From savings to security: Laying the foundation for wealth

K S Manojkumar

Wealth creation begins the moment you decide to embark on the journey. Regardless of your income level, building wealth is possible from any starting point. This journey requires controlling impulsive spending, maintaining strict financial discipline, and avoiding excessive desires.

Once a strong, unwavering desire to build wealth is in place, the next step is to gradually build the foundations of your wealth.

Start by saving at least 10% of your monthly income. By the end of 12 months, you'll have saved an amount equal to one month's salary. Many people discover that they can quickly save the equivalent of six months’ salary once they realize they can run their expenses efficiently, even living on just 70% of their salary.

These savings should be set aside in a dedicated savings account, where they’ll serve as your emergency fund. This fund is meant for times of unforeseen circumstances and is not an investment tool. Instead of seeking high returns, the focus is on ensuring liquidity and security for emergencies.

An emergency fund is a powerful source of confidence—it provides a safety net if you lose your job, need to leave an unfulfilling position, or face an unexpected crisis.

With the emergency fund in place, you can confidently move to the next step: protecting yourself and your family with life and health insurance.

No amount of savings, emergencies funds can guarantee you protection from these two risks. They are simply too huge. Buying insurance is the only way out.

A sudden death of the primary breadwinner would directly throw the family back to square one. The only way to match an inflow equivalent of the main breadwinner's salary is to ensure that he or she has bought a life insurance cover which is at least ten times of it. Buying term insurance, for a fixed period, is always a better option than buying any other kind of insurance in this category.

You never know when a disease could strike, and when it does health insurers may first be reluctant to provide you with a cover, and when they do, it could come at a very high premium.

Armed with an emergency fund, a life and health cover, now you are ready to take the next plunge into creating wealth --- investment. All about it at our next meeting.