The Secret to Wealth creation is good money management. Wealthy people have one trait in common: they are excellent money managers. Some are born with a silver spoon in their mouth, while some are not- but both handle their finances carefully and very smartly.
Investment options these days are a plenty, and you are really spoilt for choice. However, all avenues may not be suitable for you and the key is to keep things simple. No matter what the era, the golden rules to create wealth remain the same and you need to benchmark your finance management against those rules.
Take a look at the parameters below and find out whether you are a good or a bad money manager:
A good money manager-
- Saves at least 10% out of every month’s pay. Check how much you have saved in each one of the last 12 months.
- Mixes and interacts with people who are good money managers.
- Maintains clear and categorically written financial goals to achieve (for the next 6 months, 1 year and 20 years).
- Develops an intelligent plan to achieve the financial goals.
- Shows clear instances of implementing the plan.
- Minimizes borrowings for items that depreciate in value. For example, a good money manager does not borrow too much for buying a car.
- Seeks professional advice and often takes suggestions from a wealth coach.
- Indulges in strategic spending often.
- Learns about new money managing techniques and ideas.
- Invests in avenues that have a strong future in appreciation.
Now, award yourself a point for each tick; the higher your points, the better your wealth creation strategies.
A bad money manager-
- Mixes with people who are bad money managers.
- Prepares vague plans with no clear goal, plan, or timeline; thinks that all goals will be achieved someday.
- Invests whimsically and follows advice blindly.
- Buys stuff that catches their fancy, even if they have to borrow from banks.
- Hopes that the next pay rise will solve all financial problems.
- Believe that they are the best and do not need any advice at all
- Is not interested in gaining financial advice of any kind
- Spends on items that lose value over time (for example: cars, stereos, and fridge)
Now, award yourself a point for each tick. The higher your points, the more honing your wealth creation strategies need.
The above checklist may not be exhaustive, but is certainly an important tool to give you a reality check. You will get an idea of where you stand as far as financial management is concerned. In fact, the evaluation from the exercise can prove a good starting point for you if you really want to build your wealth.