Wealth Creation Definition:
Wealth creation means anything which could be owned and controlled, and have monitory value or have the potential to create the monitory value. Assets could be tangible like a car, house, furniture, machinery etc. or intangible like goodwill, copyrights, patents, trademarks etc. For a company, the land, the building, machinery, inventory etc. are the wealth creation strategies. But the employees are not assets, though they have the potential to create monitory value. Employees are not assets because the company don’t own them or have sufficient control over them. They are called as resources of a company.
Some great people who understand finance in great depth see assets in a different way. For example: the author of world famous book, rich dad poor dad, Mr. Robert Kiyosaki says that, anything which gives profit is an asset and others are liabilities. Wealth creation example: the house in which an individual life is his liability as that individual is not earning anything out of it, instead, he is paying for its maintenance and may be loan EMIs. This house will behave as an asset when that individual sells it with a profit. A house which is giving rent in the pocket of the owner is an asset which can be termed as one of the best ways of wealth creation strategies and tactics.
In accounting, Assets = Liabilities + Capital. Assets are seen as current assets (have cash very handy; liquid assets) and fixed assets (property, plant, and equipment; PPE). Assets can be classified as one of the type of creating wealth for long term or as a part of your retirement planning.
How to build wealth? This is one of the biggest question where people are looking for the answer. Here we will present various ways of wealth creation strategies as well as wealth creation tips which will help you in managing your personal finance as well as for retirement planning. Wealth creation and wealth accumulation is the dream of all the people. Here are few of the wealth creation ideas by which people can create wealth and accumulate wealth for their future protection.
1. Starting a Business:
These days, it seems like there is an entrepreneurship boom in India. Everyone seems to start or wants to start, at least, his own business. Business could be a very good asset if it is implemented well. For return on investment, the sky is the limit. Though business is a very sensitive thing to deal with as risks are very high and it requires heavy involvement of business owner, but if somehow it is set, then nothing is better than a business when it comes to wealth creation as well as accumulation.
2. Deposits and Investments:
Deposits and Investments are those assets which make money grow without much involvement of the owner. Most life insurance products are designed in such a way that the buyer could accumulate the money to the maximum. For some policies, wealth accumulation is the prime focus. The deposits also help in increasing the money. Typical examples of assets under this head are – fixed deposits, recurring deposit. Debentures, Demat, bonds, PPF, and mutual funds. Investing in gold and commodities is also a nice way to grow money as they are less risky as compared to the stock market investment. This is one of the safest and low risk wealth creation strategy.
3. Real Estate Assets:
One of the best wealth creation idea for a common man is assets in terms of real estate properties. Why so? Because real estate properties are the most valued assets which people generally owns. Investing in real estate could be one the best way to create assets and accumulate wealth. In last 50 years, the prices of real estate properties have grown so fast that never happened before it. Millions of people are investing in real estate properties. And many have taken real estate investment as their prime source of income. So, the potential is very high in real estate investments.
4. Loan as an Asset:
In first glance, loan seems to be a liability, but it could be turned into an asset. There is huge possibility that by using loan money, an individual can develop a system from which he can earn more than the loan repayment. For example – starting a profitable business using loan money and buying a real estate property which can give higher returns than the loan repayment. The loan could become assets when an individual is taking a loan as well as an individual is giving a loan. When someone gives a loan to another person, then it is an asset for the giver as he’ll earn interest out of it.
5. Trademarks, Patents, Copyrights:
The famous pharmaceutical company Pfizer has sold its patent product on prices 3 times more than the competition. This happened because that company has got patent for its product because of which no other company could claim that name. Hence, the products of that company are seen as brand product or original product while products from companies in competition are taken as fake products. This is the power of wealth creation and accumulation like patent, copy write and trademarks.
Creating assets and accumulating wealth is not that difficult in today’s scenario. Government of India as taken many initiatives like “Make in India”, “Startup India”, and “Skill India” can help common man of India to come forward in big way and can help in wealth creation and accumulation for self and the nation. We hope that this tutorial lesson will help you in how to create wealth and accumulate it for your future protection.
- Tutorial Course - Personal Finance Basics for Beginners Module -
» e-Learning Chapter 1: What is Personal Finance? Definition, Examples, Management and Basics
» e-Learning Chapter 2: Financial Assessment of a Company or an Individual
» e-Learning Chapter 3: Primary Objectives and Goals of Financial Management
» e-Learning Chapter 4: Personal Banking Products and Services of Financial Management
» e-Learning Chapter 5: Income Tax Slab, Deductions and Tax Planning Strategies for Individuals
» e-Learning Chapter 6: Difference, Relationship, Importance of Savings and Investment
» e-Learning Chapter 7: Types of Insurance offered by Insurance Companies
» e-Learning Chapter 8: What is Debt Management? Definition, Strategies, Plans with Examples
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» e-Learning Chapter 10: Personal Financial Assessment Evaluation and Monitoring Techniques
» e-Learning Chapter 11: Personal Finance Quiz – Personal Finance Basics for Beginners