Want to create Wealth. But how? - Part 1

I and a group of my friends all in their late 30s and early 40s met up for a small get-together. The topics ranged from current affairs, to politics to elections to economy. One friend popped up a question that got everybody’s attention. The question got people to think, talk, discuss and debate. I could see lot of curiosity, understanding and mis-understanding around this question,

The question was, “What is the best way to create and increase our wealth that will help us take care of all our obligations and help us lead a comfortable life?

All of us want to create wealth. Want our money to grow. However I realised one thing out of that discussion. We are either partially aware or ignorant of how to do that. Our understanding is like those blind men who were asked to describe an elephant. Their description was limited to the area of an elephant they touched.

During that intense and involved discussion we wanted to see the entire elephant. I guess for two reasons.

1.      To know whether the route(s) that we have followed is the right one with regards to our savings and investments?

2.      Will it meet our present and future needs & wants?

Prakash, who has taken help of professionals for planning his finances, started asking questions to the group.

In this blog, I will share the first 2 questions that he asked and answered.

1.      How many of you have medical insurance or hospitalisation cover plan? Some hands went up. He said with sky rocketing medical costs, if you do not have this one in place it can eat up most of your savings. This is the first thing you should have.

2.      He asked us to think of one situation. While travelling from this get-together if something happens to you and you lose your life.

Have you made provisions for the family so that they continue to get the monthly income and are able to take care of their needs and wants?

While some of us thought of this question earlier, but not as deeply as he made us think. He highlighted the importance of having a term insurance plan. The thumb rule at our age (late 30s and early 40s) he said is to have at least 10 times cover of our annual income.

Deepak who became restless by now said, you are only scaring us and asking us to put money in something that is protection against risks. The money given in the above two is not going to give any returns. And hence the wealth creation question still remains unanswered.

‘I agree’ said Prakash. The above two are crucial or else they can be show stoppers. The first point (hospitalisation cover) may turn out to be leaking buckets and can give a serious blow in wealth creation journey. The second one (term insurance plan) can severely compromise your aspiration of quality life for your family in your absence.

So what should we do?

1.      If you do not have medical insurance, check out for health/medical/hospitalisation insurance plans.

2.      Check out your term insurance cover. If you do not have an adequate cover check for : (a) Term insurance plan at competitive premiums from a good life insurance company; (b) Check their claim settlement ratio.

3.      Importantly take action and cover yourself.

Note: These are the key points I presented out of the discussion over get-together. I advise you to take a professional help while planning for your insurance and financial needs.

We started with these two questions.

1.      To know whether the route(s) that we have followed is the right one with regards to our savings and investments?

2.      Will it meet our present and future needs and wants in future?

In the subsequent blog I will share with you some interesting insights Prakash gave us on our savings & investment patterns and whether that needs a relook.