Kaun Banega Crorepati is a question we all carry in our heart. We all wish goods things in life. It requires lot of money to fulfill these wishes. So we dream to become a crorepati (millionaire) oneday. Thereby fulfil all the wishes. Many of us actual make it to it. Many fail.
A crorepati means having wealth of more than a crore of rupees. At the same time, one needs to have enough liquid money to spend to maintain a good life. If you have wealth along with liabilities than you may actually not be a crorepati. There comes the concept of networth. It is the value of your assets minus liabilities. In true sense becoming crorepati means having a networth which is more than a crore of rupees. So let’s find out kaun banega crorepati (who will become a millionaire). A person can become crorepati if he or she,
1) Make saving a priority.
A person who makes saving priority will definitely can become a crorepati. No one can become wealthy overnight. Unless he or she receives some windfall gain like in Kaun banega crorepati show or inherit wealth from ancestor. To become wealthy one has to earn and save even at the cost of sacrifices in present life.
2) Earn more than adequate
As wealth creation requires money resource, the obvious way is to earn more. A single income, unless it is significant, cannot make you wealthy. You have to look for a secondary way of earning apart from your regular earning. Now-a-days there are many ways to earn secondary income. You may read our article 5 solid ways to earn an extra income to know more about it.
There are bad ways and good ways to earn. Bad ways of earning will never be sustainable nor will it allow you to enjoy the crorepati status. Always choose the good ways. It will need efforts and time. But that makes you real crorepati. You would be able to transfer the wealth to next generation.
3) Rational in spending
Human are generally irrational spender. It means people spend money more by emotion rather than actual need. To become crorepati one has to be frugal. So that you can save more. In market, avenues to spend are abundant. Discounts, Offers, advertisement etc are major attraction to spend money. You have to save yourself from all these by being more rational.
4) Discourage debt
On an average any debt entails in 40% extra cost. It means if you spend 100 by taking loan than actual expenditure will be around 140. That because of interest levied on it. It is another form of expenditure. Any goods bought with debt is not yours until you repay it. It also reduces value of your networth. There are certain good debts. House bought on loan to stay or to rent out is an example of good debt. Car bought on loan to commute or given on rent is another example of good debt. But other kind of debts are highly discouraged.
5) Invest early and consistently
Mere savings will not create wealth. To create wealth the money saved should earn more than current inflation. That is possible only through non-traditional investment.
Fixed Deposit, Recurring Deposits, National Saving Certificate, etc. are example of traditional investment. Equity, mutual funds, etc. are example of non-traditional investment. The traditional ways of investment are low in risk. Thereby low in return. It is more for preservation of capital. Non-traditional ways bear more risk. At the same time it gives more return.
Another two aspect about investment are time and regularity. Longer the period of investment, higher the accumulation. It is ideal to invest early. Further the investment need to be consistent. If we invest as and when basis then probability of creating the desired corpus is less.
The magic in wealth creation is compounding effect. A long duration investment earns interest, which again get invested. Thereby capital base increases which earn more interest. This is the compounding effect.
6) Keep crorepati goal front and Center
In the journey of life there will be lot of challenges. There will urgent need of money. Savings/invest missed to utilise the money for other pressing needs. But you have to keep your crorepati goal in front and centre. Your life should revolve around that priority only.
7) Work with an Investing Professional
It is a good idea to engage a financial advisor. He can work out your financial need in more professional ways. He can also guide you on investment and keep you on track for continuous effort to become a crorepati.
8) Put Your Plan on Repeat
last but not least becoming crorepati is not enough. You have to maintain it. You have to continue working to earn more. Stay focused to spend less and keep accumulating wealth.
Here are few tips to track your expenditure and savings.
1) Spend upto 50% or less of your take home income towards household expenditure. It include expenses on grocery, entertainment, utilisies, etc.
2) Invest 30% or more of your take home income
3) Your EMI cost should not be more than 30% your take home income
4) Top up your investment by 10% every year.
5) Here is an example to create ₹1 crore through SIP at different time period along with monthly investment in SIP required in an equity fund.
|
Time period in number of years |
10 |
15 |
20 |
25 |
30 |
|
SIP (in ₹) |
43,471 |
20,017 |
10,109 |
5,322 |
2,860 |
It is possible to become crorepati, If you make up your mind and follow the above principle. Though it may not be easy. The trick lies in starting early and enhance your income as much possible. Keep investing and accumulate wealth.
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