Serving up some great strategy for you guys today is coming all the way out from our Risk Manager in London.
Here are 3 tried & true techniques for wealth creation besides having a savings account.
This article is a 7 min read.
3 Tried & True Techniques for Wealth Creation Besides Your Savings Account
Here at Firstline, we’re a Boutique Portfolio Management entity that creates wealth for our clients and provides them with timely financial advice.
But what does this mean exactly?
Who in the blogosphere truly knows what wealth is?
Any common English dictionary usually defines ‘wealth’ as the abundance of valuable financial assets which can be converted into a form that can be used for transactions.
Alternatively, the United Nations defines wealth in an all-inclusive manner. This means wealth is a monetary measure which includes the sum of natural, human, and physical assets. Natural assets include tangibles like land, forests, energy resources and minerals. Human assets are the population’s education and skill sets, while physical assets include things like machinery, buildings, and infrastructure.
Our Firstline definition is – in a way – a halfway house between the two. We see wealth as money and investments like real estate and stocks and shares. In other words, anything that provides financial security from unforeseen events that can blow our clients into uncharted and undesirable waters. Wealth is also the cornerstone that allows our clients to reach their aspirational goals.
Before we get to our shortlisted three techniques for wealth creation, we want to share a sort of public service announcement with everyone and that is for us all to:
Focus on earnings first,
by doing something that you enjoy
The wealthiest individuals in society have usually succeeded in building vast wealth by focusing initially on earnings or an idea that they enjoyed which allowed them to build wealth.
Elon Musk started in the business world with a company called Zip2.
Zip2 provided and licensed online city guide software to newspapers. Zip2 was sold and the money raised was used to form a new company called x.com, which over time morphed into PayPal. PayPal was ultimately acquired by eBay for US$1.5 billion.
PayPal has proved to be the pad that launched Tesla and rockets that are intended to return man to the moon.
What’s your Zip2?
Ok, on to the techniques.
TECHNIQUE 1: Develop Multiple Sources Of Income
To increase your wealth, develop multiple sources of income. Avoid quick “get rich” schemes and look initially for symbiotic income streams that are similar in nature to the income streams that you already have.
If you’re thinking about developing multiple sources of income, consider the following:
- What do you enjoy doing? You are likely to be more successful financially if you do something that you enjoy.
- What will pay well? Look at income streams that you enjoy but also will meet your financial expectations in terms of a second income stream.
- What are you good at? Look at the things that you are good at and see if you can develop that ‘like’ into a second income stream.
How To Transform Your Savings Into True Wealth
- The Masterclass -
At Firstline, we are experts at creating, growing, and maintaining wealth in Trinidad and Tobago.
With some of our staff working for over 4 decades in the financial industry, in addition to the success stories, they have witnessed many a person’s finances rise and fall or stagnate, and there are specific actions taken by those who keep their finances rising over their life, compared to those who were not as proactive.
Enter you email below to gain access to our masterclass video that outlines what it truly takes to transform your current savings into true wealth in Trinidad and Tobago.
TECHNIQUE 2: Pay Yourself First And Develop A Passive Source Of Income
David Bach wrote in his book “The Automatic Millionaire – A Powerful One Step Plan to Live and Finish Rich” that there is one proven way to generate wealth and ‘get rich’ and that is:
When you earn a dollar – pay yourself first.
Most people don’t do this. It’s true. Do you do this?
What most people do when they earn a dollar is pay the mortgage or landlord, the credit card company, the phone, and cable company and what is left over is what they pay themselves.
To avoid this trap, pay yourself first by setting up a direct debit to an investment account so that money is taken from your account as soon as you are paid and made to work for you as passive income. The money that accumulates in this account can be used to generate the funds needed to make investments that can truly build your wealth.
TECHNIQUE 3: Invest Money Appropriately
Placing money into your savings account monthly may seem like a good way to build wealth but it often isn’t because the returns offered on savings accounts offer a poor return when the impact of inflation is also considered.
If you want to build significant wealth you need to take on some risk in your investments.
This is where your investment adviser – a company like us here at Firstline who offer tailored financial advice and solutions – can help.
Investment advisers can help you determine your risk tolerance and desired return. They can also assist you in quantifying all the constituents of your financial existence. This would include your current and projected income, your investment time horizon and your cash flow or liquidity needs in both the short and medium term.
Following on from this, a financial adviser can determine an appropriate asset allocation for you based upon your unique investment and risk profile.
Conclusions
The three best tried and tested techniques for creating wealth are:
Earn enough money: This is easier if you have more than one income stream and do things to generate income that you enjoy, are skilled at and pay well.
Pay yourself first: Track your spending, trim off the fat and save money through the development of a detailed budget and financial plan.
Get professional advice: With the assistance of a financial adviser take on some risk and make prudent financial investments.
