We either earn less or spend more. Sometimes it’s because we don’t save and some other times it is because we have lot of responsibilities. If all the above is not a problem, then we still have a problem because we invest poorly, get cheated or we just don’t focus on asset allocation.

Wondering all of above is not applicable to you and you are still not able to build wealth? It’s possible. Sometimes, it’s our economy and politics that just does not facilitate opportunities to grow. Sometimes, it’s our fear, lack of knowledge or past experience. We love fixed deposits but we don’t realize that generally low risk = low returns. We love liquid assets but then we forget that good liquidity means easy access, possibly leading to impulsive spending and of course lowering down of your portfolio ROI (Return on your investment). We continue to love Mr. Fixed Deposit, Mr. Gold and Mr. Real Estate. We don’t realize that inflation eats in to our returns and the greatest risk we have in front of us is that we will either die too early or too late.

So how does one get rich? Well, we are yet to find that secret formula. But what we can tell you are our four secrets to Get Rich.

1. Manage your personal finance by Metrics. Look at your critical ratios like Income to Saving, Liquidity, Cost of Insurance to total income & EMI to total income
2. Focus on Asset Allocation. Move in or out of the asset class based on your total exposure, age, risk tolerance and stage of your life.
3. Pay attention to taxes. Ensure you leverage every tax exemption. Leverage tax friendly asset class like equity
4. Kill the risks. Ensure you are adequately insured for Life & Health Insurance and as appropriate take Critical Illness & Personal Accident insurance.

So here is my dream.

One day, everyone on this planet will be free from all financial worries. We will save money. We will manage our financial risks. We will plan for our financial dreams and we will save for our goals. We will save taxes and make our will. We will spend what is left after saving and not the other way. We will save for our retirement. We will have an emergency corpus. We will continue to love Mr. Fixed Deposit, Mr. Gold & Mr. Real Estate but also romance with Mr. Mutual Fund.  We will not buy an insurance policy to “help our relative”. We will not reject term plan because it does not give any ‘returns’. We will measure real returns and track our asset allocation. We will not continue the job just because we don’t have a secondary health cover. We will not chase that ‘extra returns’. We will not wait till 31-March for tax investments. We will not sign on any blank forms. We will ensure all our documents are with us and not with the agent or CA. We will not buy that emotionally sold “Child Plan”. We will not buy when everyone is buying and we will not sell when markets are crashing. We will worry about “Time in the market” and not “Timing the market”. We will be financially fit, and happy happy.

(This article was originally published on indianotes website at this link)