Housewives too can become millionaires


By Sanjay Matai

Given that the financial knowledge is going to serve you for your lifetime, you should begin as early as possible

The secret to becoming a millionaire lies in just one simple word—compounding. Wait! The concept is not as intimidating as the word itself sounds. In very simple terms, compounding is the process of earning income on income. In other words, it is all about earning interest on interest on interest...

An example below will make the idea clear.

Aarti deposits Rs. 5,000 per month in a recurring deposit for 30 years. Bhavna starts 10 years later and saves Rs. 7,500 p.m. for 20 years. Chitra takes 10 more years to start and saves Rs. 15,000 p.m. for 10 years. Thus, all three would have saved Rs. 18 lakh.

Assuming they earn 10% per annum interest, at 55 years of age Chitra will have about Rs. 32 lakh, Bhavna about Rs. 56 lakh and Aarti an astounding Rs. 1 crore. As you can clearly see, saving for ‘more time’ gives much better results than saving ‘more money’. This happens simply because Aarti keeps earning interest on interest on interest for years together; which is much better than investing three times the amount as Chitra does.

Aarti

Bhavna

Chitra

Age of the investors

25

35

45

Amount invested per month

Rs. 5,000

Rs. 7,500

Rs. 15,000

No. of years

30

20

10

Total saving

Rs. 18 lakh

Rs. 18 lakh

Rs. 18 lakh

Maturity value at the age of 55 yrs @10% returns

Rs. 1.13 crore

Rs. 56.95 lakh

Rs. 30.72 lakh

This is the magic of compounding. This is the secret of becoming rich. As you will observe, you need three things to become a millionaire:

  • Small amount of regular investments
  • Time, discipline and patience
  • A little bit of financial knowledge

Given the ingenuity and bargaining skills, I am sure that saving a small amount from the monthly budgets will not be a very big challenge for the housewives. All you need is to start say with even Rs. 500 every month. As you go along, you will learn to squeeze more and more amounts. And slowly but surely you will be on track to becoming a millionaire.

And, of course, when it comes to (a) giving time, (b) maintaining discipline and (c) being patient, the aptitude, potential and competence of a typical housewife is legendary. She would simply outclass men in all these areas. [In fact, I am of the firm opinion that women have more self-control and willpower then men; and hence are likely to be more successful in managing money.]

Opening an RD does not require any financial expertise. But you may need some financial knowledge if you want to fast-track your millionaire aspirations. Believe me, handling financial affairs is no rocket science. Don’t get disturbed by all the jargon thrown at you. Dump all heavy-duty calculations into the dustbin. None of it is necessary. It all boils down to plain and simple common sense…and loads of commitment.

Just six months to one year would be sufficient to become sufficiently proficient in money matters. You are intelligent enough to turn your small children into doctors, engineers and scientists. So I see no reason why you cannot turn small amounts into millions. Trust me this will be a lot easier than bringing up kids.

Moreover, given that the financial knowledge is going to serve you for your lifetime, you should begin as early as possible. But it is never too late to start. Besides, you can pass all this financial wisdom to your kids too. So, in effect, your efforts to acquire financial knowledge are going to be rewarding for generations to come.

The writer is the promoter of The Wealth Architects.

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