We work hard to build other wealth over the years. We sacrifice our present fun or leisure to make our tomorrow secure and comfortable. The amount of efforts we put creating the wealth we hardly put 10% of that efforts to protect our wealth.
As I am into finance sector I know how rapidly my wealth can erode if I do not follow below mentioned points. My biggest priority of life it having good health and sizable wealth by my side all the time. Therefore I always try to minimize the destruction factors which can badly affect my wealth.
Following pointers are some of the factors which can destroy your wealth
Your emotions: This can be one of the biggest destroying factors of your wealth. If we don’t control your emotions be it panic attack or over joyful feeling both are harmful to your wealth creation process. So always have a steady mind in each up and down cycle of the market, economic conditions and your personal life.
Your mindset: It also plays a huge role in creating your wealth or destroying your wealth. You can be RICH or wealthy only when you started believing that. Once you believe then you start walking on that path. Have a broad vision and mindset for gathering wealth and protecting it with a steady mind and controlled actions.
Splurging money: This is a slow poison which will definitely be going to destroy your wealth in the long run. If one does not know where he/she is spending and inclined towards lifestyle expenses more such spending leads you to under invested and worst in debt trap too. Unforeseen emergencies: Life is very uncertain. We think that we will always have a smooth life and all the bad things will happen only to others. But one medical emergency, job loss or any other difficulty in life may make a big hole in your wealth. It is very necessary to have an adequate emergency fund, life insurance and health insurance so that we can protect our wealth.
Debt trap: This can also be one of the prime reasons to destroy your wealth in no times. When you don’t have control over your spending habit and spending is not in line with the income you surely getting trap in DEBT. Rolling credit is the worst debt to have. Always use your credit card wisely.
Investing in non-inflation hedged investments only: Inflation is the silent eater of your wealth. If you just invest in Bank Fds and RDs and traditional insurance policies then your net return after inflation and tax will be actually negative. So your accumulated wealth keeps on shrinking as days pass and ultimately wealth gets destroyed with no reason.
Investing against your risk profiling: Many times one invests in risky instruments for that extra return without checking his risk-taking ability. If you invest without assessing the risk associated with that particular risk as well your ability and tolerance to take a risk this move can hit your very badly if something goes not as planned.
Inaction: There are some risks which are seen and some are unseen but they have an impact on your wealth. Inaction is one of that risk which can destroy your wealth slowly. Many times because of fear, inability to decide or sheer laziness we keep on postponing investment activity. This result in losing time and compounding effect of wealth creation. If we do not do any investment inflation will eat out our wealth slowly.
Your improper asset allocation: Maintaining required asset allocation throughout the investment tenure is very important. It depends upon your age, time to goal, risk-taking ability and nature of the goal. If you don’t follow it each passing year, say for equity and debt, a single bad economic event can wipe off all your earned profits since so many years.
Ponzi schemes: Greed is one reason for destroying your wealth. Many times just for 1 to 2 % extra return one got tempted to invest any proxy scheme which is not at all legal or regulated. Such one mistake seriously washed away all our hard earn money and recovery of money from such schemes is just too impossible. So always stay away from such schemes and invest your hard-earned money in legal govt regulated and tested financial instruments only.
Wealth creation is a long term process. It needs lots of patience and discipline. You set aside money for your better future when your active income stops. But one mistake can destroy your wealth rapidly. So be very careful and vigilant all the time. Give priority to Protect your wealth rather than only accumulating it.