There is always something that is at a premium – it could be time, space or money – and it is all about making choices so that you can keep all the balls up in the air and your dreams on track. These variables can also be traded off against each other. If time is at a premium, you could pay someone to do that task for you, if you run out of space, you can buy more, if you run out of money, you can use some time or space to make more. It’s all about balance and choice – and because money always enters into the equation somewhere, your wealth is impacted, either by consuming more, or earning less.
Now that we’re coming into the silly season it’s a good time to start getting your priorities right for the year ahead. By all accounts, it could be a tough year, and there certainly is a lot of uncertainty in the economy and politics. Inflation is creeping up, mostly because of the weaker Rand. Treasury is all tapped out of tax-payers funds (we think, but they may not), so Eskom are more likely to be granted their 18% increase than getting a bail-out or told to be more efficient – so keep looking at going off-grid and saving both energy and water. The Medical Aid tax credit is more ‘low hanging fruit’ that could bite the dust on 1/3/2017. Reign in your Medical Aid spending by combining a lower plan with Gap cover and if you’re on a family plan with one person using the lions share of your plan, look at hiving them off into their own plan.
If your priority is to accumulate wealth, there is no magic trick – you have to consume less than you earn. That is it. You can prioritise earning more, or by spending less – and of course looking after that wealth properly.
One important aspect of getting your priorities straight, and having half a chance of making them succeed, is that you and your partner have to have to be aligned, especially when it comes to consumption. Money may not be the source of all evil, but it certainly is at the root of more than half of rocky marriages – with toxic in-laws coming a close second. You might get away with running a dictatorship in the garden or kitchen, but when it comes to retirement, if you are pulling your wealth in opposite directions, it is going to end in tears.
I have a love of rare plants, but they usually come with an equally ‘rare’ price-tag. I get around this in two ways – firstly, with patience (often waiting years for them to flower), and secondly by growing from seed. This is how successful people build their wealth too – Slowly, day by day and patiently letting time and compound growth work their magic. Delayed gratification is an acquired taste – we can all hope that we can make up time or money – but the longer you leave it the harder it will be. A lack of wealth is usually an accumulation of poor choices, you can call it bad luck if it makes you feel better. Emotions pay a huge role in the accumulation of wealth: retail therapy; keeping up with the Joneses; spoiling children; changing houses and cars frequently; attitude of entitlement; thinking it’s cool to be clueless about technology; not continuing to learn; letting credit use you, instead of you it. Sometimes getting a financial plan is not enough, you need to see a coach or shrink to get your head and wallet aligned. Do you really know what you want? If you do, are you prepared to do what it takes to get it? Write down a list of the top 20 things you want to achieve in your lifetime. Now circle the top 5 and write them on a piece of paper – and chuck away the rest. If you spread yourself too thin you can’t prioritize or focus. Once you achieve one, then replace it. Keep growing.
If you’ve done everything you can on the income and consumption side of your wealth equation and primed the wealth pump so that there is a constant flow into your investments, then your priority will be to look after that properly, protect it and grow it. How can you do that? Your investments should be aligned with very clear objectives – retirement, home ownership, business ownership, education, family etc. These objectives will dictate the asset allocation of the investment – that asset allocation is the secret sauce of investment and asset managers and takes years of experience and research. You can, over time, do that yourself, but if it doesn’t interest you or you don’t have enough time then you’re going to have to ‘buy’ that help. That doesn’t mean you have to pay through the nose for it – keeping investment fees under control is essential. Balance is key, if you’re so focused on cutting fees, you might end up with a poorly balanced portfolio that is vulnerable to shocks in the economy.
Action: Clear the blockages stopping your income flow into wealth. Get some focus on your priorities and not spread yourself too thin and risk missing out on your dreams.
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Author Dawn Ridler ©