Smart people finish rich, they say. That pot of gold at the end of the rainbow can be yours but you’ll need to make the right moves to get there!
Many of us aren’t taught the secrets of how to make money, so we muddle through and learn along the way. But there are
many wealthy people who seem to get it right all the time. Money makes money and they know how to do it. So what can we learn from them?
Spend less than you earn
If you don’t watch your spending you could always be broke, no matter how much you earn. You could also end up in debt – a real wealth killer. Doing a budget gives you an idea of where your cash is flowing and whether you need to do some restructuring. Learning not to spend more than you earn is an important habit to develop.
Set goals
Set clear goals for yourself – both short term and long term – and then create a plan to get there. Understand why you want to achieve these goals – money decisions are driven by emotions and if you understand your why, you’ll stay motivated as it’ll feel good doing the right thing.
Make your money work
If you get your money to work for you, every rand you invest today can be worth four or five rand in future.
“Rich people know that money gives them choices and can buy them time and freedom,” says Gugu Sidaki, Director at Wealth Creed. However, it’s easy to fall into the trap of living for today. “Using your money as a tool to create more money is a powerful habit to cultivate,” she says.
Create a millionaire power hour
Each working day, you’re spending between 1.5 to 3.5 hours working just to pay the taxman, depending on your tax bracket. Then a further few hours of your time you work to pay the bills. If you’re lucky, there may be a tiny bit left at the end of it all for you.
David Bach, author of The Automatic Millionaire suggests creating a ‘Millionaire Power Hour’ in which you pay yourself the first one hour of your income each day, and make it automatic.
So, if you earn R20 000 per month, that’s around R113.63 per hour. Over a 22 working day month, you’d pay yourself about R2 500 per month. Over a period of 20 years, with an average growth of 8%, you could build up a tidy nest egg of over R1.4m, assuming you never increase your contribution. Do this over 30 years and you’ll have R3.5m.
If one hour’s income is too much to squeeze into your budget, start with what you can afford. You can always increase it over time, but get into the wealth creating habit of paying yourself first.
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Keep it simple
Warren Buffet, one of history’s greatest investors, famously said, |Never invest in a business you can’t understand.” With so many options out there, it’s easy to rush in blindly, so make sure you know what you’re doing.
Wealthy people are curious and ask questions – they continue to learn and invest in their own knowledge. Do the same. Understand what investment options are available and how they work. Some investments (such as shares) are very high risk and need a fair amount of knowledge to build a successful portfolio.
There are less risky ways to access the growth of the stock market, such as investing via unit trusts or Exchange Traded Funds (ETFs). Keep learning and developing a wealth mindset. The more you know, the better you’ll be at investing.
Take risks
Letting your money sit in a bank account may feel safe as you’re guaranteed regular interest, but it can leave you poorer in the long run. Over time, inflation will erode the value to your money, so you’ll need to take a bit more risk if you want to get rich.
Higher risk means higher possible return, and the longer your time frame, generally the more risk you can take. That is because risk is often measured and seen as short-term volatility, but you can ride out the highs and lows if you’re investing long term.
Many wealthy people also invest in other types of assets including property, gold and even artwork. You may be a long way from this, but start by taking some calculated risks on your investments, setting yourself on the path to riches.
Develop multiple income streams
According to The College Investor (thecollegeinvestor.com), the average millionaire has seven different streams of income. The top ones are their salary, spouse’s salary, investment income, real estate income and side hustle income. It may take some time to get there but you can start with a side hustle and then invest this extra cash. There are many side hustles you can do even if you have a full-time job.
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There are passive income options as well, such as investment income (dividends from shares or interest) or real estate income. This money should be ploughed back into your investments to grow your wealth even faster.
Invest for the long haul
There’s no shortcut to getting rich – it takes time and patience, something that wealthy people understand. “You are never going to achieve the goal of building wealth if you chase short- term fixes. That’s when you’ll fall prey to scams,” warns Gugu. So to get rich, actions speak louder than words.
In the words of author John C Maxwell, “If your habits don’t line up with your dream, then you need to either change your habits or change your dream.”
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