Building wealth is almost everyone’s dream, who doesn’t want to live a financially stress-free life? Wealth building is not an event, it’s a process that requires dedication and discipline. This is a guide on how to build wealth in South Africa.
There are multiple ways of building wealth, we as humans have different skills and talents. What works for me might not work for you and vice versa, however, there are things that are extremely crucial for anyone looking to build wealth. Most of these things are related to your mindset more than anything.
What exactly is wealth? A lot of people have different interpretations of what wealth actually is but most can agree that individuals with more than R15 million in net worth are wealthy. Some people may feel like R15 million is not a lot of money because it doesn’t quite allow you to live the “millionaire lifestyle”. However, R15 million in net worth is enough to shield us and our families from most financial burdens.
Change your worldview
All wealthy people see the world a little differently from other people. You are not going to amass a fortune while doing the exact same thing that is done by everyone else. It starts with a shift in mindset, you should always look for opportunities, there is plenty of them.
Wealth building is a game, a game of numbers, all you have to do is make sure that your money increases while your expenses remain relatively low. Earning R80k per month and spending all of it won’t make you wealth, you will just live the “high life”. There is nothing wrong with living the high life, the problem starts when you lose your primary source of income.
Building wealth doesn’t really require you to be innovative or to be an inventor, there are actually businesses with a clear blueprint that you can just follow. There are two main paths that you can take to being wealthy, one leverages time and the other leverages scale.
How to build wealth?
It’s important to note that there is no magic formula to building wealth. Income is not really regarded as wealth, net worth is what makes up your wealth, earning R1 million per month doesn’t make you wealthy; your net worth does.
1. Live a frugal life
As mentioned above, the game of wealth dictates that your income should increase while your expenses remain very low. Living frugally just means living below your means, this is something that is super difficult to do. However, you need to live a bit frugally if you are planning on building substantial wealth in South Africa.
Living frugally might be difficult to do for low income earners, but there will come a point whereby your income will increase and your expenses don’t need to increase proportionally. High income earners should prioritize living frugally, the excess amount can be used to grow your wealth. You don’t need to have all the latest gadgets or fashion.
2. Increase your sources of income
It’s very hard to build substantial wealth from one source of income, even if you earn a lot more money than the average worker. Millionaires on average have about 7 streams of income. 7 income streams are a lot, you don’t have to build as many streams. You should build at least 4 income streams and focus on multiplying them.
The good thing about building multiple streams of income is that you can just use one of them to cover your living expenses. The rest can be put towards investments, which will generate more cash or dividends. Building different sources of income means that you will have to build a few businesses or make some investments.
You don’t have to build overly complicated businesses; you can start with the good old property business. People will always need accommodation, some businesses that have almost guaranteed returns are beef cattle farming and pig farming.
3. Make sound investments
Investments are more about stabilizing and growing your wealth, most investments have a return of less than 10% per year. It might take you a really long time to build your wealth with investments only. That’s why we highly encourage building multiple sources of income.
However, you can use the interest from your investments to finance your lifestyle, this will leave you with even more disposable income. You should always diversify your investments. Don’t invest in the same asset, invest in unit trusts, bonds, mutual funds and stocks. This will shield you when the economy is in a depression.
4. Avoid debt
Avoid debt or any financial commitments that tie up most of your money. Nothing sucks like seeing opportunities pass by because your money is tied up somewhere. Debt should only be used for the purposes of building a credit score and tax avoidance. Keep your debt to a minimum, don’t use more than 25% of the credit that is available to you.
5. Be highly disciplined
All this requires a high level of discipline, it’s easier said than done. This is why a lot of people find it hard to build wealth, they lack discipline. Discipline is needed to succeed in pretty much any field in life. Wealth building also requires a high level of discipline. Make sure that you live frugally, avoid debts all while increasing your income and you will surely be wealthy.
Conclusion
Building wealth is not easy, it is a process that requires much patience and discipline. This was a guide on how to build wealth in South Africa. Do you have any thoughts or questions? Comment below.
