Show me the money
People around the world have adopted a cavalier attitude to money in recent times. The modern obsession is to grab as much money as one can in as short a space of time as possible. Ordinary citizens are at pains to emulate the hundreds of super-rich who flaunt their wealth on the pages of the world’s society magazines. And they’re willing to do anything to make a fast buck – except work hard of course!
South Africans are no different. This week’s Business Times Money weekend supplement urges readers to “Get rich or die trying...” The article begins with an analysis of the seven keys to creating wealth, suggesting that if we pay close attention to these steps we will soon follow in the footsteps of Donald Trump, Richard Branson and Oprah Winfrey.
Seven keys to wealth
Business Times spoke to founding editor of the FHM, Neil Bierbaum who shared these seven essentials to wealth generation. And contrary to belief it’s not what you know that’s going to help you; but rather gaining a better understanding of what you don’t know. Bierbaum believes that the financially challenged don’t know:
- How to get into the money flow
- How to create value
- The difference between good and bad debt
- How R100 saved can be turned into R1 000 when invested
- How to use other people’s resources
- How to control their emotions
- Why they want to be rich
Two of the points are particularly relevant in today’s difficult economic conditions. You have to make the distinction between good and bad debt. When you purchase a car or other luxury item on credit “you’re buying a liability.” Not one of these items is going to be worth more in five or 10 years time. The secret to identifying good debt is this: “Good debt buys assets that bring in cash!” Your spare capital is better used on an income generating asset (an investment in a shopping centre) than the latest BMW 3-Series.
It’s also important to realise the importance of saving. The magic of time and compound interest will multiply turn even the smallest amount into a sizeable sum. With a little effort you can find spare cash to save even in the tightest of budgets.
Fast money is a mugs game
FAnews Online believes there is one point missing from the seven listed above. “The financially challenged don’t separate fantasy from reality.” Being super-rich is a pipe dream which will be achieved by very few. Contrary to what the motivational speakers will have you believe you won’t become super wealthy by addressing seven points on a list? Chasing massive wealth is a mugs game and more often than not results in you making costly mistakes. By obsessing over quick returns in the investment game you make bad decisions and end up with substantial losses. So what should you do?
The more sensible advice for investors was tucked away on page 2 of the Business Times Money section. It was an article by Di Turpin, chief executive of the Association of Collective Investments, titled: “It does take time to make money.” And the advice is simple: Investors need to go back to the basics by selecting a much longer time horizon for achieving their goals.” Save regular small amounts and leave these investments untouched and you’ll be amazed with the capital you accumulate.
The sensible strategy is to take a slow and steady approach to your finances. Work hard to ensure you’ve got enough to savour the important things in life. And tuck away enough to enjoy a comfortable retirement.
Editor’s thoughts:
Almost every ‘investment’ opportunity that offers massive returns ends in tears. Yet it’s the promise of quick and massive returns that lure investors in every single time. Are you still lured by opportunities that offer a quick buck; or do you prefer the tried and tested approach of investing over the long-term? Add your comment below, or send to [email protected]
