A day out with the girls, travel escapade and household celebrations at your paid-for cabin or apartment. That is the kind of dream many people hope for. Well, I’m glad to announce to you that you do not have to make eight figures to turn these fantasies into your reality. Yet, you must have a game plan, and live with it in mind. Creating wealth begins with the right forethought at every phase of your life and believe me, you can do this!
The Africa Wealth Report 2018, published by AfrAsia Bank, examined the growth in wealth from 2007 to 2017 and offers projections to 2027. It reports that total private wealth held in Africa in 2017 amounted to US$2.3 trillion, of which US$920bn is in the hands of private high net-worth individuals, that is, those with assets of US$1M or more. Private wealth refers to finances and portfolios of individuals, as opposed to corporations; that means you could be well on your way to “rolling in the dough” sooner than later
How? Well, take a minute to ponder about what your life looked like five years ago. Now, take a look at your life today; did you ever think your life would look like it does now? Five years ago, you might have been starting your career, or you may have just made a drastic career-changing decision. The point is: a lot can happen in a few years from now and what you do or don’t do, will have a major effect on where you stand financially, in a few years.
Wealth creation is what gets a person from owning assets worth less than US$500 to owning over US$1M. Creating wealth is a process; this means there is no quick fix or fast track method. It can be achieved in many ways; investing in different asset classes is one of them. How to get there depends largely on the choices you make and the patience you have to watch your choices work for you. Here are some choices you can make:
– Set the right goals. These goals could range from a retirement plan, estate plan, savings plan, or even an emergency fund.
– Invest your money and diversify your investment portfolio
– Add another source of income. If you are not an entrepreneur, you could partner with or invest in one and earn residual income
– Think about real estate possibilities. There are very few things that appreciate in value over time. If you have the capacity, real estate is a quicker way to increase your net worth than traditional creation strategies.
As a millennial, one might ask what wealth creation has to do with me. To that, I would say: “a lot!” A study shows that Millennials will hold five times as much wealth as they have today and we are anticipated to inherit over $68 trillion from their Baby Boomer parents by the year 2030. Currently in the U.S for example, Baby Boomers control over 53% of the country’s wealth, though millennials make up the largest portion of the workforce. Millennials controlled just 4.6% of U.S. Wealth through the first half of 2020, according to data from the Federal Reserve. Yet, Millennials have the most opportunities to create wealth since they have one thing most generations ahead of me do not have: TIME.
Consider this plot: you start saving GHC 1000 every month, by the end of the year you would be making GHC 12,000. Imagine doing this for 10 years. You would have a great chance of building a solid foundation for your future. It does not take a huge sum of money to create wealth – as long as you begin early. For me, my goal is to always invest 15% of my income in wealth creation. For me, this wealth-creation practice will make good in not just money, but in opportunities down the road. As a millennial, I am certainly not wasting time and neither should you!
Further, consider budgeting like your future depends on it – because the truth be told, it actually does. A monthly written budget allocates every money to a particular cause or object. When budgeting, one can easily plan out how much to pay for food, clothes, rent and other bills as well as savings. Budgeting guarantees that you will have money for the things that matter to you.
With budgeting in mind, we should live below our means. Learn to say no to overspending. Overspending can and eventually will impact your ability to save and invest. In order to avoid this, you can stick to the 50-20-30 rule.
• 50% of your net goes into housing, utilities and necessary groceries etc
• 20% of your net goes into entertainment, fancy wardrobe etc
• 30% goes into saving and investing
Even more, there are many types of investments to help achieve one’s financial goals. The most common are stocks, bonds, real estate, etc. Let’s say you purchased 10 shares at Company X on the 1st January 2020 at GHC 200. Meaning you had to spend 10 * 200 = GHC 2000. The price goes up on 10th March and you decide to sell at the closing price of GHC 500 and receive 10 * 500 = GHC 5000. In the above transaction, you will gain GHC 3000 (5000 – 2000 = 3000). That is wealth that you created right there!
The good news is that creating wealth is not rocket science. Once you decide to begin, you just need to commit to doing it in spite of the obstacles and temptations you may face. By getting a head start now, you will be securing a healthy financial future.
By: Abigail Arthur