The Rule of 9-9-9 to Create Wealth
Every one of us wants to achieve success and earn a lot of money to lead a luxurious life. It is very much true that all of us cannot own a company which is as big as TCS or Reliance, yet at the same time, it is quite possible to earn a handsome amount for being able to afford a lavish lifestyle. Follow this 9-9-9 tips to create wealth and enjoy life.
Pay All Debts That Have an Interest Rate > 9 Percent
With the increasing interest rates, all the debts that have an interest rate more than 9 percent would fall in this category. Pay off all the obligations that have an interest rate higher than what you can earn by investing in a risk-free investment.
Assume a risk-free investment gives you 8% to 9% returns (Liquid Funds, Ultra Short Term Funds, Fixed Maturity Plans, and Company Deposits would fall in this category) and you have a loan on which you pay 11% interest. In such a case it would be better for you to invest your money in the risk-free investment and use the interest income (plus some extra) to pay off the interest on the loan.
Any loan that has a higher interest rate should be paid back as early as possible otherwise the interest liability continues rising and your debt burden goes up over time.
Save At Least 9 Months of Necessary Expenses in Savings
Everybody has their monthly expenses. This includes basics like clothing, food, housing EMIs, travel and more. Barring expenses on luxury, it would be a smart thought to know the amount you require every month. At any point in time, it is advisable to put at least 9 months of necessary expenses in savings.
Where to Invest: This money should ideally be invested in risk-free instruments and easily gettable. A bank saving account or fixed deposits are the best options to park this money.
Save 9 Percent of Your Monthly Income for Retirement
Once you’re done with saving up to meet your expenses, you should be saving at least 9 percent of your monthly income for retirement. This looks like a low saving rate for us Indians, yet this is the best minimum that one attempt to achieve.
Where to Invest: These funds should ideally be parked in long-term investment options (like a mutual fund or PPF) depending on your risk taking capacities. It is advisable to keep this investment for a long period of time (for 15 to 20 years) and imagine the kind of corpus that you would have at the end of this time period. The power of compounding comes in and the funds multiply over the time period.
Initially following these steps may seem difficult. But followed diligently and with discipline, it does become possible. And by following these steps, you would soon be debt free and have sustained savings. This, in turn, can compound over time leading to large wealth for you.
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