Read on to know how you can turn around your financial life
Updated on: 17-Nov-2022 •Ravi Banagere
Rich people stay rich by living like they are broke. Broke people stay broke by living like they are rich.
With convenient credit available, thanks to credit cards, EMIs and Buy Now Pay Later schemes, it is becoming increasingly easy to live like the rich and yet stay broke. Easy because it seems attractive to shop for shiny new things. Easy because we are living for today and not worrying about tomorrow.
But that's dangerous. As Warren Buffett rightly said: "If you buy things you don't need, soon you'll have to sell things you need." This is the mantra everyone must understand. One should reduce their spending and start investing for the future.
The importance of saving
So, how do you begin? Right off, you need to learn how to save. It is actually an art to keep aside money every month. This is how you can too: calculate your monthly fixed cost (your rent, travel cost, grocery, etc). Once you do that, check how much money is left with you and then decide to save aside a certain portion of the money.
But what if I end up using up that saved money too, you may ask? This is where investing comes in handy.
The importance of investing
Investing is a must if you want to a) protect the money you are saving and b) building your wealth. That's right, investing can actually help you build wealth in the long run. Even if you are in the early stages of your career and the salary isn't very high, investing can be a game changer for you.
And that's because of the power of compounding. Compounding can grow your money manifolds even if the investment amount is small.
Therefore, developing this belief in saving and investing is important and it has nothing to do with the scale. There are a lot of people who earn well but they don't invest, and there are a lot of people who don't earn so well but are very disciplined about their savings and investments. So, it's more a matter of attitude and habit and you should inculcate that habit as early as possible.
Where to invest
If you ask your parents, chances are they will nudge you to put money in bank fixed deposits. What you get out of fixed deposits is safe and guaranteed returns but this investment is not very desirable in terms of protecting you from inflation.
The best way to create wealth is to invest in equities. And historical data suggest that though equity may be risky over a short period of time, it is the fastest way to grow your money in the long run.
For starters, nothing beats the convenience of mutual funds if you want to invest in equity. Here, you can start investing with as low as Rs 500 per month. So, you don't need a lot of money to start investing. With new technologies, getting started has become easier than ever. If you have a bank account and a mobile phone, you don't even need to leave your house. Everything can be done online these days. Here is a guide to choosing your first mutual fund.
So, what are you waiting for? Just start, no matter how small it might look right now. This investing habit will help you gain experience and make you a wise investor over time. So, the next time you catch yourself splurging money, you should remember that it is better to be rich than broke.
To learn about the different types of mutual funds in India, you can visit our Get Started section. You'd get a comprehensive and easy-to-understand mutual fund guide there.
New to investing? Check out our specially curated page for beginners.