Individuals with limited savings may find amassing a significant amount towards investments tricky. Similarly, developing a corpus for critical goals may look daunting when challenged with a limited income. However, things don't always have to be that complicated. You can enjoy investing and build a significant corpus, even on a shoestring budget. Let’s learn how!
Know the Challenges
Contrary to popular belief, limited savings are not the actual barrier to developing an enormous investment corpus. Instead, other elements significantly shrink your corpus and you find meeting your goals challenging. They include the following :
Impulse Purchases
Running a household without a budget, opting for ‘retail therapy’ and shopping without a list may make you a victim of impulse purchases. This tendency somehow reinforces your spending habit. Consequently, you experience a shortage of money and fail to make investments.
Wrong Investment Instruments
To obtain the best benefits of investment, you need to choose the right investment vehicle. However, you may fail to do so. For instance, instead of letting your money grow at a certain pace, you choose slow and traditional investment methods like recurring, bank account deposits, insurance plans, etc. These traditional investment options are less likely to grow your money faster and help you beat inflation.
Waiting for the right time
Many times, people wait till they earn well enough to start investing for a corpus. They presume that any kind of investment would take away a massive slice of their income every month; hence its best to defer it until a specific earning level is achieved. And when they finally begin building a corpus, they have already lost a lot of valuable years. But that’s not the ideal approach. You can start with a sma;; investment of as less as ₹500 every month and develop a corpus of ₹5,00,000 in the twenty years at a standard 12% return rate.
Trend Spending
It is more of a psychological barrier to investment. You may spend your money irrationally just to maintain a certain kind of lifestyle. This eventually pushes you to spend more than you earn. Besides failing to invest, it may push you into a debt trap.
Wants Vs Needs
To budget perfectly, you should know the difference between wants and needs. For instance, housing, healthcare, utilities and food fall under the ‘needs’ category. On the other hand, eating out, travelling, big purchases etc., reflect the 'wants.' This is, indeed, a subjective matter; however, if you keep giving in to your ‘wants’ often, you may find it hard to save money and invest in inappropriate instruments.
Depreciating Assets
If you invest in depreciating assets, they won't bring you any returns in the future. When you resell them, you will end up with a sum that is way less than the original purchase price. Such assets may include furniture, expensive smartphones, high-end laptops etc.
No Financial Goal
This is one of the biggest obstructions to savings and investments. When you believe that you earn to spend, you don't make any budget or plan for the future. This prevents you from setting logical financial goals.
How to Build a Huge Investment Corpus?
Now that you know the barriers to investments, it's probably easier for you to find ways to overcome them and build a solid corpus. You can consider the following steps to make your job easier:
Set a Specific Goal
Setting your financial goals and adding value and a time horizon to them can help you a lot. It can limit your discretionary spending and aid your investment-related decisions. Once your goals are clear, you will find yourself motivated to set aside the required amount every month for investment.
Amplify Your Money’s power
Don't let your money sit idle in your bank account or locker. Instead, invest it in a suitable instrument that allows it to grow faster than the inflation rate. You must consider diversifying your portfolio by investing across asset classes like equity, debt, real estate, etc. Diversification will keep your investment safer and ultimately help you achieve your goal.
Don’t wait, start early
Put your money to work as early as you can! You should not wait to reach a specific income level before you begin investing because the more you defer it, the more burdensome it would be for you later. Start with the amount within your comfort zone and gradually increase it with your income level.
Track Your Spending
Keep a close eye on your spending. Remember, identifying the sources of expenditure is critical to developing a habit of savings and investment. It's because once you know where your money is going, you can easily close the unnecessary outlets. Making a budget and sticking to it can help you combat overspending thus leaving you with an adequate amount of money to invest regularly.
Conclusion
To conclude, developing a significant corpus doesn't require you to save and invest a huge amount. All you need to do is develop a healthy and consistent investment habit. This way, you will be able to meet your financial goals and elevate your financial status.