge pile of profit and yet the very next moment may see you crash landing into deep abyss.
Most people get worried with this chaotic movement. Yet, it is precisely this chaos that offers the opportunity to make big money. If you know how to intelligently ride this wave, you have made it. But, get it wrong and you can fall flat on your face. This roller coaster ride can both be a source of prosperity and poverty.
There are many success stories on the stock market. But the disasters outnumber the victories by a huge margin. Why? Because most people do not have the mental capacity to digest the sharp ups and downs. The difference between winning and losing lies in the temperament.
Markets will not move the way you desire. Yet most people invest with the hope that the markets will rise – soon after they have made their purchase. Markets cannot be dictated or predicted or manipulated. Therefore, firstly get over this tendency to time the markets.
Then, given this volatility, it is best to tread and trade carefully. This is best achieved by not committing yourself fully at one go. If you invest small amounts every month, you are entering the market at different levels. This normally lowers your average cost of purchase. And, as you all know, lower the cost the better are the chances of making profits.
Bottom-line: You make money only when you respect money
This article is written by Sanjay Matai. He is a personal finance advisor, author and online financial trainer. There’s a lot more free stuff to read on his website www.wealtharchitects.in.