Creating financial health for comfort

A good part of our adult lives is governed by the Three C’s that play a decisive role in how much money we have to lead a comfortable life. We strive to create wealth only to consume while maintaining a certain standard of living. The remaining wealth is then conserved for future use. Thus, balance between the creation, consumption, and conservation of our wealth is essential.

The creation or perhaps we should say, constant creation of wealth is obviously the first towards leading a comfortable life. Those of us who are in the middle income group cannot and should not depend solely on the paycheck we receive at the end of every month to add to our financial bottom line. There are other means – legal of course – to do this.

The first rule is: invest, don’t just save. The concept of savings is already ingrained in the Indian psyche. No sooner do we start earning then we begin to save for various big ticket expenses like housing, education, marriage, and even emergencies.

Our savings could be made more fruitful if we combined them with investing. While savings in bank deposits and the like earn a fixed income, investing in options that offer compounded interest is a sure way to grow our money.

If keeping a tab on the stock markets is not possible for an individual investor, then he can very well try investing through the mutual fund route. A small allocation in income or growth funds would ensure a higher return. If one wants to make a less risky investment, he can put the money in a traditional balanced fund and an income fund.

One can also go for other investment options like real estate, gold, and so on after making a careful assessment of their future prospects. If an individual is considering investing in property, it must be in a location where the price is likely to appreciate. If not, the best justification for the investment is to use the property personally.

There’s no escaping the consumption of wealth. Like death and taxes, it’s one of those certainties of life, regardless of how conservative we are and how much we earn. However, what we can definitely control is how much we spend, and on what.

It’s worth bearing in mind that most of the luminaries who are figuring on the lists of the super-rich live well below their means. If that’s good enough for Warren Buffett and Narayana Murthy surely we can all give it a try. Prioritizing a budget, and then sticking to it, is the way to go.

Since, we have to spend on essential items, it’s worth investing a little time to ensure we get the best deal for our money. Opting for a full cash payment instead of equated monthly installments (EMIs) is a god idea. Most dealers can be talked into discounts on outright purchases. The EMI option is best reserved for items that will last far beyond the date of the last installment.

While expenses are inevitable, our focus should be on combining savings and consuming. It’s always a good idea to keep tax implications in mind before making any investment decisions.

If we manage the first C, that is, creating wealth, prudently it greatly reduces the difficulty of managing the conservation part. This is where all the saving and investing we did as part of creating wealth is actually out to use. Conserving wealth is just as important as creating wealth since most of the conserved money will be used when we are not creating it. Trained finance professionals according to investor’s goals can identify financial options that suit his/her needs. Thus, it makes sense to get the best possible advice regarding how to conserve wealth for the future, even as it comes at a price.