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Before we begin, let us answer an essential question –what exactly is wealth?
Wealth is a collection of assets which can be used to continually generate more income for us.
We determine our wealth by calculating the market value of our economic resources like land, stocks, etc.
Now, what is wealth creation?
Wealth creation is an extensive process of acquiring assets which help you generate income over a long period of time.
What makes it so different from regular income?
Whereas regular income helps us maintain our day-to-day lives, wealth creation is a process with a long-term outlook.
We create wealth to ensure that our standards of living are maintained and even improved in the future.
Also, regular income contributes towards our wealth creation. How?
Most of us use funds from our regular income to purchase assets which will grow our overall wealth.
Now, let us come to our major focus in this video – why is wealth creation important?
The first reason is our standard of living.
As we grow old, our ability to keep earning might fall, and we might seek retirement.
Also, in the future, we will probably have a family of our own that we will have to care for.
Therefore, at this point, we will need a corpus of funds that we can use, to retire in peace, and give financial security to those dependent on us.
This corpus can be created through the process of wealth creation.
The next reason lies in our long-term goals.
A lot of us have plans we want to fulfil like vacations, our dream home, a masters’ degree, etc.
We can have dreams like these for us, as well as our children.
To fulfil these dreams, our regular income isn’t enough because we are already using it for our day-to-day expenses.
Therefore, we use the process of wealth creation to create funds which can help us convert our dreams into achievable goals.
Lastly, wealth creation is important because it teaches us the importance of investing.
The assets we acquire to create our wealth, will only give us benefits if they are good investments.
Therefore, the process of wealth creation can help us develop an interest to learn more about investing.
By learning about investing, we can become more aware of our risk-taking abilities, and develop financial discipline as well.
From these points, we can conclude that wealth creation is an essential component of financial security.
There are two ways to create wealth.
Firstly, we can create wealth on our own.
We can do this by learning about the various asset classes, investing, and understanding our own risk-return requirements thoroughly.
If not, we can approach financial advisors who can lay out a wealth-creation plan for us, as per –
- Our goals;
- Our risk-taking capability; and
- The returns we require.
With this, we come to the end of this video. Thank you for watching.
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