In this thought-provoking blog, get ready to embark on a journey of introspection. The upcoming content is designed to stimulate your mind and challenge your current actions, promising to be a life-altering experience. The profound insights to be shared have already proven transformative for many, hinting at a future where these revelations could lead to financial success.
Yesterday, a chance encounter at a party introduced me to a dedicated follower who likened my blogs to engaging Netflix documentaries. This inspired a vision for the blog’s future – a platform offering vital information for aspiring millionaires. Each piece of advice I impart is rooted in my personal experiences, making it practical and applicable to your life.
Recently, I had the privilege of meeting a self-made millionaire in Gurgaon, who at the age of 50, has achieved remarkable success in the real estate industry. While the exact figures may vary, his story demonstrates the power of starting from scratch and the potential to thrive. Notably, he manages multiple sites in Gurgaon, including an expansive 500-acre location. This serves as a testament to the possibilities that await those willing to venture into entrepreneurship.
An intriguing revelation surfaces as the concept of doubling money in four years takes center stage. Through a simple but powerful explanation of the “Rule of 72,” it imparts an essential financial insight. By earning an annual return of 18%, one can witness their capital double within four years. This revelation, intertwined with the individual’s journey, underscores the practicality of such financial growth.
As the narrative progresses, it becomes evident that the real magic lies in patience and consistent returns. The 50-year-old protagonist embarks on a path of financial growth, projected to transform his 50 crores into a staggering 100 crores by the time he reaches 54. The example of 1.5% monthly returns illustrates the attainability of substantial growth, especially with a substantial capital base.
The central theme of a 50-year-old entrepreneur’s journey serves as an example that transcends industries. The emphasis on dedicating a lifetime to a single pursuit echoes the millionaire’s focus on real estate, igniting a dialogue on commitment and its role in success.
The power of compounding finds its place in this narrative through the Rule of 72, which elucidates the potential for capital doubling with an annual return of 18%. This principle blends seamlessly into the entrepreneur’s story, underlining the practicality of substantial growth over time.
A compelling projection unfolds as the protagonist’s capital experiences consistent growth. While acknowledging the crucial role of taxes, the narrative delves into a hypothetical future where, by age 70, the initial 50 crores could potentially swell to a staggering 1600 crores. Though conscious of potential variables and nuances, the concept’s foundation remains strong: dedication, consistent returns, and calculated risk-taking breed substantial financial transformation.
It concludes with a reflection on the entrepreneur’s early start at 16, with a rough estimation that by age 22, a capital of around 40 lakhs would be amassed. This lays the groundwork for an awe-inspiring progression, leading to a potential legacy exceeding 1000 crores for future generations.
Many businessmen take more than this return. Now we have taken an example of real estate business. There are many such examples. If they are earning money according to 3% per month, then their calculation will be completely different. Now what will be their calculation, if a man is starting from here, he is at the age of 50 years and has a capital of 50 crores. He earns according to 3%. So how much will he have in 70 years and how much money will he have at the age of 22 and you will be shocked to see. What is important here? It is important that at the age of 22, can we get 37 lakhs? If we have to reach here, if we do not have this goal, then this amount can be less because many people are starting from today. At the age of 22, most people are in college, studying, so they do not think about earning money. What is important is that three things are important in this calculation.
Number one, you should have knowledge about the power of compounding. Now, who does not have knowledge about the power of compounding. Many people go, who assume that 5 crores, 6 crores, 3 crores win. 6 crores may not have happened, it must have been 5 crores. For example, a man won 5 crores, but you must have heard that even after winning 5 crores, that man came back on the road. He made everything zero because he did not know this. If I talk about most of you today, and most of you assume that the lottery is won, you got 5 crores. So my question is, what will you do with that 5 crores? I am telling you genuinely, many people will think that I will go to travel the world. I will buy this car, I will buy this phone, I will buy this phone for myself, I will buy this phone for my parents, I will buy this phone for my mother because they are full. They are full from inside because they see richness in these things.
You understand that if a person is rich, then he has all this, then he is rich. First he has this, and then he has all that you are thinking. So most of the people when they get money, they immediately spend it and as soon as they spend money, what will be the problem? As soon as a person, for example, from the age of 22 to the age of 26, for 4 years, he doubled his money. He made 40 lakhs 80 lakhs. So if he made 40 lakhs 80 lakhs, then he will not be able to keep that 40 lakhs with him. He will spend it. In those 4 years, the 40 lakhs that came compounded, it will not come to him. It will be spent before that, and what is bigger than that, if someone has this money at the age of 22, then that 40 lakhs will not be left after that.
The “50, 30, 20” formula provides a structured approach to managing finances, especially for those earning less than ₹4 lakhs per month.
Allocating 50% of your income for necessities like rent, bills, and groceries ensures a solid foundation. This prudent allocation allows for the fulfillment of essential needs while preventing unnecessary overspending. The formula encourages individuals to live within their means, which is essential for long-term financial stability.
The next component involves desires, encompassing activities that enhance one’s quality of life. However, these desires must be managed carefully, constituting only 30% of the income. Purchasing an iPhone or enjoying a vacation with friends falls under this category. While not eliminating enjoyment, this allocation promotes moderation and responsible financial choices.
Investments, the key to wealth accumulation, constitute the final 20% of the formula. This portion is set aside solely for growing one’s financial assets. This practice encourages individuals to embrace the power of compounding early in their careers, aiding in the realization of long-term financial goals.
It’s important to realize that earnings aren’t just the gross income earned. Taxes and other deductions play a role, affecting the actual income available for allocation. Hence, understanding the net income facilitates more accurate financial planning.
The core principle here is the importance of the interest rate in growing your investments. In your father’s jewelry business, he aimed for a 3% monthly return on his ₹1 crore investments. Achieving more than a 5% return made him very happy, emphasizing the significance of interest rates. The formula to increase money is PRT (Principal Rate Time).
Regarding SIP (Systematic Investment Plan), it’s not enough to solely rely on it to become wealthy. The “50, 30, 20” formula applies especially to those earning less than ₹4 lakhs per month. This formula dictates that 50% of your income should cover essential needs like housing, bills, and basic necessities. The remaining 50% should be divided, with 30% for savings and investments, and 20% for discretionary spending.
Starting SIP in your twenties is beneficial due to the power of compounding, but it’s essential to understand that just relying on SIP alone won’t necessarily make you rich. Combining it with a strategic financial approach, like the “50, 30, 20” formula, can help you effectively manage your finances and achieve your financial goals.
For those earning less than ₹4 lakhs per month, the formula entails allocating 50% for needs, 30% for desires, and 20% for investments.
However, as income increases beyond ₹4 lakhs, the formula adapts to a more aggressive approach. With the newfound ability to invest more, the allocation shifts to 50% for investments, 30% for desires, and 20% for needs. This approach capitalizes on the potential for significant wealth accumulation by emphasizing investments.
While adhering to the formula, it’s important to remember that only relying on SIPs (Systematic Investment Plans) isn’t sufficient to achieve substantial wealth. SIPs offer consistent contributions, but the impact might not be immediate. To accelerate growth, investing in skill development becomes pivotal. Cultivating expertise can lead to higher earnings potential, thereby contributing significantly to financial success.
Regarding SIPs, starting small is beneficial, but real financial progress often comes from expanding knowledge and diversifying investment avenues. SIPs can be employed in various vehicles, such as mutual funds, index funds, or stocks. However, venturing into stock investments requires comprehensive learning to make informed choices.
Opening a Demat account is a gateway to stock investments. Consideration of leading brokers and learning the basics of stock trading is essential before diving into this realm. Acquiring financial literacy empowers individuals to make intelligent investment decisions, maximizing the potential of their funds.
In the pursuit of financial success, it’s essential to invest not only in monetary avenues but also in developing one’s skills. This concept is highlighted through the example of a waiter at a party. The crux lies in understanding that the value of earnings is directly proportional to the magnitude of problems one solves. In other words, the bigger the problem addressed, the greater the potential earnings.
The waiter’s job, though valuable, solves a common problem that many can address. However, venturing into spaces that tackle more complex problems, such as curing diseases or technological advancements, can yield substantial returns due to the uniqueness of the solution. This concept is rooted in the idea that financial growth arises from earning more rather than just investing or saving.
While SIPs play a role in wealth building, relying solely on them might not yield rapid financial progress. For young individuals in their 20s, enhancing skills and seeking opportunities that solve larger issues can result in higher income potential. The blog advises individuals to keep their financial goals ambitious and aligned with their capability to solve significant problems.
The “50, 30, 20” formula remains relevant, emphasizing the need to allocate earnings appropriately. It encourages individuals to invest in their skills, solving bigger problems, and thereby increasing their earning capacity. The underlying message is that in the journey to financial prosperity, earning more money by providing valuable solutions holds the key, alongside intelligent financial planning through allocations based on the formula. The blog concludes by hinting at forthcoming advanced concepts to delve deeper into this financial philosophy.
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