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5 Simple Ways To Get Rich By Doing Less

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Everyone dreams of becoming rich overnight. However, becoming rich does not have to be about becoming a millionaire with a beachside bungalow in Mumbai or win a lottery. It is about building wealth.

To build wealth, you need to have the right mindset and discipline. It is about ignoring the noise and focusing on attaining financial stability.

With the world staring at an approaching recession due to COVID-19, securing one's finances never seemed more important.

 

Here are some simple ways you can build wealth.

5 Simple Ways To Get Rich By Doing Less

1. Pay yourself first

How much ever you make, pay your future self first.

Minus your monthly living expenses and transfer the rest towards savings. It could be in the form of mutual fund SIPs, a government scheme, a recurring deposit or even just another savings bank account.

You could automate these contributions. Banks now provide Flexi savings accounts that convert the unutilised sum in your account into fixed deposits (FDs). There are auto deductions for RDs, small savings schemes like PPF and SIPs as well. Just provide the auto-debit instruction to your bank.

Ideally set the auto-deduction for the start of the month so that you are not tempted to spend your salary.

If you get a hike, either increase your contributions towards existing investments or add another investment to diversify earnings.

2. Make your money work for you- building passive income sources

Taking up multiple jobs just to "get-by" cannot be a long-term plan. It works when you are young, but as you get older you need to work less and earn more. This can only happen if you plan well in your younger days.

You need to build assets that pay you. Real estate is the most simple example. Renting our residential or commercial space is a great additional source of income.

 

You can get creative with your assets like placing hoardings for ads (if you live in a prime location), registering your car with a rental services company, lending money over P2P services, investing in an upcoming business, renting your godown to online retailers for storage, network marketing, etc.

When you set up low maintenance revenue streams, you can divert all the extra income you make from these towards building more assets (wealth) or convert it into savings. This way you can use your primary source of income to improve your lifestyle.

3. Index funds or equity-based mutual funds

Equity, shares, stocks- whatever you want to call it- make for the biggest percentage of net worth among ]all the billionaires on those Rich Lists that you read in the media. Mukesh Ambani became the richest person in Asia after shares of Reliance Industries Limited (where he holds around 49% stake) soared to new all-time highs.

The key plan here is: to make money in your sleep.

It may seem overwhelming to some to invest in the markets. This is why mutual funds exist. Give your money to an asset management company (mutual fund scheme providers) and let them invest for you.

If you want to be a DIY investor, you can bet your money on index-funds. Ace investor Warren Buffett also favours this form of investment for beginners as it is the simplest, cost-effective and safest way to diversify your equity investment.

Why?

Index funds are based on an underlying index like Nifty or Sensex. This means that these funds simply invest in the same stocks that form the index. Your returns from this fund will be the same as the movement in Nifty or Sensex.

What makes them safe is that Nifty 50 and Sensex, the benchmark indices of NSE and BSE, respectively, include large-cap companies, which are stable in their earnings. Also, these indices are revised every 6 months by an expert committee to keep any unstable stock out.

In the past, PNB and Yes Bank have been removed from Nifty 50 and replaced with other better performers.

On the other hand, investing money on individual stocks requires dedicated research, which could be difficult for someone who works in a different industry.

Index funds are a great form of passive equity investment for the long term.

Note that equity is not a quick money-making deal. It requires patience and should be looked at with a long term perspective, especially if you only investing in index funds.

4. Be a smart consumer

It is no secret that you can save more when you spend less.

You are bombarded with ads on your smartphone and laptop. It is important to ignore the marketing noise and adopt a minimalistic lifestyle where you only purchase what is needed. Wants are unlimited but needs are not.

The more time you spend on social media, the more tempted you are towards an extravagant lifestyle.

If you think hard enough, you can find many ways to save on daily expenses: cook food at home more often, iron/dry clean at home, etc. You can also delete shopping apps on your phone and opt for shopping over the browser. This way, you can avoid the notifications on "hot deals of the day."

Start small and watch your bank balance grow.

5. Surround yourself with the right people

American motivational speaker Jim Rohn famously said that we are the average of the five people we spend the most time with. The people closest to us affect our choices, our thinking and even our self-esteem.

If you cannot surround yourself with the right people literally, take advantage of the wealth of documented knowledge. Read blogs, listen to podcasts, read books and watch videos that educate you.

All the best business leaders you know, from Bill Gates to Ratan Tata, read books despite already being successful. In fact, many of these successful people have shared their favourite books over social media and even written books themselves.

Rich people know that learning never stops.

If not financial education, sharpen skills in your existing field. You could get a promotion at your workplace with additional certification or use it to become a self-employed expert.

Story first published: Friday, October 16, 2020, 20:31 [IST]
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