Rules of Wealth Creation

I got this particular topic idea from a book I read titled “If Life is a game, these are the rules”. After I read it I then started to wonder, if Wealth Creation was a game, what would actually be the rules. These rules are just my observations following years of being a student of wealth creation as well as teaching it. I have had the privilege of seeing changes happen in people’s lives as well as studying people who have related wealth. The game is definitely not limited to what I have written here but these are the common factors that I have seen in most of them.

1. Take Responsibility.  It is never somebody else who can change your situation.  It is never anybody else’s fault.  If we are honest with ourselves, many of us have gotten into the trap of blaming somebody else.  A lot of the time we blame our employer.  They should of course be paying us much more. Sometimes we blame the government.  Whoever you blame, you have delegated responsibility to.  Take control back.  The most important question to ask yourself is – What am I going to do about it?
2. Spend Less than you Earn.  Seems simple enough and we all know we should do this.  However it seems to be where we struggle.  Remember a little amount can go a long way.  When I lost the comfort of a regular income I realised that the three hundred shillings I spent on lunch per day is nine thousand shillings per month and is Kshs 108, 000 per year.  What can you do with Kshs 108, 000 per year?  Holiday, pay off debt, invest are just some of the things you can spend lunch money on.
3. Know what puts money IN your pocket and what REMOVES money from your pocket. There is a difference between Assets and Flossets.  Assets increase your money (e.g. investments, businesses) and Flossets reduce your money. Ironically, society believes people are wealthy by the amount of flossets they have e.g. cars, clothes, phones, shoes, houses they live in, lifestyle, gadgets etc. These items have no bearing on how wealthy you are.  To spend less than you earn you need more things that put money in your pocket than those that remove it.
4. Do not Borrow to Consume.  Do not borrow to acquire Flossets. That’s what we call bad debt and it will take you steps backwards.  Good debt i.e. debt that will led to increased Assets will take you forward.
5. Multiply your Resources. My personal definition of wealth creation is the ability to multiply resources. Start with evaluating how you use the resource called time.  Do you spend more time doing things that remove money from your pocket or things that put money in your pocket?  Use your time wisely and multiply your knowledge, skills, networks and this will ultimately lead to multiplication of your financial resources. You can have no money in your bank account but still decide to start multiplying these other resources.
6. Know why you want to make money.  Making one million shillings will not make you happy. Why?  When you do get it, you will want ten million shillings and so on. You have got to come to terms with why you actually want to make money? A good way to think about it is if you had all the money you wanted in the world.  What would you do (after buying all the things you think you would want)?  Is it spend time with family, travel, establish an organisation, help others?  Money is a tool to help you achieve these things; it is not in itself what you really want.  Identify the reason deeper than just making more money or becoming rich.
7. Keep the right company.  I wrote an article on this recently.  Keep the kind of company that provides an environment conducive to wealth creation.  The people that complain about being broke all the time are not that company.
8. Cash Flow is King.  Eventually everybody will get to a point where income is his or her most important financial requirement.  You may retire and will need an income from somewhere to sustain your life.  You may lose a job along the way and realise the importance of income.  You may be unable to work or simply want to be able to make the choice not to work. One day the source of your income will have to move from your ability to work 40-60 hours a week to your investments. Your investments will need to be generating that income to keep you going. What is your plan to grow or structure your investments so that they can generate that level of income?
9. It’s not all about you. This is the pill that is sometimes hard to swallow.  Creating wealth cannot be all about you. A selfish attitude leads to small thinking.  When it is all about you, what you can spend, what you can buy – you may end up achieving that but only that. You can do so much more.  What you want for yourself is important but when you combine this with a bigger picture that includes family, those around you, your community you see things in a whole different perspective. The best investments you make may not be those that you were thinking about yourself but those that you were thinking about the future generation because you were willing to take a long-term view.  What do you want to be remembered for?
10. It’s a Process not a Deal.  A huge amount of money will not fall on your lap one day and sort all your problems out.  You will not get a deal.  The process of wealth creation is choice not chance. Having a vision as opposed to just focusing on survival. Action not just ideas. Empowerment not creating dependence.