It is often said that wealth building isn’t really a mystery---that is, it’s not hard to understand, although it’s hard to do. That is because it’s easier to just drift through life without a financial plan, wandering from one thing to another. To really build wealth, you have to know where you are going and also have the discipline to do the things it takes to get there. That’s why Dave Ramsey, one of America’s trusted voices on money and business, argues that taking control of your money is 20 percent head knowledge and 80 percent behavior.
What if you would save Rs.577 a month, every month, for investment toward your wealth building for the next 45 years of your working lifetime, say, starting from age 20 till age 65? If you would put that Rs.577 every month and invest it in a stock market, which gives you an average return rate of 12 percent on compound interests, every year it would be worth more, which means every year you will earn more. That adds up pretty quickly until eventually, the compound interests just goes nuts. Here’s how it works: After 1 year, you will have Rs.5,366; after 2 years: Rs.15,616; after 6 years: Rs.59,748; after 20 years: Rs.530,488; after 30 years: Rs.1,776,817; after 40 years: Rs.5,547,728; after 45 years: Rs.10,000,000, which is Rs.1 crore. That is, you could become a crorepati with just Rs.577 a month! Or, even if an estimated inflation rate of 3 percent per year is taken into consideration and adjusted, you would still end up as a lakhpati in today’s currency value.
In the grand scheme of life, Rs.577 isn’t a lot of money. Anyone can save that amount just by cutting down on two or three kilograms of meat-consumption in a month. My point is, most of us in Nagaland could figure out how to get an extra Rs.577 in our monthly budget. In today’s currency value, Rs.577 is just a two days’ wage of a manual laborer. Or, think of it this way: Rs.577 could become only a day’s wage after 15 years, or half-a-day’s wage after 30 years. So, it gets easier, not harder, each year.
Why, then, haven’t so many people started saving at least a little for investment? It’s because the thought of saving money for their future has never occurred in their head. They skip discipline in managing their money and try to go straight to enjoyment. Even if they earn a lot of money, something else always sneaks in and takes away that amount. For example, that expense may be on a new leather sofa or some other things which are not absolutely necessary to have. As a result, their income dries up easily and they find themselves financially struggling more and more. But they are unwilling to change their spending habits. Something in their spirits just won’t let them make a commitment to change their messy situation. They are like a baby sitting in a poopy diaper and resisting change. It’s like they are saying, “Sure it stinks, but it’s warm and it’s mine.”
When it comes to saving money and building wealth over the long haul, nothing is more important than discipline. Indeed, discipline is hard, it hurts, and it requires sacrifice. Quite honestly, no one likes discipline, but we all love what discipline produces. For example, when we are disciplined with our diet and exercise, we become healthier; when we are disciplined in taking care of our families and friends, our relationships are better. Similarly, when we are disciplined in managing our money, we can actually grow our wealth and enjoy our later years.
Once we have decided to get into this kind of investing, our next step would be to find some investment experts who can guide us. Because of the complexity of today’s financial markets, it is very important to have trusted advisors who make a living in investing. In advanced countries, people can afford to hire the services of stockbrokers who help their clients to determine and recommend stocks and mutual funds. Or sometimes they hire financial advisors who may plan and manage investment funds. These advisors could be Certified Financial Analysts (CFA), Certified Financial Planners (CFP), or Registered Investment Advisors (RIA).
As for those of us in Nagaland, we may not have many financial experts available to help us. Until such a time when we could expect the luxury of having our own CFA, CFP, and RIA, some private commercial banks could possibly step in to provide this much needed service. The banks could create an automatic withdrawal system from the checking accounts of their clients so that the amounts withdrawn can be invested in the purchase of stocks and mutual funds on their behalf. For example, the ICICI Bank, if I’m not mistaken, seems to have such a facility for investors in other parts of India: they handle setting up investment accounts and offer their professional opinions to their clients for investment.
Or, our State Government could step in and lend its services---setting up an investment account, keeping a watchful eye on the financial markets, and keeping track of the investors’ portfolio on a daily basis---on behalf of all its members at no cost to them. Such an effort could be a win-win for both the government and the individual investors.
So, do you think this is doable? I really believe it is, if our politicians have the political will and the people---you and me---have the discipline to do the things it takes to get there.
