According to a popular data survey handle on Twitter, Spectator Index, the world’s richest 0.7% own 46% of the world’s wealth and then the world’s poorest 70% own 2.7% of the world’s wealth. To be candid, I wasn’t really surprised by these figures. They just show that more people need to learn lessons about wealth creation.
Andrew Carnegie, a popular philanthropist, said in “The Gospel of Wealth” that “The problem of our age is the proper administration of wealth” and this is as true as can be. However, wealth creation begins with a bold step to start something and stop whining about the government.
Here are six lessons about wealth creation you should learn:
1. Learn to master the order of money management
Earn first before spending and in the process you must spend less than you earn. To be able to do this conveniently, you must learn to turn it into a habit. We all have the habit of taking a regular trip to the fridge, trust me I can’t explain it either.
2. Invest a larger part of your income
Smart people understand that that they always have to put more money in vehicles that would turn out even more money. There is a lot of information out there on areas to invest in. Here in Nigeria, Government Bonds return around 12% per annum while the best performing mutual funds return even better. Depending on your risk appetite, you can never go wrong when you gather enough information before you invest.
3. Never lend anyone money you cannot afford to let go of
Friends and families will deal with you a great deal if you cannot deal with them appropriately! It’s easy to give out money, but getting it back is another matter entirely. So don’t give out any loans you can’t forgive.
4. Have appropriate plans for every kobo you spend
Also, you must plan for your future streams of income. Nothing is free in the world we live in so plan to pay for every service you enjoy to avoid shocks and disruptions to your normal life.
5. Decisions about your money should never be made when you are happy or sad.
If you will ever go out with friends have a separate ATM card for your entertainment budget and stay strictly with it.
I will share a typical story of what I’ve experienced in my years of working in Asset Management. A client walked into our office on a Monday morning in June 2013 and was perturbed as to how his “friend” had betrayed him in building his own house ahead of him.
Our client works with a top oil company, has spent the better part of 6 years working onshore and offshore as well as outside the country. While onshore, he used to host parties with his “friend” who made sure the table was always full. The “friend” also determined what the bill for the nights out was and ensured our client’s ATM card was always with him.
Mr “friend” did this for four years and built himself a 3 bedroom duplex in Lagos despite not having any real job! Our client meanwhile lives in a serviced apartment where he pays in dollars, and he also travels round the world at the slightest opportunity just to brag in the office.
He had nothing to show after working in a choice company for about 6 years and earning over $480, 000. It might seem outrageous to you but I’ve learnt on the job that no matter how much money you make, it can develop legs and walk away if it’s mismanaged.
6. Focus on what’s important
Health, friendship and family are important and should be prioritized. After all, what is the essence of amassing wealth without good health to enjoy it and friends and family to spend it with? Make sure you put first things first so you can truly live a fulfilled life because true wealth goes beyond money.
Check out the previous episode of Your Money on three great investments you can start with N5,000.
Lateef Abioye is a Chartered Accountant with over 6 years experience in Asset Management, Banking and Financial Consulting. You can reach him at [email protected].