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Maintaining a stable financial portfolio is vital in implementing your financial goals and can be achieved by regulating your economic activity with every passing decade of your life.
Building wealth starts with proper financial planning for every working professional. However, millennials experience anxiety while mapping out their future finances or retirement plans due to the wealth-building obstacles they face today, such as long-term loans, marriage expenses, or a long-awaited vacation. Their reluctance towards early financial planning has thus garnered them a fair share of criticism from previous generations in recent times.
Maintaining a stable financial portfolio is vital in implementing your financial goals and can be achieved by regulating your economic activity with every passing decade of your life. Milan Ganatra, Founder and CEO, 1Silverbullet, suggests a decade-wise step-by-step guide to keep yourself on track with your financial roadmap while continually building that extra portion of wealth.
Step 1 –
Explaining how to build wealth in your 20s, Milan Ganatra suggests:-
Invest in yourself:
As you embark on your professional journey, maximize your growth opportunities through active networking and upskilling yourself through skill-development courses. Earn a specialization in a domain that not only complements your skillset but also offers optimal earning potential.
Create an emergency fund:
It would be advisable to keep aside funds to get through anywhere between 3-6 months in the event of unforeseen emergencies. A high-yield savings account would be the ideal medium to safeguard such a nature as they generate significantly higher interests than a standard savings account.
Avoid debt:
You cannot build substantial wealth if your income is consistently diverted towards paying off bank loans or credit card bills. Create a monthly budget and track your expenses daily using a spreadsheet or an app to ensure that your expenditures do not cross the determined threshold. Refraining from luxury purchases is another excellent way of avoiding debt.
Invest a percentage of income on your retirement:
You could bolster your retirement plans by allocating at least 15 percent of your gross annual income throughout your career. If you cannot do so at present, save steadily and ensure to increase your contributions with time to hit the 15 percent mark or surpass it. Retirement accounts such as VPFs (Voluntary Provident Fund), PPFs (Public Provident Fund), or NPS (National Pension Scheme) can be opened to save your contributions in addition to EPFs (Employee Provident Fund).
Step 2-
Suggesting how to build wealth in your 30s, Ganatra adds –
Increase your investment appetite:
It would be advisable to increase your appetite for investment following the growth of your disposable income. There are several avenues to explore to build your portfolio; you could invest in mutual funds and SIPs (Systematic Investment Plans) periodically to reap spectacular compounded returns in the long run. In addition, delving into real estate wouldn’t be a bad idea if you have adequate resources to spare. Owning property acts as the ideal option for family accommodation and allows you to enjoy a sizeable monthly revenue stream in the form of rental income.
Start paying off your debt:
Paying off debts is essential in achieving sound financial health. Automating your credit card bills and EMIs ensures their timely payment while enabling you to improve your credit score. Once your debts are cleared, you can truly maximize your savings and achieve other financial goals.
Step 3-
On how to build wealth in your 40s, he suggested: –
Increase your earning capacity:
This decade represents the peak earning years for most professionals and is an excellent time to expand your skillset and demand substantial compensation for your years of expertise. It would be a wise move to enrich your resume with highly sought-after certifications and competencies that would enhance your worth in the job market considerably.
Ramp up retirement savings:
In your 40s, it is recommended to save anywhere between 12-15 percent of your yearly income for your retirement. However, if you haven’t started yet, you might have to allocate around 18-20 percent of your annual earnings to make up lost ground.
Discuss finances with your children:
As a parent, it is vital to lead your children towards obtaining a better understanding of the value of financial stability and independence. Creating a savings account for them is a great way to encourage them to make intelligent financial decisions and start saving early.
Step 4 –
Opining on how to build wealth in your 50s, he further said:-
Set a retirement goal:
With retirement right around the corner moving into your 50s, it would be advisable to save as much as 6 times your current salary in the twilight of your professional career. While the intricate details might vary from person to person, it is essential to create and execute a customized set of plans to ensure the timely accomplishment of your retirement goal.
Diversify & assess your portfolio:
It is always preferable to maintain a diverse portfolio consisting of fine balance between stocks and bonds. However as you draw closer to retirement, it would be ideal to reduce your investment in high-risk assets such as stocks and focus on increasing your fixed earning capacity through bonds.
“It is essential to understand that no matter where you stand in your financial journey; In your 20s, nestled safely within the comforts of your first apartment, or in your 30s, having accumulated adequate savings for early retirement. It’s always beneficial to stay true to your financial objectives, considering the ever-changing economic landscape,” he concluded.
