13 Steps to Bloody Good Wealth

Understanding the Mechanics of the Wealth Management System

Love it or hate it, money is an intrinsic part of any human’s life. It’s necessary for pleasure and comfort, let alone survival. It has a fundamental influence on the quality of life and, consequently, levels of satisfaction and well-being. We can’t escape money’s power, but we can learn to manage it to the best of our abilities.

Sunil Dalal has no professional training in financial matters, is not a banker, and doesn’t have an economics degree. However, he has extensive experience in finance as a consumer. He spent many years accumulating wealth and learning to manage it. Sunil Dalal had many pleasant and unpleasant experiences with financial establishments and learned how to avoid being mistreated and taken advantage of.

“Money can’t buy you happiness, but it can buy you the kind of misery you prefer!” –Sunil Dalal.

Dalal stands on the consumer-end financial spectrum and shares insights about the inner workings of the money industry from the client’s perspective. He breaks them down into simple-to-understand bits of information, establishing the 13 steps needed on the road to bloody good wealth and brilliant money-management skills.

Establishing a clear definition of wealth and formulating a strategic plan is essential

Like most things in life, money is simply a concept. It has no meaning outside of human perception and acquires its importance only when people give it such. Dalal views dealing with money as a game people play throughout their lives. Like usual games, it’s easy to become obsessed with accumulating wealth.

Your first step is defining what money and being rich mean to you. Wealth is a dynamic concept and depends on many factors. To some, wealth means owning a private jet. For others — buying a new phone or not living paycheck to paycheck is very wealthy. The meaning of wealth fluctuates depending on the place a person lives, the background they grew up in, their social environment, and their age. A delicious fancy ice cream you treasured as a child doesn’t hold much meaning when you grow up.

“Money is never stable: it’s an ever-changing concept”— Ashwin Sanghi, Sunil Dalal.

So many factors influence the definition of wealth, and understanding its meaning can be overwhelming. Dalal outlines four key needs that can help you along this road:

• Basic needs. This element applies to any human: everyone needs food, clothes, and a place to live. It is the foundation of material needs.

• Higher needs. After taking care of basic needs, you can consider this category. It comprises nice-to-have things, such as cars and vacation homes. Saving money for the education of your children also belongs here.

• Financial independence. This concept is essential for Dalal. Indeed, financial freedom is intrinsic to this if you want to feel secure and stable.

• Retirement. Depending on the job you have and the country you live in, you may get some pension when you get old. Still, it’s much better to have a plan to ensure financial independence when you can no longer work.

Money and wealth are dynamic. By defining them, you can more clearly determine your next move. You shouldn’t strive for luxury or waste money just for the sake of it. This may very quickly lead to obsession. But you have to consider what you need for your comfort.

“I remember one of my college teachers telling me that money could buy you a pretty good dog but not the wagging of its tail”— Sunil Dalal.

Confronting Inflation and Controlling Your Impulses

Do you remember how much ice cream cost when you were a child? Could you compare it with the current prices? The change in value is shocking regardless of your age, but the older you are, the more intense the surprise will be. Inflation is intrinsic to the monetary condition. The cost of things is constantly rising. It skyrockets with drastic outside factors, like an economic crisis or full-scale war. They double, triple, and so on. Even when the changes are not as dramatic, values are never stable. You must learn to work with inflation to manage your money as best as possible.

The pivotal element of wealth is knowing how to manage your finances efficiently. Wealth doesn’t mean buying whatever you want just because you have money. Money isn’t endless, and expenses should follow the same path. A luxurious lifestyle where the word “no” doesn’t exist might sound like an enticing dream until all you have left are crumbles of your wealth.

“Frugality and wealth go hand in hand”— Ashwin Sanghi, Sunil Dalal.

Regard yourself as the SEO of your life. You could imagine your life as a company when it comes to money. It would make managing the expenses easier because they would feel less personal. Dalal proposes several rules that might help you along this way:

• Always remember about your bank account. You shouldn’t overbudget and should always put some money aside for investing. Sure, a new belt looks lovely on your pants, but the money you spend on it looks better on your account.

• Set money aside. Each month, put some money away. You can use it to plan a big purchase or save up.

• Bonuses feel even better later. Treating yourself feels excellent, especially after hard work. But treats can be much bigger and more pleasant if you put your bonus aside and invest it in something.

• Control your raises. Sure, additional income is a joy. But your spending doesn’t have to change dramatically as well. Investing your money will make this extra profit even more terrific.

• Budget. A strict budgeting policy is intrinsic to the success of any good company. The same applies to you.

Planning expenses is essential to acquiring and managing wealth. A well-planned budget will undoubtedly improve the quality of life.

Supplementing income streams and harnessing the power of compounding is essential for financial growth

The older generations, boomers, for example, are used to working for the same company their entire lives. It used to be like this: you got a degree, then a job, worked hard, and accumulated wealth. Your work gave you stability, which convinced you that no one could fire you for no reason. Nowadays, the market has changed and is fluctuating much more. The economy is also unstable, which undermines your feeling of security. What can save you from this uncertainty? The answer lies in creating additional sources of income and investing.

How can you get additional profit? Think about the things you enjoy. People frequently think it’s wrong to turn a hobby into a career. But there’s a silver lining here: a key element of a job is its permanence and your dependence on it. You may become sick of it if you do something you love daily. But your hobbies can turn into great side hustles. Say you work as a lawyer, and while you love your job, in the back of your mind, you’ve always dreamed of becoming a baker. Making pastries makes you delighted, and your pies always bring joy to your friends. Why not try sharing your incredible skills with the world? You could bake whenever you feel like it in your free time and sell your goods online. Considering that this income won’t be your primary one and you won’t depend on it so much, you’ll feel less stressed.

“Contrary to popular belief, you can combine pleasure and profit if you keep the right balance”— Ashwin Sanghi, Sunil Dalal.

The great news is that we live in the digital age, which means finding additional sources of income has become much more manageable. Are you good at writing? Do your friends enjoy listening to your takes on different matters? Try blogging or making a podcast, and share your thoughts with the world. There are myriads of side-hustle opportunities: you could try yourself as a musician, a stylist, a photographer, a designer, an editor, a teacher, a writer, a trainer, a craftsperson, and even an astrologer if that’s what makes you excited.

Compounding is the trick that can turn your income into more money. If you just put some sum aside every month, you’ll save a safety pillow, but you won’t get richer. If, on the other hand, you invest your income, your net worth will grow.

Transform your possessions into a source of profit

You must establish how assets differ from liabilities on your road to becoming wealthy. Both have a similar meaning, so it might be challenging to tell them apart. Roughly speaking, the former will bring you money in the long run. For instance, your expensive phone might seem like an asset, but it becomes less valuable as time passes. Assets don’t lose their value — on the contrary, they acquire more worth in the future.

“If you are left with no job, assets bring you money, not drain you of more”—Ashwin Sanghi, Sunil Dalal.

Dalal speaks of the wealth trinity that rules the investment world: risk, return, and time. Regarding risks, there are specific tool measurements: standard deviation, beta, and alpha. Standard deviation concerns calculating volatility in a company. It shows how steady or dynamic the return from your investments will be. For example, suppose the standard deviation of the fund you’ve invested in equals 3%, and your yearly return usually amounts to 9%. Your returns may range from 6% to 12% in that case. Beta deals with measuring risks compared to the whole market. Finally, alpha measures the stock’s performance against a benchmark.

There are different types of returns: absolute return, annualized return, compounded annual growth rate (CAGR), and internal rate of return (XIRR). Absolute return amounts to your net income from an investment: if you invest 100 and earn 140, your absolute return will be 40. Annualized return corresponds to 12 months. If your return is 40% in three months, your annualized return will equal 120%. CAGR measures how your returns grow over the years. If CAGR equals 30%, and you’ve earned 130 the first year next year, your return will rise to 160. XIRR is an annualized return measured over an extended period.

Regarding investing, time can also be divided into three groups. The short-term horizon is no more than two years and concerns low-risk investments. The medium-term horizon lasts up to five years and concerns equities, with risk based on your desires. The long-term horizon extends for more than five years and concerns a much higher proportion of equities. Understanding these variables makes it much easier to delve into investments.

The cornerstone of your investment strategy is asset allocation

The world of investments seems complicated and, frankly, scary. But there’s nothing to be afraid of: you don’t need a degree in finance or work in banking for ten years to understand the specifics well enough. The thing that puts people off investing right from the start is complicated vocabulary. However, all terminology can be explained, making the investing experience much more pleasurable.

“Gatekeeping creates complicated terminology, which can easily become accessible by simplification”—Ashwin Sanghi, Sunil Dalal.

Asset allocation is the portfolio of the investments you own. The more diverse it is — the better. Why is it so? The thing is, if your assets are uncorrelated, they have different behavior. The same things do not influence them. They change in different directions and at other times. It minimizes the risk that is an inevitable part of investing. There’s no universal recipe for investing that is sure to work one hundred percent of the time. The variables that lead to a great outcome in investment are numerous, and some are intangible, like sheer luck. Others can be measured and assessed when you consider investing. It also minimizes risks. Diversification, though, is one of the most powerful tools of risk balancing. Think of your investment as a meal: to get proper nutrition, you need a combination of different foods: minerals, vitamins, protein, and carbohydrates. The same goes for investing.

Several factors influence your investment choice. One of them is determining your allocations. There’s a rule that you don’t necessarily have to follow, but it is nice to remember. The percentage of equity equals your age subtracted from 100. If you’re 40, your portfolio should be 60% in the stock. I would also like to know how much risk you will take. Low-risk investments may not bring you enough profit, while high-risk ones can lead you to lose it all. Try testing your portfolio and applying it to different scenarios, from the luckiest to the most horrific ones. This way, you’ll know which situations to survive and which are much better to avoid.

According to UBS, most Americans with assets between $1 million and $5 million don’t consider themselves wealthy.

Conclusion

Every person has their perception of money. Some treat it with disdain, some become obsessed, and others are blatantly scared of dealing with it. No matter your approach, you can’t deny the significance of money in human existence. It’s best to accept the vitality of money and learn how to deal with it in the most efficient way possible.

Sunil Dalal proposes several steps that can help you on this journey. He claims that one doesn’t have to be an expert to master the financial field. There are several key elements you have to consider to reach total efficiency. The first one is inflation. It’s intrinsic to the world economy, and there’s no way of getting rid of it. There are, however, some solutions that can help you predict inflation rates and beat them. A great way of enhancing your profit is by considering additional sources of income. You could monetize your hobby for this.

Finally, the real key to getting rich is, of course, investing. Although it seems like a complicated matter, expressed in complex terminology, it is easily broken down into simple concepts.

Try this

Take the time to assess your financial situation, understanding your income, expenses, and savings to determine a specific amount of money you are comfortable investing. Once you have established this sum, explore the different investment channels, such as stocks, mutual funds, real estate, or startup ventures, to identify opportunities that align with your interests. Focus on areas that inspire or align with your values, whether technology, sustainable energy, or local businesses. If you feel confident in your choices and the potential risks, consider investing in a few selected projects and monitor their progress to see how they evolve.