Is it even possible to grow my money these days?

The first thing I want you to know is that you don’t have to be at the mercy of others if you arm yourself with knowledge. This is what will help you take charge of your financial future.

I want to revisit one of the cornerstones of wealth creation in this blog. I also want to illustrate how investing in the advice of a fee-based Financial Advisor can make the difference in your income from day one.

Many so-called financial gurus will tell you that, to manage your finances, you need to budget better and buy one of their products. They will end the story there. I want to tell you that this is not the secret to growing wealth!

Allow me to explain why

Don’t make a mistake! I am not saying you can get rich without budgeting and saving! Again, the important thing to realise is that it is NOT ENOUGH, especially when the world has been turned upside down and the markets are reeling like a sailboat in the South Easter.

Budgeting is the door, but it doesn’t secure the destination.

So! Managing your finances DOES include budgeting, managing what you earn and developing different sources of income (called income streams) as well as keeping what you spend your money on under control.

Now that we know that budgeting is not enough, the question that we want to answer is this: how do I grow my financial position, despite the rough seas of the economic environment? When we refer to wealth, many people conjure up vast tracks of land, a mansion and a yacht. That may be the end result, but it may look different to different people. When we talk about wealth, we are referring to growing your finances, once your daily necessities have been taken care of.

Multiple eggs and multiple baskets

You know the line that you were taught at school about not putting all your eggs in one basket? Well, it is true! It isn’t only the money in your bank account that matters. It is also about your assets – the things you own or have invested in.

These could be the home you own and live in, as well as any other property you rent out. The money you’ve put aside for your retirement, such as your pension and retirement annuities. Your emergency savings that will help you survive a crisis, as well as any other unit trusts or investments you may have.

Here is the lesson: It is the return, which is a fancy word for the interest / the income you receive from your assets, that builds your wealth.

Down by the boat house

I want to tell you the story of a couple who came to see me because they wanted to buy a beautiful house on the side of a lake on the scenic Garden Route. The estate agent told them that this property could also include a boat house, but it will cost an additional R250 000. That may sound like a bit of a waste, as neither of them owns a boat, nor are they planning to do so! Wouldn’t the wise thing be to NOT spend money on something they won’t use?

This is what I pointed out to them: IF you buy the boathouse, you can earn R30 000 a year from renting it to people who actually DO own boats. In financial terms, this would mean that they would earn a return of 12% on their investment from day one. As their financial advisor, I told them that this would be an excellent return.

Isn’t playing it safe – well – safe?

Let’s imagine you were to come to me with R250 000 and said you want to put it in a savings account and forget about it. Maybe you think it’s the safest option with the least hassle.

If you were my client, I would tell you that the best interest rate you will be able to get in a savings account would be 6%. That doesn’t sound as good as 12% does it? It gets worse. You will then have to pay tax on top of that.

So how do I put my money where my mouth is?

Well, once a year, in your birth month, I will ask you to find out the value of all of your most important assets. I will then help you figure out how to grow these assets.

Here is an example of someone I recently helped. Let’s call her Grace. Grace recently lost her partner to whom she was married for 20+ years. When she came to me, I asked her to make a list of her assets. Twelve months later, I asked her to compile a list of the values of each category again. After I put the figures into a table, the picture became clear to her.

This is what it looked like:

Birthday Month12 Months laterDifference
Main Residence 1 200 000 1 500 000 300 000
Rental property 1 500 000 1 700 000 200 000
Pension Benefits 2 300 000 2 500 000 200 000
Retirement Annuities 800 000 850 000 50 000
Emergency Savings 50 000 55 000 5 000
Other Investments 1 000 000 800 000 -200 000
Totals 6 850 000 555 000

Wait a minute!

The value of her investments fell by a whopping R200 000! Surely that is no reason to celebrate? And this, dear reader, is where my experience comes in. I am not emotionally involved. I have also been around for a long, long time. I can confidently tell you that the financial markets get shaken up regularly. BUT! They always recover. Growing your wealth is a long-term commitment.

The big picture is what is important here

The critical takeaway here is that though she lost R200 000 in her investments, in a year, she grew her OVERALL wealth by R555 000 over a year. This is equal to R 46 250 per month. When you diversify your assets, your ship will be better able to roll with the waves until calm returns.

Back to the so-called financial gurus

They are not lying when they say that budgeting is important and that saving is important. There is a place for savings and other off-the shelf products. Just don’t be lulled into a false sense of security.

I cannot stress enough that you and your financial service provider must share the same vision!

My game plan with clients

I meet with my clients at least four times a year, whilst many other financial services providers will meet with their clients once per annum. Why?

I want to build a relationship with them. I need to understand THEIR views, obligations, aspirations and challenges, first, before I say anything! Then, we need to set goals that both parties do some homework. At NFS, we take an active approach – we review and adjust on an ongoing basis to maximise results. I want my clients to trust me. Trust is earned. I’d much rather show than tell!

What are the goals we will set?

  1. I will help you to become financially independent by helping you manage your debt and to come up with a realistic budget.
  1. I will then help you find ways to build and protect a lifestyle that you are comfortable with. Once you have a clear idea of how you want to live and feel secure in this, it is easier to stick to financial goals.
  1. I will also help you to grow your wealth so that you can start to do the things you want to do, instead of just slaving away to survive from month-to-month.

What sets our services apart

I sell advice, not only products. I am not earning all my money chasing a commission from the large comprehensive insurance or investment companies. We only accept 25% of permissible commission and pass that saving on to you to offset a large portion of our fees.

You are also not buying my time. You are buying my knowledge and my experience. You can ask any of my clients, many of whom have been around for years, If I’m not panicking, you don’t need to!

Come! Let’s walk the long road to financial freedom together.

For the YouTube version on this topic, please follow this link.

Leave a Reply

Your email address will not be published. Required fields are marked *