Wealth accumulation is an intentional and continuous process by which wealth is accumulated to reach specific meaningful objectives. Without a clear direction, wealth accumulation is nothing but the inability to attain desired goals without any hindrance or changes in your normal routine. Consequently, wealth accumulation is like hoarding of possessions without any definite purpose. For the sake of clarity, wealth accumulation will be discussed in the context of three general goals:
Goals for Achieving Financial Freedom
In the next section, we will discuss how wealth accumulation relates to the three generic goals of achieving financial freedom, living comfortably in one’s own home and freedom and maintaining personal dignity. It is important to note that wealth accumulation and its corresponding challenges differ from one individual to the other.
o Financial planning. Most of the individuals do not give their complete attention to financial planning. They consider the wealth investment and its implications in their lives only when the need to borrow funds arises to meet the various demands of the lifestyle. For retirement purpose, retirement cash flow plays a critical role in an individual’s wealth accumulation and eventually in their independence. Proper financial planning enables you to plan your retirement cash flow and lead a stress free life after retirement.
o Living comfortably in one’s own home. Some of us dream of having a comfortable retirement – either as a full or part time pensioner or as an owner of our own business or even just a comfortably married life with no dependents at all. While all these things are important, financial goals that are aligned with your wealth accumulation goals also play a vital role. You cannot afford to spend money on things that you don’t have to and live in an uninteresting way just because you want to.
o Home ownership. Another important aspect of wealth accumulation is ensuring that you have property that is both under your name and in safe hands. Buying real estate or paying for the mortgage on a property that belongs to somebody else may lead to many difficulties in the future. The safest way to go about this is ensuring that you have a steady source of income and are prepared to face the problems associated with home ownership such as property taxes, maintenance costs and home insurance.
o Term loans. One of the best ways to ensure wealth accumulation over the long term is to take out a term loan to fund an emergency situation. A personal debt consolidation loan can help you reduce the burden of existing debts and consolidate them into one affordable payment. You should always take into account the benefits and advantages of any long term loan and never neglect important areas such as the personal balance sheet and personal finance budgeting.