How to empower yourself to take control of your finances

Building Wealth and achieving financial independence is not just a dream—it is a practical goal that anyone can attain with the right mindset, knowledge, and actions. Many of us grow up believing that Wealth is something reserved for a select few or that financial freedom is a distant fantasy. However, the truth is quite the opposite: each one of us has the power to take control of our finances and build a prosperous future. Here are five essential steps to help you do just that, explained with anecdotes and insights tailored to our unique Indian context.

1. Pay Yourself First: A Powerful Habit for Wealth Accumulation

One of the most foundational principles of financial success is "paying yourself first." This means setting aside a portion of your income—at least 10%—for savings before you spend on anything else. Think of this practice as planting seeds that will grow into a forest over time. It establishes a habit of saving and helps build a financial cushion, allowing individuals to accumulate Wealth consistently.

Consider the story of Rehana, a young architect from Delhi. Despite earning a decent salary, she found herself constantly worrying about her finances. Rehana realised that her financial woes stemmed from her need to prioritise savings. Inspired by the concept of "paying yourself first," she decided to automate her finances by setting up a standing instruction to transfer 10% of her monthly income to a separate savings account as soon as she received her salary.

Rehana did not stop there. She gradually increased her savings rate to 20% by reducing her expenses, such as dining out less often and cutting down on non-essential purchases. Over 15 years, this consistent habit of saving and investing her money with an average annual return of 12% allowed her to accumulate approximately `50 lakhs. This growing Wealth gave her the freedom to take a sabbatical and explore her passion for photography, a dream she had long deferred.

Rehana's story shows that "paying yourself first" is not just a catchy phrase—it is a powerful habit that builds discipline and accumulates substantial Wealth over time. By prioritising savings, you ensure that your future financial security comes before your desires.

2. Make Your Money Work for You: Smart Investments to Grow Wealth

Many people believe that saving money is enough to build Wealth. While saving is crucial, making your money work for you is equally important. Money should be invested wisely to generate additional income. This involves seeking investment opportunities that yield good returns and letting your Wealth grow over time. The key is to make informed investment decisions.

Take Irfan's story, for instance. Irfan, a middle-class father of two, initially believed that all he needed to do was save his money in a bank account. However, he soon realised that inflation was eroding the value of his savings. Determined to make his money work for him, he decided to invest `10,000 per month in aggressive equity mutual funds. Over the next decade, with an average annual return of 15%, his investment grew significantly to approximately `27 lakhs.

However, Irfan did not stop there. He wanted to create a steady income stream for his family without depleting his capital. He reinvested this corpus into a Systematic Withdrawal Plan (SWP), allowing him to withdraw a fixed amount of `15,000 per month at a 9% return. This provided a reliable monthly income while the remaining corpus continued to grow at 12% per annum in aggressive balanced equity mutual funds.

Irfan’s strategy illustrates the importance of making your money work for you by generating multiple streams of income. His example shows how smart investing, coupled with careful planning, can help you grow your Wealth while ensuring financial security.

3. Seek Knowledge and Professional Advice: Hire a Certified Financial Planner

Financial empowerment is not just about saving and investing; it’s also about making informed decisions and seeking the right guidance. The financial landscape can be complex, with various investment options, risk factors, and market dynamics. This is where knowledge and professional advice become critical.

Take the story of Nisha, a single mother from Jaipur who realised that no one else would secure her financial future but herself. Initially overwhelmed by the multitude of financial products and options, she decided to seek the help of a CERTIFIED FINANCIAL PLANNER (CFP). This decision marked a turning point in her financial journey.

The CFP helped Nisha create a personalised financial plan based on her goals, risk appetite, and financial circumstances. They identified her short-term and long-term goals, such as saving for her children's education, building a retirement corpus, and purchasing a home. The planner suggested a diversified investment strategy, including equity mutual funds, ELSS for tax benefits, and debt instruments for stability. They also recommended a balanced approach to maintain a mix of risk and security.

With the CFP’s guidance, Nisha started investing `10,000 per month in an Equity-Linked Savings Scheme (ELSS) with a track record of good returns. Over ten years, with an average compounded annual return of 17%, her investment grew to approximately `27.5 lakhs. This growth in her savings gave her the financial security she needed and the confidence to explore further professional development opportunities.

By hiring a professional, Nisha gained a clear roadmap for her financial future and peace of mind, knowing that her investments aligned with her goals. Her story shows that seeking professional advice can make all the difference in navigating the complexities of personal finance and achieving your financial objectives.

4. Invest Wisely and Build Wealth: The Power of Diversification

Investing can seem intimidating, but it doesn't have to be. The key to successful investing is diversification—spreading your investments across different asset classes to manage risk and maximise returns.

Let us revisit Arvind's story. Arvind, a young professional from Pune, was initially hesitant to invest because he thought the stock market was too volatile and risky. After attending a seminar on personal finance, he learned about the importance of diversification in building a stable financial portfolio.

Arvind began by investing `2,000 per month, diversifying his investments across various asset classes, such as stocks, mutual funds, and a small portion in gold. With an average annual compounded return of 15%, his investments grew significantly over the years. After ten years, Arvind’s disciplined investing had resulted in a corpus of approximately `6.5 lakhs.

This diversified approach minimised his risks and maximised his potential returns. Arvind's story illustrates the power of disciplined investing and the importance of diversification. By making informed choices and staying committed to his financial goals, Arvind built a robust financial portfolio that set him on the path to financial freedom.

5. Live Below Your Means and Avoid Financial Pitfalls

Living below your means can seem counterintuitive in a society where status symbols like luxury cars, branded clothes, and expensive gadgets are often equated with success. However, it is one of the most powerful steps in building Wealth. Let us understand this through the story of Anjali, a young marketing executive in Mumbai.

Anjali enjoyed the finer things in life—fancy dinners, branded clothes, and exotic vacations. However, after realising that her lifestyle led her toward mounting credit card debt, she decided to change. Anjali adopted a minimalist lifestyle, focusing on what truly mattered to her. She cut back on discretionary expenses, traded her luxury car for a more economical model, and started buying only what she needed.

However, there are other common financial pitfalls to avoid:

Lifestyle inflation: As Anjali learned, earning more money often leads to spending more money—a phenomenon known as lifestyle inflation. She realised that every time she got a raise, she had been upgrading her lifestyle rather than increasing her savings or investments. By consciously choosing to live below her means, Anjali could redirect her additional income towards her financial goals.

Falling for ‘get rich quick’ schemes: Another pitfall is the allure of schemes that promise high returns with little to no risk. Many people get enticed by such offers, only to find themselves in financial trouble later. Anjali understood this when she nearly invested in a dubious scheme offering unrealistic returns. Fortunately, she did her homework and consulted a financial advisor, realising that if something sounds too good to be true, it probably is.

Ignoring the impact of debt: Many people need to pay more attention to the long-term impact of high-interest debt. Anjali was no different—her reliance on credit cards had created a vicious cycle of debt that was eating into her income. She decided to prioritise paying off her debt aggressively, starting with the highest interest rate card. This reduced her financial stress and freed up money that she could now invest.

Anjali's journey to financial discipline shows that avoiding these common pitfalls requires conscious effort, but the rewards are worth it. Living below your means does not mean depriving yourself—it is about aligning your spending with your values and long-term goals.

Conclusion: Empowerment Starts with You

Taking control of your finances and building Wealth is a journey, not a destination. Rehana, Irfan, Nisha, Arvind, and Anjali's examples each show different aspects of financial empowerment, all linked to the five easy steps outlined in this article.

By paying yourself first, you establish a habit of saving that serves as the foundation for wealth accumulation. By making your money work for you through smart investments, you unlock the growth potential. Seeking professional advice ensures that your decisions are well-informed and aligned with your goals. Diversifying your investments minimises risk and maximises returns. Finally, living below your means prevents common financial pitfalls and helps you build and maintain Wealth.

The relationship between these steps and the article's headline is clear: financial empowerment is within your reach. Each example illustrates that no matter where you start, you can build a prosperous financial future through practical actions and informed choices.

The path to Wealth is paved with small, consistent steps. It is about making wise decisions, challenging misconceptions, and avoiding common pitfalls. Start today by taking that first step toward financial independence. Remember, the power to control your financial destiny lies within you—seize it and build the Wealth you deserve.

Disclaimer:

The content provided in this article is for informational purposes only and should not be construed as professional financial, investment, or legal advice. Every individual's financial situation is unique, and consulting with a qualified financial advisor or other professionals is recommended for advice tailored to your circumstances. The author does not assume any responsibility or liability for any errors or omissions in the content of this article. Any reliance you place on such information is strictly at your own risk.

Disclosure:

The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of any other organisation or entity. The author may have financial interests or affiliations that could influence the content, but efforts have been made to maintain impartiality and objectivity. Readers are encouraged to perform their research and due diligence before making financial decisions.

About the Author:

Taresh Bhatia is a CERTIFIED FINANCIAL PLANNER and the founder of The Richness Academy, where he coaches and mentors individuals and families to achieve financial freedom and a richer, more fulfilling life.