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Building Wealth With Smart Financial Decisions

Category : Frugal Habits, Personal Finance, Retirement, Smart Investment Ideas

Buy What Thou Hast No Need Of, And Before Long Thou Shalt Sell Thy Necessaries. — Ben Franklin

The street smart  philosophy about building wealth is simple at its core — building wealth with smart financial decisions!

Most people don’t build wealth not because they are not smart; they don’t build wealth — for most part — because they are gullible and easily buy into the notion that wealth is either inherited or strikes the doors of lucky few.

Reality is starkly different. Building wealth takes astute planning and flawless execution with smart financial decisions.

We make choices everyday. Those choices are seeds for the future landscape of our destiny.

I want to share story of my cousin who lives in India. He is a living proof of someone who has built wealth with smart financial decisions early on in his life.

He retired since 1992 after working for only 10 years as a Chemical engineer for Reliance, a large fortune company in India. What he shared with me recently is worth sharing with anyone who aspires to retire young and build wealth with Mr. Money Mustache like acumen.

1. Have end goal in mind to build wealth.

If you wanted to retire early or build wealth when you are young, set a financial goal to accumulate the amount that allows you to achieve your freedom.

Having a financial goal allows you to adjust your lifestyle to save required capital every year so that you can retire within the time frame of your choosing.

My cousin was saving 70% of his salary for the first 10 years. It was difficult, but he was motivated to do so for the ultimate freedom.

2. Know how to live after taking sabbatical.

In Asian culture — and especially in India — it’s a norm for father and son to live together. Considering that there is no government welfare system in place, this tradition provides best of both world for everyone.  Son gets to live in a  mortgage free home while he takes care of his parents in their golden years.

My cousin moved back to his hometown after quitting a well paid job.  He also got rid of his car as he can use public transportation or a two-wheeler when he travels occasionally.

These ideas are bit extreme for the western culture to embrace. Nonetheless, you can plan on paying off your mortgage the day you retire.

I know that low-interest rates and mortgage deductions are too good to pass on. Believe me, if your goal is to retire with ultimate freedom, you are better off knowing that you have a  place of your own.

3.  Make smart financial decisions.

Your financial well-being depends on making smart financial decisions to grow your nest egg once you have freedom to invest in your own future.

My cousin did nothing for a year after retiring. Well, he did plunge himself into learning different ways to protect his nest egg and grow it wisely.

He invested a portion of his capital into real estate and rest into dividend paying stocks and/or debentures.

He carefully picked real estate locations in early 90′s right before Indian government opened doors for the rest of the world. With the economic boom of the past decade, his real estate investment alone has grown into multi-million dollars asset.

Due to his minimalist lifestyle, he has managed to live off of the interest income from portion of his savings in CD and debentures. You may be surprised to know that 9-10% return is common for most CD accounts in major Indian banks.

He has generated wealth at a fast pace in the last decade due to the snow ball effect of the real estate boon and dividend reinvestment.

Parting Thoughts:

My cousin has certain advantages that most Americans don’t have. He lives with his father and seldom spends any money on transportation or big vacations.

Nonetheless, if you wanted to retire, you can commit yourself to start saving aggressively early on by taking advantage of changes in savings rate, and pay off your mortgage as soon as you retire.

At that point, you are free —  from ball-and-chain of financial worries feeding your anxieties — to build wealth with smart financial decisions at your pace.

Isn’t it wonderful to give up chase for possessions to have time and freedom? I think so.

Readers: Have you considered retiring early? If so, do you have a plan in place to achieve your goal?

Elsewhere:

Financial Independence … 23 Years Later @ Mr Money Mustache

The Dark Side of Early Retirement @ Financial Samurai

No, I’m Not Rich. But I am Financially Free @ Len Penzo

Considering Switching Careers @ Modest Money

 Photo by: Chrismarper

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Comments (25)

[...] Building Wealth With Smart Financial Decisions on Street Smart Finance [...]

I have a plan but implementing it is the tougher challenge. As I’m still working to build my business and survive the early years, that’s the #1 priority and can’t really start making great progress until the income increases.

Agreed. It’s hard, if you are building your business. I’ve been through that phase in my life, so I can relate to your feelings.

I never considered early retirement when I first started working. I was always conditioned that you worked until you were in your 60′s and then retired. Only recently, have I seen that it may be possible to retire early, but I will most likely still be in my 50′s. Right now, the goal is to work part time. I enjoy my work for the most part, so that’s a good compromise. How wonderful that your cousin set his goals early on and achieved those. I like that he still lives frugally even though he is very wealthy.

I like your thoughts, Kim! If you love your work, there is no need to quit. My definition of retirement is not to work; rather, it is to earn freedom to do what you love doing most.

Yes, I consider him my role model. With all the riches, he lives a very modest life. That’s the key to the lasting happiness and wealth.

As you can tell by my blog name, I’m all in favor of living a modest life even if you do have a lot of money. It’s pretty awesome that your cousin managed to retire after only 10 years of work. That really shows how important it is to properly manage your money. Sure he got lucky with real estate prices skyrocketing, but others can achieve similar success by being smart with their money too.

So true! You can never go wrong by living modestly no matter how rich you become.

Advantages or not, your cousin made some pretty great decisions; and sacrificial ones at that!

Agreed. His simple living is inspirational to anyone who wants to retire early.

We have thought about early retirement but we will have to see how things go once we have kids as our financial situation will change. We do have a plan in place for saving right now but that may change once we expand our family. I think your cousin though is an inspiration. They really showed how we can think out side the box and make retirement happen.

He started with end goal in mind. He started saving aggressively to reach his goal in 10 years. This shows that with planning and lifestyle adjustment, you can achieve your financial freedom.

Good points Shilpan, and an excellent reminder of the differences between Western and Eastern cultural norms. As you know, my entire blog is basically my road map (i.e. money design) for figuring out how to retire early and stay that way. Your notions of saving aggressively, taking advantage of the resources you have available, and simply having a plan are some of the pillars of my strategy!

Yeah, your articles are mainly focused on the topics of life design for an early retirement.

That’s great your cousin is living with his dad. I’ve thought a lot about multigenerational households and could find myself living with my in laws down the road. It may not work out, but I’d be wiling to give it a try so we could help take care of them. And living in a paid off house is of course a big perk!

You can save a lot by living in a house with no mortgage. It has certainly worked out well for him as he has retired since 1992.

This is definitely an inspirational story to those who are looking to go down a similar path.

It might be hard to save the 70% per month your cousin did if you’re not in the same living situation he was, but there’s still a lot to be gained from understanding how his modest lifestyle turned into considerable wealth in a relatively short period.

Thanks for sharing this!

All you have to do is to set financial goal($X savings in y years), and adjust your lifestyle expenses to achieve that goal. Thank you for visiting, Garrett!

All it takes is one dumb decision to ruin it, so true! Work smarter not harder!

Law of gravity at work. :) It takes time to build wealth mountain, but in no time you can slide down to the abyss of despair if you are not careful.

[...] @ Street Smart Finance writes Building Wealth With Smart Financial Decisions – The street smart philosophy about building wealth is simple at its core — building wealth [...]

[...] @ Street Smart Finance writes Building Wealth With Smart Financial Decisions – The street smart philosophy about building wealth is simple at its core — building wealth [...]

[...] @ Street Smart Finance writes Building Wealth With Smart Financial Decisions – The street smart philosophy about building wealth is simple at its core — building wealth [...]

[...] Building Wealth With Smart Financial Decisions Buy What Thou Hast No Need Of, And Before Long Thou Shalt Sell Thy Necessaries. — Ben Franklin The street smart  philosophy about building wealth is simple at its core — building wealth with smart financial decisions! Most people don't build wealth not… Read more [...]

[...] @ Street Smart Finance writes Building Wealth With Smart Financial Decisions – The street smart philosophy about building wealth is simple at its core — building wealth [...]

[...] @ Street Smart Finance writes Building Wealth With Smart Financial Decisions – The street smart philosophy about building wealth is simple at its core — building wealth [...]

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