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! 

  

  

Walter Okpala: Building wealth with your income 1

Walter Okpala: Building wealth with your income 1: In my last post, I said I would give some tips on how one can build wealth with his or her income. It is important to remind people that bu...

Building wealth with your income 1

In my last post, I said I would give some tips on how one can build wealth with his or her income. It is important to remind people that building wealth does not depend on how much a person earns, but on one's ability to follow some basic principles, which by the way, are common sense.

     The first principle is to spend less than you make, period! It is impossible for you to be wealthy by spending more than you make. This is a very simple concept, but many people do not obey it. When you use you buy things on credit, you are spending money you do not have, in addition to paying others interest for borrowing their money. Do you know that when you borrow money, the lender is getting richer while you are getting poorer?

     You can do a research about the millionaires to see how they spend money. None of them buys things on credit. They only things they can afford to pay cash for. So, if you want to be wealthy, forget about buying things on credit. In my next posts, I will give more tips on this issue.    

        

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Walter Okpala: How do you manage your income?

Walter Okpala: How do you manage your income?: One of the problems facing workers is their ability to manage their incomes. The reason is that workers always receive their pay checks on ...