5 wealth-building money lessons CA says people learn too late in their lives
5 Wealth Creation Money Truths CA Teaches Too Late in Life, As Per These Individuals
Making wealth is not about earning lots of money. This is because making wealth is about how early you started, how you have been consistent in saving and investing money, and how you have managed risks and decisions. According to many Chartered Accountants (CAs), most people regret not knowing some essential money facts in their early days. The facts are very basic and effective yet unfortunately known only when time is wasted.
In this article, we will examine five important money management lessons to build wealth that CAs often state people usually understand too late in life, made easy to understand in a way that anyone can start applying early to secure their financial futures.
Lesson 1: Invest ASAP – Your Bigest AssetValue Is Time
Research: “Why People Learn This Late”
Most people put off investing for the following reasons:
“They believe investing is a risk”
They believe they do not earn enough
They want to “enjoy now” and save for later
They think that when their incomes rise, they are able to invest more
CAs frequently claim this to be the worst financial blunder people commit.
The Power of Compounding
Compounding is the earning of returns on the returns. The sooner you begin, the more the effect of compounding.
Example:
Person A begins his investment with ₹5,000 every month at age 25
Person B invests ₹10,000 every month starting at age 35
Both of them invest until age 60 with an annual return of 12%
???? Person A invests less; however, Person A will end up richer than Person B.
Time is more valuable than money. The early bird catches more worms.
CA’s Advice
Start investing once you begin to earn money
Even small SIPs (₹500-
Don’t wait for the “right time”
memoirs
Let compounding handle the hard work
Why This Matters for Wealth Building
We noticed that Americans spend
Reduces pressure in later life
Enables You to be Adventurous Early
Stays within budget
Assists in attaining goals of life such as home, retirement, and education of children easily
Lesson 2
Income Growth Alone Will Not Make You Rich
Common Misconception
People believe:
“After my pay rises, I shall start saving and investing.”
However, CAs notice individuals who earn high incomes but are struggling financially.
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When income increases, expenses will follow:
Bigger house
More expensive car
Luxury gadgets
Frequent Travel
Higher EMI
This is known as lifestyle inflation, and this kind of inflation will prevent wealth generation.
CA’s Real World Observation
People who earn ₹30,000 or less save more (in terms of percentages) than people who earn ₹
It is created by habit, not by income
Golden Rule Suggested by CAs The Golden Rule
“Save first, spend later.”
As soon as the salary is credited:
Save/invest a fixed portion
Then spend the remainder
It is not the other way around.
Why This Lesson Comes Late
The reason for the
People recognize this only when:
EMIs stack up
Expenses: Out of Control
Income rises but savings don’t
“Billions in Retirement’ combines the
Key Takeaway
Income versus Savings: Wealth is a function of savings rate, not income
Control Lifestyle Inflation Early
With a
More investment with each pay raise
Lesson #3: Not Having Debt is as Important as Investing
Good Debt vs Bad Debt
As already stated,
CAs will often say:
“Not all debt is bad, but most people misuse debt.”
Good Debt:
Home loan (reasonable)
Education loan (skill building)
Bad Debt:
Credit Card Dues
International Loans
Buy-now-pay-l
Lifestyle Loans
Why People Learn This Too Late
“Debt feels easy and benign at first: take money from one
“Only ₹5,000
‘I’ll pay it next month’
“Everyone uses credit cards”
But slowly:
Interest accumulates
Interest
Cash flow problems arise
Stress levels rise
Investments cease
The Credit Card Trap
Many people don’t know that:
Interest rates of credit cards range from 36-48% per year
“Minimum Due Payment” ensures you are stuck in debt permanently
CAs find people wasting years of wealth-building on just paying interest.
CA’s Advice regarding Debt
CA advises
Avoid consumer debt altogether
Credit Cards
If you use credit cards, pay the full amount every month.
Don’t convert wants into EMIs
Finally,
Pay off high-interest loans first
Why This Lesson is so Essential
Interest will be working against you
Debt hinders investing capacity
Financial independence will no longer be achievable with huge levels of debt
Lecture 4: Financial Planning is Not the Privilege of the Rich
Common Belief
“I don’t make enough to be able to do financial planning.”
CAs completely disagree with such an attitude.
Why Financial Planning is Important to Everyone
Financial planning assists:
Set Goals
Most parents are
Allocate money properly
Manage Risks
No Financial Chaos
Planning prevents money from moving randomly.
“Regions in Which People Fail Without Planning” Title Page Abstract
There was no emergency fund.
No insurance
Random investments
No clarity on retirement
Emergency Fund – Frequently Overlooked
An emergency
CAs explain, “One realizes the importance of CA only after:”
Job loss
Medical emergency
Business failure
The emergency fund should provide for 6 to 12 months of living expenses.
Insurance Planning – A Painful Late Lesson
Many people purchase:
Costly ULIP
Incorrect Insurance Products
No health cover
They can only realize their errors in times of emergencies.
CA’s Recommendation
Purchase term insurance at an early age
Purchase health insure even when the company offers one.
Split insurance and investment(linkedinsurance
Why People Regret This Later
——–|———
*
Medical costs increase with agePremiums Rise
Health problems restrict choices
The family becomes financially vulnerable
Lesson 5: Retirement Planning Must Begin at Age 20 and Not at 40
The Largest Surprise for Humanity
At 40-45, people suddenly ask:
“Will I have enough money to retire?”
By then, time is limited.
Why Retirement Planning Is Ignored
“It“I don’t see retirement coming when
Present goals are currently more relevant
No financial education
Overconfidence about future income
Moreover,
Reality According to CAs
People are living longer
Healthcare Costs Are on the Rise
The
Pension Schemes are limited
Children may not support financially
Early Retirement Planning Advantages
Small investments can yield large results.
Lower Monthly Burden
Financial independence achievable
Incentives or
Errors Commonly Made by Humans
Casing only on PF
Inflation being ignored
- No clear retirement target
Starting late
CA’s Golden Advice
The
Start retirement SIP with first salary
Enhance Contribution Gradually
Do not touch the retirement accounts
Plan for long life.
Why People Learn These Lessons Too Late
As per the CAs, the grounds are:
Insufficient financial literacy
Social pressure
Short-term thinking
Emotional financial decisions
TOEFL Specialized Test
How You Can Apply These Lessons Early
There are several ways that you
Begin investing now, even if it is only a small amount
Control Costs as Revenues Increase
Aggressively Avoid Bad Debt
Make a financial plan with set goals
Begin retirement planning today
Conclusion
In conclusion
CAs frequently utter:
“The greatest regret is not having acted early.”
Building wealth is not hard. It needs: Family – Pat Incons Right decisions at the right time
—Oscar A When these five takeaways are applied from the early stages of one’s life, financial stress decreases, freedom increases, and wealth can be gained regardless of financial levels.
