Publication details: Money Manager – CNBC Bajar – 06-05-2016

Responses, opinion and view from Kartik Jhaveri.

Money can be earned, but wealth has to be created. Each one of us aspires to be rich and wealthy. But due to lack of awareness and at times sheer idleness, we fail to make optimum utilisation of our existing resources and simply derail from the journey to wealth creation.

In order to kickstart wealth creation, we need to embrace 9 habits.

What are these habits in your view?

budget calculation

Image courtesy :

1. Get control of expenses

  • Most of us have strong intentions when it comes to saving money. But if you do not know how much is coming into your bank account and how much is going out, chances are you will not know how much you can devote to your goals.
  • Most of us generally do not track our income and spending.
  • Prepare a budget. List all your fixed, variable and discretionary expenses. Find out areas where you can cut down spending and generate a more healthy surplus.
  • Spend on needs and not wants.

That is all very nice and good… But how can we implement it? Is there some good habit for that?

Image courtesy :

Image courtesy :

2. Reverse your thinking

  • Most people spend some money, pay their bills and then save what’s left.
  • Ideally, you should be saving for your financial goals first, paying your bills and and then consider spending the money you have left over.
  • Use the Income – Investment = Expenses formula!

Tell us a good habit to invest. Is there some guru mantra?


Image courtesy :

3. Don’t just save…. Invest!

  • Saving and investing are 2 different ideas.
  • Saving is a good habit, but without investing, your money simply sleeps. You need to make money work for you.
  • Investing seems like a complex task – choosing the right investment product, analysing, reviewing and restructuring. All of us are ready with excuses – I have no time; I do not know where to invest; Equities? Too risky for me!
  • If you cannot devote time to extensive research, then investing in mutual funds is a good option. You get the benefits of professional management as well as diversification of risk.
  • While investing, it is important to follow certain key points – Start investing early; Invest regularly; Pay attention to asset allocation.
  • If you cannot do any of the above, just beat inflation – that’s good enough too!

What about financial planning? Does that play a role somewhere?

Image courtesy :

Image courtesy :

4. Set financial goals and avoid ad-hoc investments

  • While investing your surplus is important, it is equally important to have a clear sense of direction while doing so. Adopt a goal based investment strategy.
  • Set financial goals, quantify them and set a time frame.
  • Besides setting financial goals, it is important to prioritize them.
  • Create a financial plan. It will tell you the goals you need to provide for, the target amount (factoring inflation) needed and the number of years in which it is required. This will help you figure out how much money you need to set aside every month or so as a lumpsum to provide for your goals.

So once the planning is done – what is the next good habit on the list?

Image courtesy :

Image courtesy :

5. Don’t just plan… Execute!

  • Simply planning will not help you achieve anything. It provides the starting point for achievement of your financial goals.
  • Financial discipline plays a very important role in creating long term wealth.
  • Having an execution plan in place will give you a sense of direction and help you stay on track with your goals.

What is the next good habit?

Image courtesy :

Image courtesy :

6. Have a solid risk management package

  • Assess your life insurance needs and make sure you have an adequate life cover to take care of all outstanding loans, provide for all financial goals and provide a substantial monthly income for your family, in case of any eventuality. A term policy is a good option here.
  • It is also important to protect your assets from any adverse happenings. This helps to keep your financial goals on track as you do not need to dip into your savings to pay for any major repairs.
  • Along with life insurance, it is also prudent to have your health insurance in place. Any medical emergency results in a sudden outflow of money. This then hampers your financial goals as the additional surplus is diverted towards medical expenses. Having a family floater policy is a good option.

Can you also give some tips on loans and credit cards? Is avoiding them a good habit?

Image courtesy :

Image courtesy :

7. Stop overspending with credit

  • It is not a bad thing to have credit card accounts that you can use when you have emergency situations. But when you use those credit card accounts to develop spending habits that overwhelm your monthly income, then you are headed for trouble.
  • If you notice that your monthly credit card payments are starting to become more than your monthly income, then you need to break this bad financial habit quickly.
Image courtesy :

Image courtesy :

8. Avoid getting into too much debt

  • Debt can really weigh on your investment capability and also on already created wealth.
  • Assess the need for it and only if necessary opt for it. Avoid taking loans for luxury related things.
  • 25% of your income must be invested. So accordingly maximum loan can be 40-50% of your income provided you invest 25% and live within the balance 25%.

We have now spoken about 8 good habits. What’s the 9th one?

Image courtesy :

Image courtesy :

9. Use Leverage

  • Leverage is a method of achieving inorganic growth. In simpler words, it deals with taking loans. In this regard, one has to be very careful. This is a calculated risk.
  • Taking a loan is good option if it is used for the purchase of another asset like a home and you are able to make more returns than the interest you pay on such debts.
  • Taking a loan is a good way to create more business profit. Eg. buying new machines, premises, company etc.


+91-22-4002 4043 / 44 / 45


Nariman Point, Mumbai


10:30am – 6:30pm