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The Six Rules Of Wealth Creation

wealth creation

The key to wealth creation is getting your money to work for you on a regular basis, growing your money every day, and the place to start is with seed capital.

Seed capital is part of your monthly income that is set aside first each month to generate more money and grow both your net asset value (NAV) and passive income. Wealth is about the accumulation of assets at the least cost and
incurring as little debt as possible. Clearly the more money you set aside each month, the sooner you become wealthy. But there’s a question that people who are generally radically overspent ask: 

 

Where and how to start?

Now, you may think managing a budget is very mundane and such a chore but, there is no doubt that without a wealth creation budget you will never achieve sustainable wealth. Sustainable wealth is not the result of investing. It is the result of a systematic approach to money management and budgeting is where we begin. But a wealth creation budget is not your usual run-of-the-mill budget: It requires an entirely different mindset from the simple objective of budgeting to spend less than you earn.

The six rules of wealth creation

1. The first rule of wealth creation is that your NAV must grow by a specific percent each year to achieve your retirement target; and this is not negotiable. So the younger you start the better!

2. Obviously the second rule of wealth creation is that what goes out can never be greater than what comes in, under any circumstances. And buying on credit to overcome this rule is pure folly!

3. The third rule is that we must use our money before other people use it: That 50% or more of our income must work for us to generate more income at the most favourable rate of return (ROI). So paying PAYE upfront each month and paying into low return pension or provident funds over which we have little say, is not profitable.

4. The fourth rule is that we must allocate money to seed capital before any other expense. And we must target growing our NAV by a specific percent each year. We also need to understand our risk profile and the most favourable ROIs that we can expect from the different asset classes that we have in our portfolio.

5. The fifth rule is that wealth protection must follow wealth creation in order of priority.

6. The sixth rule is that debt reduction comes next in line. Only then do we allocate money to our monthly expenses.

 

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