Wealth creation - much sought after but rarely practiced!

Everybody wants to be wealthy? Right! – What a dumb question to ask? Not really, as you shall see -

What do you expect a wealthy man to have? A strong financial balance sheet; a reasonably good health; and, a rational mind which continuously updates itself for financial (if not all) decision making (among other things).

Now look around you (no need to pry, it is easily apparent) to realize how we practice wealth or value destruction through some choices we make –

1. How many of us have a Balance Sheet? Don’t kid yourself by saying that since you are a salaried person, it is not mandatory for you to prepare a balance sheet. Without a balance sheet, how accurately would you know, what exactly are your assets, liabilities and net worth? What is the rate of growth of your net worth over the last year etc. etc.? Without a clue about this, how will you know how far you are from a financially safe retirement corpus?

2. How many of us go for an annual health check-up? How many of us keep a track of our vital health parameters and file records, so that in case there is an emergency hospitalization, the doctor on duty can quickly access the relevant medical records to know the history and proceed on an appropriate plan of action without losing time? In such an event, the potential damage health-wise and in financial terms can have long term consequence. But, then who cares? This is a typical ploy of an insurance agent to sell more insurance (or so you think)! Ok, this need not be the truth, but then neither is it far from it!

3. Most employers mandate that you have to submit details of your tax saving investments or any other financial detail, latest by some date in December, January or February. This is to help the department responsible for deduction of taxes and payment of salaries, so that it has adequate time on hand to take care of both without mistakes and delays. However, how many us, start planning and executing this activity from April 1^st, the first day of the new financial year? Apart from being way ahead of any deadline, this will also give us more time in deciding which is the best way to go about it, rather than do these in a hurry, when we have no time to evaluate the decisions we take nor evaluate the recommendations we receive.

4. You have some on-going insurance policies for which you pay a significant premium. A new-kid-off-the-block who is a self-styled financial planner says that they are not worth continuing, that you should surrender these policies, collect the surrender value and insure yourself with term insurance policies and invest in mutual funds and other long term investments. Now this guy is a relative on your wife’s side of the family and you are politely avoiding him, citing a busy schedule. Are you inclined towards finding out, whether there is a grain of truth in what he says? Do you have the where withal to evaluate the pros and cons? What will you do?

5. Sorry, to leave you with a teaser rather than a set of New Year Resolutions which would have made for a feel-good read but then you would have done nothing about it and hence it would not have left any impact on your thinking. You read in the papers sometime back that electricity consumers have been allowed to switch their service providers in the suburbs of Mumbai and that Reliance Infrastructure which is your provider has been found to have charges higher than their competitor Tata Power, because they buy power from Tata’s and supply to their customers, the higher bill you pay is simply the mark up which Reliance levies on its customers. Now, what you have to do is simple – i.e. if you are a Reliance customer, find out the potential savings per month and calculate the total value of your savings till retirement, assuming that you will be saving this amount and earning a return of 10% p.a. on the same.

Rounding off with another gem from the Oracle of Oklahoma, Warren Buffet “I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.”

What is the fun in having NYRs which are 7-foot bars, if we fail to notice & clear the 1-foot bars?