How can I become wealthy?
Please don’t tell me what I want to hear, tell me what I need to know.
I have recently written several articles on several topics directed at the South Africans abroad and thought that I would be ‘cheeky’ enough to write a few more on the financial industry I know and work in, for the benefit of the readers both in South Africa and abroad.
As I am an investment manager, I have had much exposure and gained much experience over the many failures and successes over the past 35 years in the business start-up, development and investment sectors so I thought the following few articles including this one, could be of benefit for some readers, private individuals, those who are considering starting their own business and those who are already in business in the UK.
So, what is the secret to becoming wealthy.?
This has to be the most common thought on people’s minds and is probably the most frequently asked question.
Before we unpack the question on becoming wealthy, we should spend some time looking at what being “wealthy” actually means.
With the constant bombardment of materialism and consumerism our society faces daily our perception of what being wealthy is and what it means to us can very often become a bit blurred. The perceptions and pressures of society often go some way to polluting our ideals when it comes to determining the real wealth in our lives and we very often start defining our successes and failures by these perceptions instead of what truly matters to us most.
Before we can look at the principles of becoming wealthy, we need to deal with and understand what being wealthy actually means to us. If we fail to understand what this means from our own perspective, we can never know whether we are truly wealthy or not. If we get these basic principles right from the start, we will be well on track to understanding the actions we need to take in order to achieve our goals as quickly and painlessly as possible.
When it comes to building wealth in a financial sense, there is no magic formula that we can apply to every person in every different situation. The simple reason being that everyone is different, we all have different circumstances and we all have different goals that we want to achieve. What we should consider are a few basic principles that we can keep in mind when trying to build wealth, such as the following:
Avoid get rich quick schemes
So many of us have been caught by get rich quick schemes, succumbing to the promise of outlandish returns with little to no risk. Before investing in any kind of investment we should always remember that if it looks too good to be true it usually is, and no risk usually means no return.
We should always do our homework properly before investing in any investment and be aware that risk is always part of return and should be fully understood before we consider investing.
Get the right advice
How often do we find ourselves reading something, seeing an advert or, better yet, having a dinner party where someone is bragging about how much money they have recently made on an investment? How often have those discussions led us to invest in those same investments, only for us to end up losing money – something we never hear anybody bragging about at dinner parties.?
Instead of taking this one-sided sentiment-driven investment approach we should rather engage with professionals who can assist us in making the correct decisions to suit our particular needs by providing us with holistic financial planning and giving us all the correct information we need to make properly informed decisions.
Have a plan
Not having a good understanding of where you currently are financially, where you want to be and how you’re going to get there relative to your current circumstances and goals is a bit like getting in a car without knowing where you are and where you want to get to and not having a map or GPS to guide you once you have these particulars.
Start by understanding your current financial situation as well as what you want that situation to be like in the future. Then formulate strategies to make sure you are doing the right things to get you there. Always start the process with this in mind and then measure your success regularly against your plan, making any adjustments along the way to ensure that your plan remains current and relative to your ever-changing circumstances.
Stick to your plan
One of the many problems we have as investors is impatience and a lack of discipline when it comes to sticking to our long-term investment strategies.
Often, we find ourselves constantly making changes and switches because of short-term volatility and emotional decision making. This does little except drive up the costs of the investment, incur tax on the returns we have made and change the long-term financial plans we have made.
By no means should you invest and forget about it for the next twenty years. However, it does mean sticking to a long-term strategy and avoiding making short-term emotional decisions that could derail your long-term objectives.
I am not suggesting that you should not live and enjoy life’s many blessings by denying yourself. Rather, you should think a little before going out and spending needlessly, particularly when that spending means using credit cards, bank overdraft facilities or any other kind of borrowing.
You should always try to live within your means by setting a budget. Entrenching these kinds of habits go a long way to making sure you achieve our goals and appreciate what you have.
Once we get our spending habits right, saving more becomes that much easier to achieve.
The best way for us to think of saving is actually to think of it as paying ourselves for the work we have done. By investing first before we go out and spend, we ensure that the most important things get paid first.
Never put all your eggs in one basket
Another sure way to provide a consistent return on our investments is not to put all our eggs in one basket, but rather to buy a variety of different investments and asset classes.
This removes some of the risk we’ll face if a single asset or investment suffers losses. It also exposes us to a variety of investments that may outperform one another at different times and under different circumstances.
By taking the proper advantage of this ability to diversify risk and exposure to various investment types you will be providing yourself with the protection and potential growth needed to grow your investments sufficiently to achieve your goals.
This investment decision should be discussed with a qualified professional financial planner who will guide you through the asset allocation process, providing you with all the information you will need to make informed decisions relative to your goals and ability to assume risk.
Time in the market, not timing the market
Warren Buffet, arguably one of the worlds most famous and successful investors, has long advocated the theory that we as investors should not try to time the market, but should rather invest when there are good opportunities to get good value and hold onto those investments for a long time. Trying to time markets is akin to gambling at a casino as no one really knows what the future holds. Although we may get it right from time to time, these windfalls are mostly due to luck and not skill.
By taking these principles into account, along with a clear understanding of what wealth means to you, you should find yourself with a fairly clear road map to achieving the goals you have set yourself when dealing with wealth and what you desire in your life. All that is left to do is implement the strategies that you have decided on and stick to the plan.
As always, it is advisable to discuss these with a professional financial planner who can assist you in creating road maps to financial well-being
‘Marc Bandemer is an international business developer, speaker, financial and technical author, businessman and entrepreneur living in the United Kingdom and France. The views expressed in this article are his own and do not necessarily reflect the opinions of the owners of this page or their website.’ Please visit him on Facebook, LinkedIn and Twitter or contact Marc at email@example.com visit his website at www.marcbandemer.com for more information on his specialised services.