Basics of Wealth

Principles for Building Wealth
You can create personal wealth. It is possible to meet your financial goals by choosing to budget and disciplining yourself to work within the budget. You can pay off your debts, send your children to university, or buy yourself a comfortable home, or start a business.

" Through proper budgeting, saving,  investment and debt reduction, your wealth goals can be reached ..."

Through proper budgeting, saving and investment, and by reducing your debts, all your goals of wealth can be reached. Building wealth requires having the right information and then setting out plans that involve discipline and commitment.

The time-honoured principles are:

  • Budget to save.
  • Save and invest.
  • Control or slash debt.

Your Net Worth is your Wealth
A wealth-creating asset is a possession that increases in value or provides you with a return. This includes; a savings account, a retirement plan, shares and bonds, assets such as land, land development.

Some things like a car, a television, or clothes are also assets, but they are not wealth creating assets because they don’t earn money or rise in value. A liability is also known as a debt. This is money you owe others. These include a mortgage, credit cards, a personal loan, car finance, hire purchase, student loans etc. Net worth is the difference between your assets and your liabilities. It is the difference between what you own and what you owe. The balance is your net worth, which is equal to your wealth.

What Finance Type Are You?
When it comes to financial affairs, people can generally be put into the following groups.

Check where you fit in.

  • Planners: Control their financial affairs. They budget to save and keep to it.

  • Strugglers: Have trouble “keeping their heads above water”. They often live beyond their means and they cannot handle budgeting to save.

  • Deniers: Refuse to acknowledge they are in financial strife. They don’t like budgets and they refuse to follow a budget in order to save.

  • Impulsives:  Seek immediate satisfaction. Their philosophy is, “spend today and let tomorrow take care of itself”. They couldn't care less about budgeting to save and they are always in financial trouble.

Knowing the type of financial person you are helps determine the changes you need to make in order to maximise your wealth creating ability.