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 Wealth Creation |
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Wealth creation is a process described by a few essential laws of money. If you live by these rules your chance of financial success is very good. And yet the majority of people will struggle financially as they go through life. Why is this?
You may have the desire to make more money and fulfil all your dreams, but if you don’t know how to get the process going, you cannot expect to achieve your goals.
Wealth creation has to start somewhere. Identifying where and how to begin is probably the most difficult step. But once you get the ball rolling it becomes very easy from there onwards.
Let me try and shed some light on this:
Suppose I ask you to paint a newly built brick wall with a colour of your choosing. Will you be able to do it? I’m sure you would if you are familiar with the process of preparing and painting a wall. Once you know where to start, the process becomes a lot easier: Buy the plaster and paint, select your paintbrushes and building tools, acquire a ladder if necessary, plaster the wall, apply one or two layers of undercoat and then the final coats of paint. Whola, job well done!
The point is if you know how to go about doing a certain task, the only thing you really have to do is get off your butt and do what you have to do. The same thing works with making money.
As a working individual caught in the rat race, building wealth is governed by a standard universal framework.
There are 9 words which describes the entire process:
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- Use
- your
- surplus
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- income
- to
- purchase
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- income
- generating
- assets
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Wealth creation is commonly understood to be an exercise in investing. Have a look at the figure below.
The conventional thinking is to save part of your monthly salary in a pension fund/401k over a long period of time so that when you retire one day you have something to live on.
One can see that investing is planning for the future. It’s a delayed wealth creation strategy. Instead of accumulating wealth today, investors set cash aside for use during retirement, 20 or 30 years down the line.
With this approach the hope is that one’s investments will increase in value over time.
Wealth creation sets off on a completely different path. Where investors save part of their salary (before costs) in a savings vehicle like a pension fund, wealth creators focus on spending part of their salary (after costs) on income-generating assets.
It may not make sense but spending is the name of the game not saving. The amount you spend and what you spend it on is vitally important to achieve financial success.
Real wealth accummulation is achieved by owning revenue streams that is under your control. There are several approaches to wealth creation; for example you can increase the income you already have, add a second source of income, investing in real estate, and by being ruthless in deciding how to spend your hard earned money.
While you surely can trick someone into giving you their money, the easiest way to build wealth is by creating value for others, so instead of thinking ”Wealth Creation” you should think ”Value Creation”. That will give you the right mindset that you need to become really successful, because it shifts the focus from you to your customers. |
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