Practising Few Financial Habits That Will Help You Create Wealth and Retire Rich: This is How You Can Plan the Finances for Your Retirement A solid investment planning is the foundation of a healthy retirement and here's how you can do it

Wealth creation and a comfortable retirement life is an aspiration for almost everyone but very few people are able to create meaningful wealth and have enough savings for retirement. For some, it may be circumstances that did not allow them to have a sound retirement corpus but for most, it's the lack of knowledge and a sound strategic retirement plan that stopped them from having an adequate nest egg. Many people do not give retirement serious thought, either they believe that they are too young or they are not prepared yet and as a result, they keep procrastinating the decision of starting retirement savings. It should be remembered that one could avoid retirement savings but not the eventuality of retirement. Retirement planning and saving, therefore, is a must for every individual. Preparing for retirement may seem a staggering task, however, the good news is that when it comes to building wealth there are no secrets. The same set of principles will work for absolutely everyone! If you're willing to put in the work and make the sacrifices you need to make you can build wealth at a fast pace.

Here are a few personal finance habits that will help you create wealth and retire rich.

Realize That Time Is Money:

The key to creating wealth and retiring rich is to start saving and investing as early as possible so that your investments get the required time to grow. Many people, strapped for cash or eying a major purchase, tell themselves they can make up for lost time by making higher contributions in future years. Unfortunately, money doesn't work that way. Thanks to the power of compound interest, cash invested today has a disproportional impact on your wealth level at retirement.

For example, assume that you will retire at 60 and your investment generates an annual compounded rate of return of 10 per cent. If you start investing INR 10,000 a month at age 40 years, you will make a total investment of INR 24.10 lakhs and your total retirement corpus will become INR 76.28 lakhs. However, if you start investing INR 5,000 a month at age 25 years, you will make a total investment of INR 21.05 Lakhs and your total retirement corpus will become INR 1.80 Crores. In the second scenario, you will able to create a wealth that is double of what you would have created if you had started out early, that too with half of the investment amount. This difference in returns can be attributed to the power of compound interest and time, which is often not truly understood.

Save As Much Money As You Can From Each Paycheck:

To create wealth you have to save first and for that, you have to implement and practice the saving methodology (i.e., Income – Saving = Expenses) in your life, rather than the most common saving tendency (i.e., Income-Expenses = Saving). Try to set a minimum of 15per cent saving target of your net take home each month. If saving 15per cent of each paycheck sounds impossible, just think of retirement as another bill that you have to pay regardless. When money is tight, you still find ways to pay rent, the electricity bill, and your car payment; the same attitude should be applied towards retirement savings. It's easy to put off saving for retirement because you think you have plenty of time left to save, however, in reality, the longer you put it off, the harder it gets to catch up. The best part about saving a percentage of your salary rather than a set amount each month is that you automatically increase your savings as your income increases.

Try to Avoid Debt, and Specifically Credit Card:

It is easy to get into the debt trap nowadays as getting a loan has gotten much simpler thanks to the technological advances in the fintech space, getting a loan has been reduced to just a matter of applying with few clicks and you are done. However, these easy loans are a recipe for disaster as they promote impulsive expenditures and enhance financial indiscipline. It should be remembered that debt will hold you back from so many financial opportunities, so make it your mission to avoid all forms of debt except some necessary ones such as student loans, home loans etc.

Credit card debt is one of the most dangerous forms of debt because it often builds up unwittingly and carries extremely high-interest rates. The longer it takes you to pay off that debt, the more you rack up in interest, and the less you're able to save for retirement. If you are already in debt before you start blindly throwing money at your debt and hoping it goes away, creates a road map so that you're paying off your debt in the most strategic way. If you have debt from multiple credit cards, consolidate it through a balance transfer or repay with one single loan. Otherwise, start with the one with the highest interest rate (while still paying the minimums on your other cards). Next, stop using your cards altogether and pay for everything in cash until your debt is paid off. As a bonus, this will force you to live within your means, and you'll likely spend less than you would by charging all your purchases.

Track Your Spending Closely And Refrain From Impulsive Buying:

Following a strict budget may not be easy, but it's tough to save when you don't even know where your money is going. Pay close attention to your monthly spending, and set limits for different categories. This is especially important if money is tight and you can't manage to save for retirement as well as knock out debt and continue to pay your other bills. Chances are, that there are other areas where you can cut back. One should also refrain from impulsive buying and should always plan and save for any major purchases, it is also advisable to make a significant down payment for each major expenditure because it not only reduces the amount of loan but it also reduces the monthly EMI amount that is required to pay off the debt.

Create a diversified Investment Strategy and take the financial risk early on

Investment of monthly savings inappropriate investment vehicles is equally important after all one needs to put their savings to work so that it can generate sufficient wealth in due time. A solid investment plan is the foundation of a healthy retirement corpus. Individuals should gauge their financial risk tolerance and invest appropriately. Most individuals are risk-averse and it's understandable, however taking the financial risk early on in one's career is not all bad as there is enough time to make a course correction if some of the investments go bad. Higher risks lead to higher returns and can impact the size of the retirement corpus.

It is often noticed that a majority of individuals opt for financial safety and only invest their savings in fixed income securities, bank FD's and other retirement tools such as Provident funds. Investment in low-risk financial products is a safe investment strategy, however, this safety comes at a cost of lower investment returns. A robust investment portfolio should have both high risk and low-risk investment products and should also include physical assets such as gold and real estate. As one progresses in their careers and life the proportion of riskier asset classes in their investment portfolio should be reduced and shifted to more secure investments.

To summarize, saving for retirement is more of a mindset than a chore. Once you start practising healthy financial habits, they become a way of life and you won't even to think twice about them. Remember that you're investing in your future, and you will only realize the value of these sacrifices in the present time when you will retire with a comfortable corpus in hand.