4 Smart Ways to Manage Your Wealth if You’re a Beginner

Are you looking to manage your money in a better way? Do you want more from every rupee you invest? You may consider the four smart ways to manage your wealth. It helps you achieve your financial goals and even save on taxes. If you are regular and disciplined with your investments, you may create wealth over some time. However, you will have to understand your risk tolerance to construct an optimum portfolio and build wealth in the long-run. 

Let’s take a look at the four smart ways to manage your wealth.

1. Create a Budget

You may consider creating a budget that accounts for every rupee you earn and spend. You will always have money for the things you need if you make a budget. You may consider making a budget to stay away from the debt trap.

A budget encourages you first to save your money and spend it at a later time. You could stay away from high-interest loans such as a personal loan, as you have sufficient funds to meet your needs. 

You may consider making a budget to store funds for a financial emergency. It helps you avoid liquidating your investments and losing out on attractive returns. You don’t have to borrow using your credit card, which charges a higher interest rate. An emergency fund may protect your wealth during a financial crisis. 

2. Re-evaluate your risk tolerance

The COVID-19 pandemic may have affected your risk tolerance. For example, you may have invested your money in mid-cap funds before the pandemic. However, due to your current financial circumstances, you cannot invest in these funds. 

You may have to reevaluate your risk tolerance to match the changing conditions. You may not be able to bear losses with your investment at this point. You could look at creating wealth at a more opportune time and concentrate on safeguarding your portfolio. 

3. Re-balance your portfolio 

You may have constructed your portfolio depending on your investment objectives, age, risk tolerance, and return expectation. It means selecting the asset classes such as equity, debt, gold holdings, and putting your money in them. However, the economic conditions may have changed after the pandemic.

Also Read: 4 Reasons Why Mutual Funds are a Better Investment Than Real Estate

You may consider taking a close look at your portfolio. You could have a higher exposure to equity investments in comparison to fixed income in your portfolio, after the recent rally in the stock market. You will have to rebalance your portfolio with fixed-income investments, to match your investment objectives and risk profile. Increase or decrease the proportion of your investments in certain asset classes to harmonise your portfolio. 

4. Reduce your debt

You may consider borrowing as spending tomorrow’s income today. You could use a bonus or inheritance money to repay all your high-interest loans such as a personal loan or credit card dues. It saves you from the problem of managing hefty interest expenses and protects your wealth. 

You could also look at earning a little extra money to get rid of debt. You may consider upgrading your skills in your relevant field to increase your salary. Focus on monetising your hobbies or take up online tutoring to create multiple sources of income. It helps you manage your wealth as you won’t have to depend on your emergency fund or liquidate essential investments in a financial crisis. 

You may consider availing of a health insurance plan to protect your wealth during a medical emergency. You may look at saving your money and spending what is left. It helps you achieve your financial goals without having to borrow money. It would be smart to rebalance your portfolio to match investment objectives and risk appetite. Finally, you must learn to manage money to stay financially secure. 

For any clarifications/feedback on the topic, please contact the writer at cleyon.dsouza@cleartax.in

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