Walter Okpala: Happy Easter!

Walter Okpala: Happy Easter!: I wish everybody a Happy Easter Celebration!

Happy Easter!

I wish everybody a Happy Easter Celebration!

Walter Okpala: Common mistakes for wealth creation 3

Walter Okpala: Common mistakes for wealth creation 3: In my last post, I wrote the misconception that wage increase adjusted inflation is a bad way to think about wealth. In this post, I will t...

Common mistakes for wealth creation 3

In my last post, I wrote the misconception that wage increase adjusted inflation is a bad way to think about wealth. In this post, I will talk about another common mistake workers make. The mistake is related to lifestyle, with special emphasis on accommodation. Whether be it rented house or owned home, the same problem is observed. 

     Many workers tend to live in a middle-class neighborhood. There is nothing wrong with this idea if your wage can afford it. Some workers pay house rents which can represent about 40% of their takehome pay. This may not be obvious because house rent and condominium fees are paid in different days. One can only create wealth when he or she minimizes the expenses and maximizes accumulation and compounding mechanisms. 

     Many other workers take up high value mortgage in order to own their houses. Although having a home is good, one cannot put all his money in that. How can one live in a house with mortgage value of $1 million, but living on a monthly wage of about $20,000? What happens if the person buys a small house and accumulates $7,000/month for a period of 10 years in investments? At the end of this period, the person can buy the house of $1 million and pay cash. The person will be rich to the point he or she can even decide to stop working. 

     Wealth creation requires patience. In the success jargon, it is called delayed gratification. That is, to have patience and make sacrifice now so you can be wealthy in the future and buy whatever you want. Think about that!          

  

Walter Okpala: Mistakes for wealth creation 2

Walter Okpala: Mistakes for wealth creation 2: In my last post, I wrote about one of the most common mistakes people make about creating wealth for themselves. In this poat, we will look...

Mistakes for wealth creation 2

In my last post, I wrote about one of the most common mistakes people make about creating wealth for themselves. In this poat, we will look at another common mistake we make. The mistake is looking at the wage increase and inflation adjustment as a way of maintaining standard of living or wealth.

     From my experience of working with executives, I have come to realize one common area of addiction of all. I generally have argument with them about wealth creation. The common belief among them is whatever it takes to maintain their current standard of living with inflation adjustment is alright. Even when they make investments, they will be counting on the return that will maintain the current purchasing power of their money. I tried to show them that this way of thinking is wrong. As a result, some live in expensive houses of about $1 million dollars, but do not have any investment. 

     My argument is that one should accumulate as much capital as necessary to be giving him or her good and sustainable return. The support to my argument is that someone with $10 million cannot feel any type of inflation when compared with someone with $500,000. The person with $500,000 did not invest because he thinks the return is small and cannot keep up with his current standard of living. The point I am making is that inflation affects everybody, but not at the same rate. The wealthier one is, the less is the effect of inflation and vice versa. 

     In summary, fighting for wage increase through inflation adjustment is not a way to build wealth. Rather, wealth is built by having patience and accumulating a lot of money through investment. Think of that!           

Walter Okpala: The common mistakes for wealth creation 1

Walter Okpala: The common mistakes for wealth creation 1: In my previous posts, I have given some tips on how someone can build wealth through his or her income. These tips are necessary because mo...

The common mistakes for wealth creation 1

In my previous posts, I have given some tips on how someone can build wealth through his or her income. These tips are necessary because money is something that everybody wants to have, but few people really understand the principles behind having it. Almost everybody skips these principles. As I am writing this blog, I have made a lot of mistakes regarding money. Some of the mistakes we generally make are:

 - that only people from rich family can be rich

This idea is completely wrong. A recent research carried out in the USA in 2015 showed that 80% of the millionaires are self-made ones. In other words, they did not inherit anything from their parents. Some people use this as a reason to make themselves comfortable instead of struggling to break the barrier of poverty.  

 - that one cannot be rich by doing a 9 to 5 job

If a street vendor can be a millionaire, why shouldn't someone with a well-paying job be one? If one understands the power of his income (wage), he or she can be rich faster than someone without a college degree. The reason is that the source of wealth creation is right with the individual. Some well-paid executives or workers play lottery, hoping to become millionaires through this process. Think about an executive who makes $15,000 to $20,000 monthly. Investing in mutual funds, the executive will be a multi-millionaire in less than 5 years if he or she can be investing $5,000 monthly. That does not require a lot of sacrifice. If one can have $1 m after 30 years by investing only $100 monthly, $6 m by investing $500, imagine what happens by investing $5,000 monthly. If one can make this sacrifice, he or she can even stop working after 5 years. This way is more effective than waiting to reach retirement age in order to be receiving pension. 

In the next posts, I will write more mistakes we make.         

Walter Okpala: Building wealth with your income 4

Walter Okpala: Building wealth with your income 4: In my last posts, I have given some tips on how one can build wealth from his or her income. Building wealth does not necessarily depend on...

Building wealth with your income 4

In my last posts, I have given some tips on how one can build wealth from his or her income. Building wealth does not necessarily depend on on how much one makes, but on the mindset and the ability to delay gratification for the long term profit. It is interesting that everybody wants to be rich, but only few can do what it takes to get there. So, why don't people get there even if they want to be there?

     The number one barrier is the lifestyle. Lifestyle does not permit many think on the long term. Your lifestyle does not allow you see your financial level so you can live accordingly. For example, I know of working class individuals making about $5,000, with a take home pay of $4,000 monthly, spend $1,200 on house rent. The irony is that they are married with children. From the remaining amount, they pay high school fees for their children. How can people living like this be wealthy?

     Never. Although each makes a reasonable amount, they spend have nothing remaining at the end of the month. In other words, they cannot build wealth. They only thing they have is their pension plan. Their struggle is always to maintain their current standard of living when they retire. That is, to assure an income of $5,000 after retirement. That is a bad plan.

     A better plan would have been to live in a cheaper house of $1,000 and use the extra $200 invested in a mutual fund. Over a period of 30 years, this amount will turn into $2.2 million. After retirement, this amount will be yielding about $15,000 monthly for you, besides your traditional pension of $5,000. The calculation I made results from only changing one thing about your lifestyle and having an extra cash of $200 every month. What happens if you save another $200 from car payment, eating in expensive restaurants, etc.? How much would you make after 30 years? Think about it!

                  

Walter Okpala: Building wealth with your income 3

Walter Okpala: Building wealth with your income 3: In my recent posts, I have given some tips on how to build wealth with your income. Today, I will give more tips as regards to building wea...

Building wealth with your income 3

In my recent posts, I have given some tips on how to build wealth with your income. Today, I will give more tips as regards to building wealth. In the first post, I recommended spending less than you make. In the second post, I wrote about what you do with the surplus you have from your income. That is, investing it. In this post, we will look at the effect of compounding as a tool to have wealth. I am writing this because only investing for the short term is not enough. You must invest for the long haul. Investing for the long haul implies understanding the power of compound interest.

     The major difference between the wealthy and the others is that the first invests for the long term and delay gratification while the second only thinks about the short term. The reason is that the first group understands the effect of compound interest on investment. It is ironical that anybody that passes through primary school or high school studied compound interest, but it is only few that really makes use of it. In order to understand the power of compund interest, ask any good financial adviser to calculate how much you can have in a period of 20 years or 30 years, investing in even a conservative fund.

   Recently, a famous financial adviser said that investing only $100 every month for a period of 30 years (period assumed for retirement) will yield $1.170 million. The same adviser did the calculation for investing $500. He concluded that $500 will give between $5 - $7 million. This means that you become a multi millionaire by the time one retires. So, think about it!   

  

Walter Okpala: Building wealth with your income 2

Walter Okpala: Building wealth with your income 2: In my last post, I gave one tip on how one can build his or her wealth by spending less than he or she makes. Although this may seem simple...

Building wealth with your income 2

In my last post, I gave one tip on how one can build his or her wealth by spending less than he or she makes. Although this may seem simple, many people do not obey it. Buying things on credit means that you cannot afford the product now. What you are doing is, in fact, transfering your future wealth to another person.

     The second tip on how to build your wealth is by investing. In order to be rich, you must be an investor. If possible, be an active investor. Learn how to do it and participate. Do not think being an investor is a thing of the few. In fact, anyone can be an investor. An investor is someone who uses money to generate more money. The first and the second tips are complimentary because you cannot invest unless you spend less than what you make. 

     There are many types of investments. Do not invest in savings account unless you need the money as your pension fund. At least mutual funds can give you a 12% return per year. There are other ones that can yield more. Try and seek a specialist advice on investing and learn how it is done before starting the business. 

     Depending only on your salary cannot make you wealthy, but you can use your salary to build wealth by investing. Think about this!