There is a thin line of difference between earning money and building wealth. Even a fresh college graduate or a MBA pass-out gets salary credited on the last day of a month. They do earn money, but being wealthy takes a millionaire mindset and different set of strategies. Creating wealth or making more money need clear financial acumen and strong experience. Not all who earn has that perseverance and knowledge to make money and be richer with time.
Primarily building wealth is a function of three aspects: savings, time and return. There are multiple ways of earning more money. That may be active or passive way of income. Active ways are directly investing money to buy an asset like real estate and passive way is to make more money with the help of earned money. One may start own website, blog or start own venture, all he or she needs is savings, time and return. Now let’s have a look at how these three pillars work in making money.
Once you start earning it is essential to have your own piggy bank. It can be as small as fifty rupees. But savings is critical at every age for an earning individual. It is rightly said that you start making money when your expenditure is less than your income. With no saving, one cannot dream to have own venture or invest in something massive for long term return. Hence it is advisable to have budgeted expense every month and one should try to keep average spending below the same.
Perseverance is the key to make money. Impatient individuals can rarely build wealth. For passive income, money multiplies with time, even when you sleep. Value of real estate also proliferates with years. Your investments, share and stock prices also varies with time depending on market scenario. Even if you start your own venture, to reach the marginal profit you need to have patience at least for a year. Your savings is also related with time. The more time you keep earning, the more savings you will end up having in your kitty.
The third pillar of being rich is financial return. One you save, you start investing the same in diverse fields, and with time those investments start yielding returns. Fixed deposits, KVP are few such investments which mature with time and give hefty returns. Even while starting entrepreneurial venture, with time there come returns. This return may be saved and further utilized in other fields. For the best return in stocks and shares, one must have sound financial knowledge and experience.
Hence to be a millionaire in long term, apart from experience, integrity and knowledge, one must keep an eye on the above three pillars. Savings, time and return are cyclical phenomenon. Once you get return, you need to save a certain amount of the same to further invest. One of the mistakes millennial does is to splurge the entire return. Unfortunately they cannot build wealth, rather just earn money.