What went wrong?
I started earning handsomely from the very beginning of my career, thanks to a relatively high paying job that I managed to land from my college campus. Yet, it took me a lot of time to make my first 1 crore in savings.
As a matter of fact, many of my friends who earned less than me, made their first one crore before me. Also, unlike many others, I was financially literate - having known many market instruments and having dabbled in stocks from the very beginning.
So, what went wrong? Why was I so bad at creating wealth? Turns out - even though I earned more and I knew a lot about "Finance", I just didn't figure out the real rules of the game.
The Real Game of Creating Wealth
When people talk about creating wealth, they focus mainly on earning, saving, investing etc. While earning, savings, investing are straight forward concepts, many a times you do not have a direct control on them. The real game is to figure out what do you do so that the "saving" actually happens, or what do you do to compel yourself to take the right choices about your investments, or how do you motivate yourself to stay the course etc.
Because of all my initial failures, I have sort of become an "authority" about what not to do! So, with that glowing credential, allow me to reveal the secrets to the fastest road to your first 1 crore.
1. Focus on the mechanics of savings, rather than the amount you save
First and foremost, stop saving manually and focus on setting up an automated system for savings.
This includes creating a Standing Instruction (SI) or Automated Clearance House (ACH) mandate that takes some amount from your account every month and put it to your investment account (it could be recurring deposit, MFs, etc.), without needing you to do anything.
It does not matter how small or big is the amount. What matters is something gets saved each month on the same date - rain or shine.
2. Create a team with your spouse / boyfriend / girlfriend / fiancé
Declare your plan to your spouse/significant other from the very beginning and take them into confidence. You will need to do it together. Let him or her contribute to this journey as well. Even moral support will do.
By agreeing to the plan together, you will be able to keep close eyes on your frivolous spending and reduce chances of occasional missteps such as extravagant expenses in shopping or travel.
3. Don’t track everything but plug the loopholes
They say, "If you can't measure it, you can't improve it". This is why you must start tracking your expenses for a few months. This includes, writing down your expenses, checking your credit card bills, going through your account transactions etc. each month.
But don't overdo this. You do not need to be pedantic with tracking expenses. You just need to largely identify the main loopholes that are leaking your wealth. Track your expenses till you plug those holes.
4. Understand the distinction between Needs and Wants
"Needs" encompass the essential expenses required for survival and well-being, such as food, shelter, clothing, healthcare, and education.
"Wants," on the other hand, represent non-essential desires and luxuries that enhance our quality of life but are not vital for survival, like dining out at expensive restaurants, luxury vacations, or high-end gadgets.
Until you meet your goal, focus on the "Needs" only. Build good habits and create a minimalist life.
5. Pay off Loans
As simple as it sounds, before you can invest and make any big plan, focus on paying off any loan you might have - including, education loan, car loan or personal loan (I can make an exception for house loan - although this might be good idea to even pay off your house loan).
Never do things like, taking loans to invest in stock market or crypto or such.
No instant gratification
Lastly, make a habit of literally watch your wealth grow! Open your investment accounts time to time and check how much you have progressed. After all, when it comes to building wealth, there is no instant gratification.