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How to Manage Your Wealth in the Long Run?

Updated on August 3, 2020
talesofvikram profile image

Vikram Brahma has over a decade of corporate working experience. By profession, he is a Digital Entrepreneur, Blogger, Writer and YouTuber.

We need to manage our wealth
We need to manage our wealth

Introduction

If you ask anyone to write down some important goals for life, you will always find 100% of people will say they need more money. In whatever country you travel and ask the same question, you will get the same answer. It is true people love and needs money to survive and to enjoy life.

There is nothing wrong if you want more money in your life. Those people who dream of becoming rich and wealthy will going to work hard to achieve their goals. I admire those people and they can be role models for society. If you become rich then you can enjoy and afford a different kind of lifestyle. You can live life in your terms and that’s why everybody wants to become rich.

In this article, I am going to share a system which can help you to manage your current income. Once you will start applying these principles you can see growth in your wealth. But the golden rule is to start applying these rules as soon as possible. But the sad part is no one will ever teach you these secrets either in school, colleges or even in your jobs.

Need to spend daily on food items
Need to spend daily on food items

Current Expenditure

The first important aspect related to wealth creation is how much income you earn in a month. As you know you need to spend money daily. In this case, you need to break your monthly income into different baskets. As per this rule, first, you need to set aside 50% of our total income for current expenses.

For example, food, rent, electricity bill, petrol, daily travelling cost, children expenses, education etc all come under this category. In other words, these expenses are also known as a daily living expenditure or in simple words cost of living. Whatever may be your income, you have to spend some amount on a day to day basis. The expense can vary depending upon your earning capacity.

Is luxury shopping a need or want?
Is luxury shopping a need or want?

Lifestyle Expenditure

There are some expenses which we need to incur occasionally and this depends upon our monthly habit. So, the next 10% to 15% of our income we can spend on such activities. These activities are known as lifestyle maintenance cost.

For example, eating out in a fine restaurant, shopping for some expensive dress or accessories, watching movies in the cinema hall or if you want to purchase an expensive car etc.

In this case, I will like to tell you another golden rule i.e never take loan especially personal loans to purchase any luxury items. It may include watches, mobiles, holidays, television set, cars etc. Instead, first, purchase some assets and when those assets start giving income then go ahead and acquire your luxury items.

If you want to take a loan for purchasing your favourite car then make sure to pay the maximum down payment. You have to remember to save 10% to 15% continuously for many months then go ahead and purchase your lifestyle products. But the best way we will increase your ability to earn more.

Future Reserve And Investment

Till now we have talked about two major expenses i.e current and lifestyle. For this, we need to spend up to 60% to 65% of our total income. Now, we need to save another 30% for our future reserve and investment. So, make it 15% each but you can change ratios as per your need.

In simple words, 15% you have to save for any future requirements. It may include anything like travelling, marriage, children higher education, medical fund etc. And next 15% you need to invest in those itineraries which will help you become financially free in future. This is one area which majority of people ignore and that’s why people go broke in the long run.

Whatever may be your income you have to invest in something and make your money work for you even when you sleep at night. For this, you can invest in the stock, mutual funds, gold, equities, real estate, fixed deposit, post office schemes etc.

Apart from real estate, you don’t need any heavy invest in any other schemes. But whatever investment you do, first learn about them from some mentors, do research or read books, watch videos and then do some intelligent investments.

Self Education And Charity

Now we need to have and reinvest at least last 10% on self-education and charity. There is a famous quote which says “formal education will make you a living but self-education will make a fortune”.

So, never ignore this part. Learning is a life long process and the moment you feel “I know everything” you will stop learning and growing. So, spend 10% on self-education and for charity.

When you will give to others with open arms, this universe will return you with multiple arms. Do whatever charity you believe in. If you want to take care of local dogs do it, if you like to give away to poor people, do it. It’s all up to you how you spend 10% of your income. But make sure no one takes advantage of this situation.

If you like this article, then try to read another article related to money matter. This article will give you clues about why people lose their money and go broke in the long run.

https://hubpages.com/money/5-Ways-People-Lose-Their-Money-And-Go-Broke

Conclusion

Let me share and break down this system in numbers. Suppose Mr A earns Rs. 30,000/- per month. So, as per this system, he should spend his monthly income like the below-mentioned chart.

1. 50% i.e Rs. 15,000/- on current expenses
2. 10% to 15% i.e Rs. 3000/- on luxuries
3. 15% i.e Rs. 4500/- on future reserves
4. 15% i.e Rs. 4500/- on investment
5. 10% i.e Rs. 3000/- on self-education and charity

Out of above all, investment and self-education will help you to earn more in future. I hope you have enjoyed reading and understood this topic well.

This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2020 Vikram Brahma

Comments

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    • talesofvikram profile imageAUTHOR

      Vikram Brahma 

      7 weeks ago from Assam, India

      Thank you, Kabi Sir, for your comments.

    • profile image

      Kabiranjan 

      7 weeks ago

      Enjoyed reading I thought many of us already have plans or following Go going

    • talesofvikram profile imageAUTHOR

      Vikram Brahma 

      7 weeks ago from Assam, India

      Thank you, Liz, you are very supportive and forward-looking individual. I am sure you are very good at managing your finance.

    • talesofvikram profile imageAUTHOR

      Vikram Brahma 

      7 weeks ago from Assam, India

      Hi Drew, you are welcome and I am happy that this article of mine could help you in some way. Yes, if you are good at saving, you are going in the right direction. I am sure you will be very good at managing your wealth. Thanks.

    • Eurofile profile image

      Liz Westwood 

      7 weeks ago from UK

      I was especially intrigued by your inclusion of a form of tithing in your financial plan. You have given a helpful and interesting financial breakdown.

    • Drew Agravante profile image

      Drew Agravante 

      7 weeks ago from Philippines, Currently in Qatar

      Thanks for the nice tips. I'll try to use it. I know how to save, but I'm not really good at managing my money.

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