Why do some families have wealth
while others do not? (12)
The experts say there are many intertwining reasons. Many people feel
that poverty, like wealth, is a result phenomenon– a result of
decisions taken or not taken by families over the long haul. For example:
a) Some cultures build the saving
and entrepreneurial component in
their
education system, others do not.
b) Some peoples seem to ‘celelbrate’ the
consumption culture, totally oblivious
to the view that life is a long
tern journey. So they spend all
100 cents in their paycheck at
every pay period. Others do not.
c) Some spend less than the ‘full
hundred’ cents and learn
how to invest the rest. Others
do not
d) Some families have a financial
and standards-of-living vision
for the medium and long term. Others
do not.
e) Some people learn, very early
in life, how to put some of their
money to work for them over the
long term. They have a vision of
their tomorrows. Others have no
vision for their future and are
content to keep working for money
all their lives. Invariably, those
who develop a vision of their future
and plan for it will create more
wealth than those who do not have
that vision and fall, instead,
for the short-term gratification
of the cost of high living.
How do people who are not wealthy exist,
financially?
They exist by working physically harder
and longer, (way past retirement age),
for money to meet their recurring bills.
Working for money all of one’s
life (and not investing any or enough
of it) is one of the worst ways to spend
one’s productive years. It sometimes
lead to marginal living standards especially
in retirement because, there was not
enough ‘set-a-side’ for their
proverbial “rainy days”
How do people who are rich exist, financially
speaking?
They tend to live reasonably comfortably from the income they receive
from
putting their money to work while they themselves are still working. They do
this by, inter alia, putting some of their money in:
a) real estate and rental income
b) ‘government paper’ i.e. lend some to the government (which
is
usually the biggest borrower in a country)
c) shares of companies listed on recognized stock exchanges
d) their own companies either as sole proprietors, partners or limited
liability companies (entrepreneurs)
e) Research and Development initiatives that lead to inventions, patents
and
royalty.
If we are ‘tired’ of
being poor and want to change our financial
status, and
living condition, how/where can we start?
In our head!! This means changing our way of thinking. One way to make
this
change is to coax ourselves into believing that is possible for us to change
the
direction and quality of our life entirely by our thought and action, while reminding
ourselves that we alone have that power to change or not change!!! Listen to
four who should know:
a) “It is possible!! You are blessed and highly favoured by your
Creator” international motivational speaker Les Brown from a very
poor Miami neighbourhood who was declared ‘uneducable’ by an
unsympathetic teacher
b) “Life is a do-it-myself programme” says outstanding behavioural
scientist Dr Denis Waitley
c) ‘You are responsible for your own life. You become what you
believe’.
Oprah
d) ‘We are what we think. All that we are arises with our thoughts.
And
with our thoughts we make our world’ Buddha
Enough said?!
What is the typical income stream of
wealthy people?
a) Dividend income from ownership
of stocks
b) Interest income from lending
their savings (however small) to
their own government and other
reputable borrowers who will repay
c) renal income from property
d) Royalty from inventions, patents
and other intellectual property
These people try hard to make the decisions on their income source. They
rarely, if ever, operate savings accounts in banks
What is the corresponding income stream of people who are not wealthy?
This is primarily wages from employment,
miniscule returns on savings and
CD accounts which have the following characteristics:
a) Size of wage set by union and out of their control
b) size of bank/CD interest rate set by bank and out of their control.
Are there any basic strategies that can be recommended to people who want to create some wealth over the long term?
There are many. Ten are:
a) assume the responsibility
to do so now i.e. initiate an investment
and wealth-building culture in
the family
b) develop a family plan to implement
the responsibility
c) Let time start working for
you i.e. start where you are now
with what you have and build on
it
d) Pay yourself first from every
pay cheque, bonus, incentive and
every windfall payment i.e. save
or invest from it first before
you start spending from it
e) Invest at least 10% of all
regular income and at minimum,
20% of every bonus, incentive or
windfall payment
f) If your employer has an employee
saving or investment plan in which
they will match anything (or a
fixed portion) of what an employee
saves, qualify yourself for the
maximum employer contribution.
This contribution is like net profit
in an enterprise. It will grow
your savings at a faster rate
g) Let the multiplying magic
of time work for you
h) Let the magic of compound
interest work for you
i) Teach the kids about investment and wealth creation
j) Have a valid Will to facilitate
inter-generational wealth transfer
and building in the family
What can "not
so wealthy" people do to gain some
control over their income stream?
Start with the help of a trustworthy Financial Planner. Make financial
sacrifice, and still more sacrifice, by denying or postponing some immediate
wants so that they can start an investment programme. The objective is
to benefit from the wealth building effects of time (as measured in decades)
and the compounding magic of interest rate. Interest sensitive investments,
index and other managed funds may be good places to start the investment
programme.
