What is wealth creation?
Wealth creation refers to building wealth through a variety of methods using financial products. When you invest in financial products for a long period, you get back higher returns. Hence, it is an essential part of your financial journey in order to achieve all your long-term financial goals like your dream house, your child's education, and much more.
Why is wealth creation important?
Wealth creation is essential for a number of reasons:
- It provides you with money to fulfil your future goals.
- It offers a steady flow of income even when you are no longer employed or working. This can be a great way to ensure financial liquidity and help your loved ones to continue to live a life of comfort, abundance, and security.
- Retirement can be a challenging phase with increasing medical and daily expenses. However, with wealth creation, you will never experience a financial crunch and be independent for as long as you live.
Are there some tips for long-term wealth creation?
When it comes to long-term wealth creation, the following measures can be helpful:
- You should start by setting a financial goal for yourself. Keep in mind that your goal needs to be realistic and should promote long-term wealth creation. When you set a goal, make sure that you choose an appropriate timeline for it too. So, you can achieve them without being frustrated or facing disappointments.
- The power of compounding forms the foundation of long-term investments. The power of compounding is a concept that will help in building a considerable amount of money in the future. The concept of compounding revolves around reinvesting the returns back into the initial investment to earn higher growth. As a result, the earlier you start investing, the higher will be the rewards. No investment is too small. So, regardless of your income, you must begin your journey at the earliest to create a sizeable amount of money.
- Consistency can go a long way. This is why you must remember to invest periodically. Monthly, quarterly, half-yearly, or yearly plans can turn into substantial investments over time, without creating a burden on your present needs or wants.
- Having a well-balanced and diversified portfolio will guarantee that your risk is under control. Keep a combination of debt and equity funds in your financial plan to eliminate the threat of market fluctuations and unexpected losses.
Wealth creation plan offered by ICICI Prudential Life
ICICI Pru LifeTime Classic* is an ideal wealth creation plan for long-term savings. This unit linked insurance plan+ offers you two major benefits – financial protection for your loved ones in the form of a life cover1 as well as the opportunity to create significant funds for your financial goals.
The plan offers 4 portfolio strategies, and you can choose any of these as per your goals and risk appetite. You can choose between equity, balance, and debt funds, and switch between these funds at any point in time, without any additional charges. In addition to this, the plan rewards you with loyalty additions^ and wealth boosters` for staying invested for a longer period and paying all your premiums without any defaults. This considerably adds to your overall earnings. You can also choose to pay the premium monthly, half-yearly, yearly, or stick to a one-time payment. Lastly, you get tax benefits of up to ₹ 46,800/-# on the premiums paid, under Section 80C of the Income Tax Act, 1961.
How to Achieve Your Wealth Creation Goals
To achieve your wealth creation goals, you must start by defining clear financial goals, creating a budget and increasing your income. It is important to prioritise saving systematically, paying off high-interest debt and wisely investing your money. Remember to set realistic milestones, track your progress regularly and stay disciplined. Building an emergency fund to ensure a safety net in case of unexpected financial needs is also essential.
Remember that everyone's financial situation is unique, so it is important to create a wealth creation plan specific to your goals and circumstances.
Challenges in Wealth Creation
Wealth creation process can have several challenges. Below are some things to be wary of:
It is important to prioritise long-term wealth-building over short-term wants. A lot of people give in to their impulses and spend money on non-essential items. This can hamper your ability to save for the future and the potential to increase savings. It is crucial to adopt a disciplined and consistent approach to wealth creation. This can be done by avoiding instant gratification and instead focusing on the long-term goal.
Market fluctuations, such as sudden price movements, can impact your investments. They can also lead to impulsive investment decisions made out of panic and fear. Following a well-crafted wealth creation plan that focuses on portfolio diversification and risk management is important. Additionally, you must periodically rebalance your portfolio to lower the impact of market volatility.
Lack of Financial Literacy
Understanding basic financial concepts and investment instruments can help you speed up your wealth-creation journey. Financial literacy helps you make informed decisions, avoid financial scams and make careful investment decisions. Remember to invest time in educating yourself. Understand the importance of budgeting, tax planning and savings on your long-term financial well-being. You may also reach out to a professional financial advisor for assistance.
Taking on too much debt or excessive risk in pursuit of wealth creation can lead to financial challenges. Overleveraging, such as taking on too much debt or adding high risk to your portfolio, can stall your financial progress and can jeopardise your financial security during market downturns.
Try to strike a balance between risk and reward. You must also be careful when using debt and assess the associated risks.
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* This is not a product brochure. For more details on the risk factors, terms and conditions, and the charges and benefits related to Surrender, Premium Discontinuance, Revival etc., please read the sales brochure carefully before concluding the sale. Past performance is not indicative of the future performance.
+ Unlike traditional products, unit linked insurance products are subject to market risk, which affects the Net Asset Values and the customer shall be responsible for his/her decision. The names of the Company, product names or fund options do not indicate their quality or future guidance on returns. Funds do not offer guaranteed or assured returns. This is a unit linked insurance plan. In this policy, the investment risk in the investment portfolio is borne by the Policyholder. Unit linked Insurance products do not offer any liquidity during the first five years of the contract. The Policyholder will not be able to surrender/withdraw the monies invested in unit linked insurance products completely or partially till the end of the fifth year. On surrender, after completion of five years, the surrender value will be the Fund Value including Top-Up Fund Value, if any.
^ Loyalty Additions: Each Loyalty Addition will be a percentage of the average of daily Fund Values including Top-up Fund Value, if any, in that same policy year. Loyalty Additions will be allocated among the funds in the same proportion as the value of total units held in each fund at the time of allocation. The allocation of Loyalty Additions is guaranteed and shall not be revoked by the Company under any circumstances. If the premium payment is discontinued any time after 5 years, the number of years for which premiums have been paid will be considered as the premium paying term for the purpose of deciding the Loyalty Additions to be paid for the rest of the policy term.
` Wealth Booster: Each Wealth Booster will be equal to a percentage of the average of the Fund Values including Top-up Fund Value, if any, on the last business day of the last eight policy quarters.
Wealth Booster will be allocated between the funds in the same proportion as the value of total units held in each fund at the time of allocation. The allocation of Wealth Booster units is guaranteed and shall not be revoked by the Company under any circumstances. If the premium payment is discontinued any time after 5 years, the number of years for which premiums have been paid will be considered as the premium paying term for the purpose of deciding the Wealth Boosters to be paid for the rest of the policy term.
# Tax benefits of ₹ 46,800/- under Section 80C is calculated at the highest tax slab rate of 31.20% (including cess excluding surcharge) on life insurance premium under Section 80C of ₹ 1,50,000/-. Tax benefits are subject to conditions under Sections 80C, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Service Tax and cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on the above.
1 Life Cover is the benefit payable on the death of the life assured during the policy term.
ICICI Pru LifeTime Classic (unit-linked non-participating individual life insurance plan) - UIN: 105L155V08