5 essential habits for wealth creation

We all want to grow rich but always complain of falling short of the necessary savings. The amount we earn has a long-term bearing on our savings. However, are we taking necessary measures towards wealth creation? A conversation with some financial experts revealed certain common behavioural trends and habits that, if taken care of, can help ensure financial success by helping to build wealth over a period. These include:

Have a budget in mind: You can never proceed in life without having a plan in place. This holds true for planning your financial goals too. Having a budget in mind is the first essential step to wealth creation, without which your earnings, expenses and savings will continue to remain haywire. Vineet Patawari, co-founder, stock analytic app StockEdge and financial market learning portal Elearnmarkets.com, says, "Having a budget gives you the visibility of, and thus, the control on your spending. With a budget, you will know if you have any surplus money and you will be able to implement smart saving and investing strategies. It makes forecasting future expenses and savings easier. Thus, you can plan your overall finances better."

Saving early: We do not start earning in lakhs at the beginning of our career. This makes many of us postpone our savings until the date we earn more than we can spend. However, it is this wrong attitude that impedes our financial growth. Raj Khosla, founder and managing director, MyMoneyMantra.com, says, "Saving and investing early unlocks the magic of compounding interest and also builds long-term security. Small contributions over working life years will create a sizeable corpus which serves as protection against life's vicissitudes."

Goal-based investments: It is not enough to invest your earnings. Investing with a purpose in mind is what enhances the effectiveness of your investments. "While saving money, we need to look beyond just the returns. The investments need to be aligned with one's goals and needs in terms of liquidity and tenure. We also need to keep in mind the tax efficiency, risk profile, regular income needs, etc.," says Suresh Sadagopan, founder, Ladder7 Financial Advisories.

Curtailing your expenses: Frequent partying at high-end clubs, expensive dining at fine restaurants, aggressive spending decisions or spending long before you have got that bonus point towards your spendthrift nature. Putting a stop to unwanted expenses or opting for budgeted ways of enjoying yourself helps in greater savings. CS Sudheer, founder and CEO, Suvision Holdings, says, "Track spending with a budget and manage utility consumption to cut expenses. Make a shopping list and stick to it. Avoid impulsive purchases and stop eating out. Postpone non-essential purchases by at least a month and buy only if you feel the need, after this time period."

Not relying on loans: Money has a determining effect on happiness as increased purchasing power ensures that you have what you need. However, the advent of online lending platforms and reduced lending rates has resulted in many people borrowing to meet their ends. While this may help you imminently, it may cause you to lose your earnings in the form of interest repayments. Vishvajit Sonagara, founder and CEO, Quicko.com, says, "Having multiple loans and credit cards are very common. One should choose to pay off a higher interest rate loan over a lower interest rate loan. You can save or invest the difference in interest and earn returns on the same. For example, Arjun has taken up a home loan at 9.25% interest rate with an outstanding balance of Rs 10 lakh. He has also taken up a car loan at 12.50% interest rate with the same outstanding balance. Arjun stands to save Rs 12,500 if he chooses to pay off the car loan (which has a higher interest rate) over the home loan. Arjun can earn 6-8% interest by putting it away in a savings account or 10-15% (depending on market performance) by investing in equity markets."