One of the paradoxes of the modern world is that despite the emphasis on having a solid financial standing, precious little is taught about how to build wealth.

The simple fact is that you can’t rely on just your paycheck to meet all your short-term and long-term financial goals; therefore, it’s important to gain a full understanding of the many ways you can save, invest, and grow your wealth.

Here are a few steps you can take to build your wealth for the future.

1) Start saving

The first step to building your wealth is putting a portion of your income aside every month for your savings. Many would argue that they simply don't earn enough to save, but that isn't necessarily true.

Just like we think of our utilities bill or children’s school fee as mandatory payments that we have to pay before we spend on nonessentials, we should consider our savings a similar non-negotiable expense. We don’t expect the taxman or the government to defer our dues if we don’t have the money to pay them. We owe the same level of discipline and responsibility to our savings. In other words, we must save before we spend. There is no other way to accumulate wealth.

An easy way to ensure that you do this is to transfer your intended savings into a savings account or investment instrument as soon as you receive your paycheck and manage your expenses within the remainder of your earnings.  

When you begin your savings journey, try to put aside at least 10% of your paycheck every month and keep increasing your allotment to savings as your earnings increase over time. You should monitor how you are able to manage your finances during your initial months of savings and cut back on unnecessary costs if you find yourself struggling.

A useful exercise is to keep a record of all your expenses for a few months to determine which are necessary and what can be pared down. It's often the case that we aren't putting our discretionary income to its best use, allowing advertising and lifestyle creep to lure us into spending on purchases that don't benefit us in the long run. It’s not uncommon for people to take out loans in order to make bigger purchases they otherwise cannot immediately afford; the payback installments for these loans go on to become an additional monthly expense, thereby depriving you further of money you could have saved or spent on essentials.

It's a tough balancing act but one well worth the returns. And while you may falter in the initial months, you'll see that savings is like exercise —  the more you save, the easier it gets.

It's also a good practice to create an additional savings pool for emergencies, once your savings account is reasonably stocked. An emergency pool is a good buffer between your salary account and your savings because you access these funds in case of a sudden expense and leave your savings untouched.

2) Protect yourself financially

It’s common practice to save for the expected big expenses in life, such as our children’s college education, their wedding events and our own retirement. However, a key aspect of managing your savings is securing it against unforeseen circumstances such as a major illness like cancer or heart problems that could jeopardise your ability to make an income.

It is therefore necessary to save for medical emergencies as deliberately as we do for our planned future expenses. However, treatment for many critical illnesses are prohibitively expensive, which is why it is recommended to reinforce our savings with a critical illness insurance plan. This will generate a significant lump sum in the event that the policy holder is diagnosed with an illness listed in the policy. In this manner, you will be able to focus on recovery rather than worry about your finances.

It’s worth noting that many critical illness plans also account for your possible loss of income during your critical illness and pay for your household expenses.

It is similarly advisable to reinforce your savings in the event of your passing. Life insurance plans offer a guaranteed payout to your beneficiaries n the event of your death so that your family is not left financially unsheltered during an already difficult time period.

Click here to learn more about the critical illness and life insurance plans at Continental Insurance Brokers.

3) Make smart investments

Once you have savings and have protected it, you can begin to make your existing wealth work harder. When you invest, you essentially put your savings in someone's business venture with the expectation that you will gain a profit from it.

The kind of investments you choose depends on your life situation and changing financial goals, so it’s important to approach investment planning with flexibility. Are you saving to buy a house? Do you want to get an early start on your retirement savings? Travel plans, education goals and meeting your children’s needs all figure into the type of investments you choose.

While there are many ways to categorise investments, a simple way to look at them is contractual instruments and non-contractual instruments. Contractual investment plans are those that require you to invest a set amount of money per month for a set period and there are penalties for non-payments or early withdrawal of the funds. Non-contractual plans do not penalise non-payment or funds withdrawal but offer significantly lower returns.

When you are starting out your investment journey, it’s recommended that you begin investing with short-term guaranteed savings plans e.g., those that mature in five to seven years. This gives you relatively fast access to a larger savings pool, which can either be used or reinvested into a new fund to match your next financial goals.

You can explore more sophisticated investment instruments such as gold, future options and oil commodities later when you have more financial confidence. Until then, continue saving with the help of regular plans and start today.