Essential personal finance rules that will help you create wealth

New Delhi: The Covid-19 pandemic, followed by India’s high inflation rate, has emphasised the importance of saving, investing, and creating wealth. Many people fear finding themselves in similar financial situations again. This mandates all of us to look at ways to start generating wealth in the long run.

Most people want to leave a legacy for their children and grandchildren, but they rarely follow through. When they are older, they lament the opportunities they did not take. However, as a financially aware citizen, you do not want to pass up the opportunity to remain economically independent, even if you do not wish to work.

Let us examine the starting point from which you can begin to generate wealth.

Check for financial stability

Before embarking on an investing journey, you must first establish financial stability for yourself and your family. Life is uncertain, but you can make your finances secure enough to use during times of uncertainty.

To deal with unexpected scenarios in your life, such as job loss, sudden disability in work due to illness or other reasons, and so on, you must create an emergency fund equal to at least 6 months of your expenses.

Invest at least 60% of your income

Long-term returns require you to invest 60% of your income in financial instruments. When making an investment, you should always have a financial goal in mind. A well-diversified portfolio will help you generate passive income and eventually achieve financial independence.

Get rid of your debts first

If you want to live a financially secure life, you must stop incurring unproductive debts. Productive debts are those that assist you in earning money or providing you with something of value. Your debt repayment priority should be to pay off inefficient debts first, followed by costly but productive debts.

Focus on your health

“My health has been my most costly investment. I would encourage everyone to invest the most in that,” stated Jhunjhunwala in one of his 2018 interviews.

Why don’t we apply his words early in our lives? As healthcare costs skyrocket as a result of the Covid-19 situation, we must all be prepared for the diseases and costs we may face. Getting health insurance for each member of the family may be a necessary step in the right direction.

Buying life insurance 

Your family will always rely on you even if you are not present, so you don't want to disappoint them. Life insurance could save your dependents, whether it’s to replace lost income, pay for your child's education, or provide financial security to your spouse.

There are numerous methods for quickly becoming wealthy available in the market. Quick tips would be far less effective than the process of first protecting yourself and then focusing on wealth and legacy.