Wealth

Wealth is a lot of things. It is much more than just money.

• Merriam-Webster defines 'wealth' as abundance of valuable material possessions or resources.
• The United Nations definition of inclusive wealth is a monetary measure which includes the sum of natural, human, and physical assets. Natural capital includes land, forests, energy resources, and minerals. Human capital is the population's education and skills. Physical capital includes such things as machinery, buildings, and infrastructure.
• Wealth means different things to different people. Wealth has a meaning that varies from person to person as well as family to family.
• Wealth is what you accumulate — not what you make. If you were to stop working tomorrow, how long could you support your current lifestyle? That is what makes you wealthy.
• A community, region or country that possesses an abundance of such possessions or resources to the benefit of the common good is known as wealthy.
• The wealth of households in the world amounts to USD 280 trillion (2017).
• The net worth of a person, household, or nation – is the value of all assets owned net of all liabilities owed at a point in time.
• Wealth is created through using labor and/or capital to make things, or provide/perform services, that other people find valuable. In the modern information economy, computer programmers often create wealth too, so it isn't necessary to create a tangible product in order to create wealth.
• Wealth means being able to be financially free to do the things you love, to live the way you want to live. But it also means being healthy, and to know that your family and the ones you care about are healthy and spiritually whole, and that they’re contributing.
• Wealth provides access to more. While money doesn’t make you happy, it does give you freedom to not worry about those financial stresses
• Having excess income allows you to be more involved with family and community.
• If you’re a healthy person, you are already wealthy. If you have your health, if you have your life, you can accomplish pretty much anything if you get the right mind-set.
• Material aspect of wealth is very important, because everything else is much easier to plan around if you are financially stable.
• For the poor it is always survival mode. The transition from scarce resources to financial security will be a challenge. It’s always about choices.
• Spending and taking care of money is a skill — not everybody has that skill.
• On the business side, wealth creates opportunities. On the personal side, wealth is about having more security and giving more to those you love.
• Wealth means you have the luxury of being able to provide for your family and determine how much work you want to do.

Rich is having abundant financial assets: money, real estate, investments, material possessions, etc. Wealth has four categories of assets:

1. Core Assets: your family, values, faith, health and the individual well-being of each family member;
2. Experience Assets: good and bad experiences, education, reputation, networks, knowledge and the wisdom of each family member;
3. Contribution Assets: contributions made to the well-being of others;
4. Financial Assets: money, real estate, investments, material possessions.

Managing money wisely

• Inflation, taxes, government policies, geo-political situations and economic cycles affect all investments. 
• The day you part with your money, you have taken a risk. Bigger the risk the greater scope for higher returns.
• Holding cash is worst form of investment, which depreciates with time in an inflationary economy like India.
• Understanding risk and managing prudently helps protect wealth and generate higher returns. Saving at the beginning of career alone is not enough. What you do with savings that will help staying ahead is more important.
• Bank fixed deposits are fairly safer but its interest rates falls short of inflation rate.
• Debt mutual funds that invest in bonds for short-term goals returns increase as bank FD interest rates fall. The average returns of such funds over a period of five years are around 12-17%. While FD interest is taxable, debt mutual funds held for three years or longer, you can adjust your gains against inflation, with indexation. Any capital loss can also be offset against capital gains on other investments, like shares or properties sold. 
• Debt is not a bad thing, if used correctly. While education or home loans are good debts, credit card debt or a personal loan, to buy something you could live without, is a bad debt.
• Staying debt free is important because debts carry much higher interest burden than what you earn on your investments. As retirement approaches one must become completely debt free to have peaceful retired life.
• Stocks carries considerable risk although liquidity is good. Hence invest that much money which you can afford to lose. Stock or commodities trading, while returns could be high, risks are also higher if traded without research & strategy.
• It is always good to buy blue chip stocks when the markets are down, at a time when nobody is buying and everybody's selling, for long term holding. Investing in long-term equity mutual funds (MFs) is an option. The risk is higher if your holding them is for few weeks or months.
• Overall, the Indian stock markets have returned a good 10-11% compounded annually over a 10-year period, despite the ups and downs.
• Opting for a systematic investment plan (SIP) where you invest a fixed amount of money every month regardless of market fluctuations suits for investing salary surplus amounts.
• The basic principle of investing is to reduce your risk as you get older. A common thumb rule is that individuals should hold a percentage of stocks equal to their age in bonds, government debt and other safe assets and rest in equities. For a 30-year-old, 30% of the portfolio should be in bonds, government debt and other safe assets and rest 70% in equities.
• If you are in your 20s, 30s or even 40s and have years before you retire then "take some risks and opt for more volatile investment that will potentially give you more returns in the long term". However, if you are retiring in the next few years, depending on your circumstances, invest in a conservative manner.
• Always look at big-ticket expenses (child's education or marriage, retirement) that you could incur over the years. Keep aside money for contingencies and have a plan for a fixed monthly income after retirement (through pension, post office or mutual funds monthly income plans, senior citizen savings schemes, FDs and bonds). Not everything will go as per plans, but planning is imperative.
• Insurance is a premium for someone to pay your family a big sum of money, if you die. That premium is just a cost. For peace of mind, it is important to take insurance that covers health, disability, accident, life and property, you should only buy the cover you really need. The life insurance cover's simple thumb rule is to multiply monthly expenses by 300. You may not need life insurance if no one is dependent on you.
• Remember insurance payments are not investments. Insurance is good. Investment is good. Combined into a single product, they make you poorer.
• Real estate, with low risk over long term, is great investment usually with very high returns but with very poor liquidity. Therefore invest into real estate that much money which you may never need it. 
• Investing in rentable properties is a good idea to get some monthly income.
• Spread the Risk. Research carefully and diversify your investments, placing pre-decided amounts in different asset classes: equity, mutual funds, bonds, FDs and property. Rebalancing and realigning your portfolio at definite intervals, according to your goals and risk appetite, is a good idea.
• Invest in tax saving instruments like PPF, ELSS etc for minimizing tax outgo.
• Spend wisely. Overspending is a bad habit. Before you buy anything ask yourself: Am I buying this because I want it or do I really need it? Can I live without it? And, can I really afford it?
  Remember the words of Warren Buffett: "If you buy things you don't need, soon you will have to sell things you need."
• As lifespans lengthen, the need for money between the ages 70 and 85 increases because of medical expenses, medical insurance premium etc increases. At this age, people need house help and insurance doesn't cover everything. The costs involved in maintaining an older person, who is not fit, is much higher than the expenses of an average person.
• Beware of credit cards which are good, if used judiciously. Otherwise small print terms and service charges are bound to make you poorer, in case of reckless spending using card.

Whatever you decide to invest in, do it regularly. Do not watch your investment too often. Do not speculate. Stay invested for the long term. Your money will not only be safe, it will grow many times over. 

Neither a borrower nor a lender be,

for loan often loses both itself and friend ... Polonius