Simple 'Mantras' for Wealth Creation

Wealth creation is a very simple exercise in reality, but many people have a tendency to make it look complicated. And this complication is created by those who want to create wealth at the cost of others. This includes a host of advisors and product pushers who complicate the matters without focussing on the crux of wealth creation, that is matching resources with the underlying needs. The problem with most advisors is that they take a very 'myopic' or 'short term' view of the client's situation, without taking into account the importance of fostering long term relationships. The gullible client falls into the trap laid by the maze of information floating around in the media in the shape of short cut schemes of becoming rich overnight. But, fortunately, there are no short cuts to 'Wealth creation'. One has to practice the simple mantras to accumulate wealth steadily over a period of time. Here are five time tested mantras of wealth creation:

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  Goals need to be defined: We all have certain dreams, these dreams are the starting point for determining our life's goals. But these goals must be defined properly and nurtured towards their fulfilment. Each goal must be reasonably linked to the resources available presently as also the resources that can be raised in the future.
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  Earnings need to be saved: Indians take pride in being called a 'nation of savers'. Our net savings ratio as a percentage of GDP has consistently been over 35%. Savings is a good habit which if learnt in the childhood lasts a lifetime. We must inculcate the importance of saving to the younger generation. Regular savings provide the cushion to tide over emergency situations in life like illness, accident etc.
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  Savings need to be invested: Earnings saved is only 25% of the job done. Unless saving is invested profitably, wealth creation remains a distant dream. Many of us have never thought of savings beyond the bank deposits or guaranteed return government schemes. But, little to our knowledge, most of us are destroying wealth by putting our entire life long earnings into these schemes, as most of the appreciation in their value is eaten up by inflation. We must diversify our investments to gain in the long run. Investment in riskier assets like equity is not a bad idea, provided we understand its worth.
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  Expenses need to be budgeted: With the advent of development in the Indian economy, our expenses are multiplying fast. Many earstwhile luxeries like mobile phone and laptop have become necessities in modern life. But one must control the temptation to acquire a product unless it is matched to your need. We need to budget our expenses: a classification into essential and non-essential expenditure will help us tide over this dilemma. Most non essential expenditure needs to be foregone or at least postponed.
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  Debts need to be limited: Easy availabilty of credit often lures people to go in for non essential puchases, thus imparing their capacity to repay the debts taken. Debts must be properly analysed, otherwise we would lead ourselves into a 'debt trap', which can ultimately lead to a 'death trap'. The recent global meltdown, that ocurred in 2008-09, is a grim reminder of the reckless recourse to debt without having proper earnings/ resources to match it.

To practice these five wealth creation mantras, we need to have a better understanding of the financial world, either independently or with the help of a trusted advisor. 'Financial Wellness' is definitely a step towards attaining 'Physical Wellness'.