Building Your Home Brick by Brick - Home Loan Blog - Tata Capital

Building your Home and Wealth

Mar 07, 2017

Everyone wants to be wealthy. But becoming wealthy overnight is something that happens only to one-in-a-million. For the rest of people, the path to wealth is slow and requires a lot of discipline and common sense.

Experts suggest that people should think about wealth-creation in phases. Though it can be called by other names too, fact is that a person needs to ensure that firstly, his basic standards of living are maintained. Secondly, there is scope for ensuring that future living standards are also maintained.

Of course it is easier said than done. It requires a lot of effort to build wealth in this manner.

One must first move towards ensuring that current standards are maintained. So it's best to continue earning as much as possible and also keep some amounts for emergency or unplanned expenditures. It's also necessary to protect various kinds of risks by buying adequate life insurance, health insurance, disability insurance, property insurance, etc. If you have purchased a house using home loan, then you should buy an insurance to cover your housing loan too. If you are planning to purchase a house on loan, then don't go overboard and use the full home loan eligibility.

With current needs taken care of, one also needs to save and invest to ensure that there is no shortage of money in future, most importantly in his retirement. So preservation of future living standards, at least in line with inflation should be one of the goals of investments.

Now different assets and investments need to be linked to these two types of goals for each investor. One can think of this as building a house from scratch. The first thing that needs to be done is to build a strong foundation. This is about preserving the current lifestyle. So it's mainly about ensuring that you earn well and also to have all risks insured. You should also have some money as emergency funds to cover unplanned expenses, which would not be met by insurance.

The next step after building the foundation will be to put up the rest of the walls and roof. These are your savings and investments for ensuring that future lifestyle is maintained. You can also purchase more income generating assets during the course of your life and use the income from those assets to further boost your savings for future.