10 secrets of How to Become a Crorepati from Scratch
What does it take to
become a Crorepati from scratch? Is it luck, talent, or hard work?
The truth is, it is a
combination of all three, plus some other factors that you may not be aware of.
In this article, we will
uncover 10 secrets that can help you overcome the challenges and obstacles that
stand between you and your financial goals. Whether you want to start a
business, invest in the stock market, or create a passive income stream, these
secrets will guide you on your journey to becoming a Crorepati from scratch.
1. UNDERSTAND GOOD DEBT V/S BAD DEBT:
Crorepatis are very savvy
when it comes to Debt. They are okay with Good Debt but avoid Bad Debt
Good Debt are those debts
wherein you are taking a loan to purchase assets that will generate INCOME for
you.
(Bank Overdraft, Student
Loans, Home Loan) Good Debts help you create more income and build Wealth and assets.
Even a Housing Loan is a
good debt as it will help you buy a Home which is an asset that appreciates in
value over time and of course also gives you shelter, comfort, and tax
benefits.
Bad Debts like Credit
cards carry very high-interest rates and fees. Credit Cards can also damage
your CIBIL score hurting your ability to get loans at lower rates.
Car Loan is also an
example of Bad debt as they tend to have high interest rates and also Car is a
depreciating asset.
Personal Loan is the
WORST Debt to have as they not only have very high interest rates but also have
no collateral. Personal Loans are easy to get and hence many fall into the trap
of getting easy money and end up getting caught in the cycle of debt leading to
financial distress.
If you dear readers, are
already in any of these Bad Debts, get out of them as early as possible.
1. Only borrow money when
you absolutely need to.
2. Make more than the
minimum payment on your debts.
3. Pay off high-interest
debt first.
Debt, when used properly,
can be a great tool to achieve your financial goals.
2. LIVE WITHIN YOUR MEANS:
Crorepatis tell your
money WHERE to go rather than wondering WHERE DID MY MONEY GO?
Budgeting helps you in
this. If you don’t know where the paisa goes, soon you’ll lose the rupees… then
the house.
Remember that there is a
huge gap between WANTING TO SAVE & ACTUAL SAVING and this gap can be easily
filled by BUDGETING.
The BEST budget according
to Financial Planners is
50% Needs
30% Wants
20% Savings
Each month that you
manage to spend less than your budget allows, you’re effectively contributing
to the reservoir of your lifelong wealth.
This will lead to more
savings at the end of each month in turn will help you avoid getting into debt
too!
3. INVEST DON'T JUST SAVE:
Once Crorepati people
have created a budget and saved some money, they go ahead and do something more
important than just saving money. They Invest!
Invest the difference between your income and expenses.
Invest your savings
according to your asset allocation, risk horizon, and investment time frame.
Work with a financial
advisor to create an investment plan that is right for you.
Automate your savings and
investments so that you can save and invest more money without even having to
think about it.
Investing rather than
just saving, is a smart way to grow your wealth and achieve your financial
goals. Saving alone is not enough, as inflation can erode the purchasing power
of your money over time. Investing helps you beat inflation and earn compound interest,
which means earning interest on your interest.
For example, if you
invest Rs.10,000 in an asset that pays 10% annual interest, after one year you
will have Rs.11,000. If you reinvest the interest, after another year you will
have Rs.12,100. That’s Rs.100 more than if you had just saved the money without
investing.
The difference becomes
even bigger over time, as you can see in this table:
Year
Amount (Rs.)
Interest Earned(Rs.)
1
10,000
1,000
2
11,000
1,100
3
12,100
1,210
4
13,310
1,331
5
14,641
1,464
This is the power of
compound interest, and it can help you grow your money faster than saving
alone.
4. DIVERSIFY AND HAVE MORE INCOME STREAMS:
Depending month after
month on your salary can be frustrating and Crorepatis make sure they have
multiple streams of income. With rising living standards, peer pressure, and
social pressure, it’s become a necessity to start earning more and more.
Do understand that the
more different ways you make money, the more financially secure you will be.
Crorepatis learn and
implement ways to earn money outside of their regular jobs. Utilise fully your
time and resources like maybe renting your car or taking tuition during
weekends, tailoring, writing, getting rent, interest on deposits, dividends
from investments, etc. to ramp your income streams.
Having multiple income
streams not only bolsters financial stability but also accelerates wealth
accumulation. It offers a safety net during economic downturns and allows
individuals to take advantage of various opportunities for growth and financial
independence.
That’s what Crorepati
does and that’s what you have to do to hasten your journey of scaling up to
become a Millionaire.
5. JUDICIOUSLY USE THE SALARY RAISE AND BONUS:
Getting swayed by the ads
of the latest iPhone, Tanishq, and Amazon is understandable, but they
make your salary rise and bonus disappear as fast as it appears.
Using this EXTRA money
towards
a) Settling Pending Bills
and clearing Debt (especially high-interest debt like Credit Card bills) is the
best way to speed up your journey to becoming a Millionaire.
b) If you do not have an
emergency fund or have a smallish amount, scaling up the all-important
Emergency Fund will help your Finances get a Shock Absorber
c) Buy that long pending
BIG EXPENSE like the Jewellery for your wife, the long pending car for the
family.
Instead of going for the oh-so-easy-to-get EMI, use this Bonus Money and
Salary rise to fund that BIG expense. This helps in avoiding debt and the peace
of mind of getting a good asset to the family.
d) Top-up Insurance
Cover.
Whenever anyone takes insurance in the beginning the cover is small. As
you start growing in wealth and also as the responsibilities increase, the
insurance coverage should also compulsorily go up, and using the Salary Rise and
Bonus is the way Crorepati do and so should you.
Remember, Salary Rise and
Bonus is NOT FREE MONEY. It's given to us as you have worked hard and you
deserve it. Use it judiciously and hasten your journey towards becoming a
Millionaire.
"Supercharge your wealth creation with Top-up SIP. Elevate your monthly investments by 10% each year to outpace inflation.
Just as plants need a FERTILIZER boost for healthy growth, a SIP top-up accelerates your financial journey.
For example, consider a SIP with an initial investment of Rs. 10,000 per month for 20 years, assuming a 12% annual return. This would result in a corpus of Rs. 1.14 crores. However, by adding a monthly top-up of Rs. 2000, your corpus after 20 years would grow to Rs. 1.56 crores. That's an extra Rs. 42 lakhs!
#DontRetireRich #WealthOfWisdom"
6. USE TAX LAWS TO MAXIMUM BENEFITS
Crorepati are adept at
leveraging tax laws to their advantage, and adopting similar strategies can
certainly expedite your path toward Crorepati status.
Take advantage of all the
deductions and credits that you are eligible for.
Some investments are more
tax-efficient than others. For example, an investment in EQUITY LINKED SAVINGS
SCHEME is much better than an Endowment or money-back for tax-saving purposes.
Efficient usage of tax
benefits helps even in Asset Protection (insurance) and Asset Gathering (Equity
Investments)
Always consult a
qualified tax professional before making any tax-related decisions.
7. FOLLOW ASSET ALLOCATION RELIGIOUSLY
Asset allocation is the
process of dividing your investment portfolio among different asset classes,
such as stocks, bonds, and cash. If you have observed closely, Crorepati follow
Asset Allocation and use it strategically to increase their Wealth.
Using Equities for
Growth, Bonds/Dividends/Rent for regular income, and Liquid funds for Emergency
helps the Crorepati not only take advantage of volatility in different assets
but also helps reduce risks.
Do note that asset Allocation depends on each individual and varies
depending on your goals, risk profile, and time horizon.
Asset Allocation is also
a very dynamic process and needs constant monitoring and hence a Mentor would
be highly recommended.
Following the Asset
Allocation strategy prudently not only helps you book profit at higher levels
but also enter assets at lower levels.
Asset Allocation has the potential to deliver Above-Average Returns with
below-average volatility!
8. UNDERSTAND THE POWER OF GOALS
Identifying a Goal helps
in adapting the asset class that matches the comfort level and time horizon of
the goal.
Crorepati has measurable
goals which help in better planning and sharper focus.
Clear-cut goals also help in tracking the progress of the goal and doing course corrections if needed.
Do remember PERSONAL
FINANCE IS PERSONAL FOR A REASON.
Everyone has different needs and goals requiring a distinct
portfolio.
Focus on YOUR goals and needs so that a financial plan is tailored to
your unique situation.
By setting clear
measurable goals, you can increase your chances of achieving financial success.
Crorepati know this and put it to work in their own lives.
9. READY TO SAY “NO” WHEN NECESSARY :
One of the traits that
set Crorepati apart is their ability to say “no” when necessary,
especially in financial matters.
Crorepati is not afraid
to say no to people, even if it means disappointing them. They know that they
have to do what is best for them and their financial goals.
Saying NO when required
is a very powerful skill that helps Crorepati avoid unnecessary conflict and
financial regret.
Crorepati knows that
taking on too much risk can lead to financial ruin. That’s why they are careful
to evaluate all of their investment options carefully before making a decision.
Many times, we have seen
how a relative/neighbor/ friend who was doing nothing suddenly becomes a
Financial Expert once they become an Agent.
And they lure you into
Exotic products with all accompanying fancy brochures. And the vast majority
are obliged to fall into the trap of financial ruin by buying those products
which otherwise they would have NEVER EVEN CONSIDERED.
BE BOLD. BE READY TO SAY “NO”. After all, it’s YOUR hard-earned
money.
If you are in deep financial trouble, will these people come and help
you? No? Then why get into obligation and fall into a pit?
Avoid them like a plague, be bold, and say “NO” !!!
A vast majority also fall
into a financial trap when a friend/relative asks for a LOAN.
Being able to say NO,
especially to financial traps plays a highly crucial factor in the journey
towards Crorepati status.
10. HAVE A MENTOR
For many Crorepati,
having a mentor has been a crucial factor in their journey to financial
success. By having a mentor, you can learn new things, build your network, and
grow as a professional.
A mentor provides
valuable guidance and expertise, helping individuals navigate the complexities
of wealth accumulation. They offer insights based on their own experiences and
can steer mentees away from common pitfalls.
A survey by wealth firm Spectrem Group reveals that 85% of Crorepati with
more than $25 million have a Financial Mentor.
Having a mentor can be a
valuable asset on your journey to becoming a millionaire. If you are serious
about becoming a millionaire, I encourage you to find a mentor who can help you
achieve your financial goals.
Note: Having a mentor can be very helpful and beneficial, but it is not the
only factor. A mentor can provide guidance, advice, support, and inspiration,
but ultimately, it is up to the individual to take action and make the most of
their potential.
Becoming a Crorepati is
not easy, but it is possible if you are disciplined and persistent. Follow the
tips above and you will be well on your way to achieving your financial goals.
1. UNDERSTAND GOOD DEBT V/S BAD DEBT :
2. LIVE WITHIN YOUR MEANS :
3. INVEST DON'T JUST SAVE :
4. DIVERSIFY AND HAVE MORE INCOME STREAMS:
5. JUDICIOUSLY USE THE SALARY RAISE AND BONUS:
6. USE TAX LAWS TO MAXIMUM BENEFITS
7. FOLLOW ASSET ALLOCATION RELIGIOUSLY
8. UNDERSTAND THE POWER OF GOALS
9. READY TO SAY “NO”
10. HAVE A MENTOR
So…in short these are the
10 secrets. Make a note of them. Follow judiciously and see yourself on the
expressway to becoming a Crorepati.
Wishing you all the very
best on your Financial Journey.
Srikanth Matrubai
Author — Don’t Retire
Rich
Volatility Coach
You are strongly encouraged to consult your financial planner before making any decision regarding this investment.
The views expressed here are the author's personal views and should not be interpreted as a recommendation to invest/avoid.
