Having worked for the last three years alongside some of the smartest and wealthiest people in the country through my time on the RMB Class Of programme, I’ve come to realise that it’s rather easy to become wealthy. It takes just two simple ingredients – patience and discipline.
There’s no need to think up the next perpetual energy machine, or a new widget that every person in China needs, or to go neglecting your family, friends, health and hobbies to get there. For the average South African, the mentality of “me-too,” if used correctly, is all you’ll need to become the next Joe with seven digits to your asset column. Here are my thoughts on how you can set the wealth wheel in motion.
Firstly, be disciplined about your money. Everyone has a particular kind of relationship with their cash – some, an anxious one, some a comfort one – but each person a different kind. Some worry about how much liquidity arrives every month and how to grow this, others worry about the little leaks in the dam wall that seem to drain each month’s income. Whichever you are, make a few promises to yourself about how you’ll save money first, and then spend what is necessary. Few people realise the opportunity cost of their cash, when it’s spent on a luxury item of clothing or a few unnecessary nik-naks, rather then earning interest, and interest on that interest, over a period of time to give you a life far differnt to how you’ll end up if you live hand-to-mouth. So if there’s one important first step, it’s to put aside a portion of cash each month, as soon as you get that salary notification SMS.
Property is one of the few asset classes that South Africans can finance with debt. The beauty of this is that the bank ultimately provides a platform for your asset to grow and compound, while you’re slowly chipping away at repaying the capital. If you had a R100,000.00 and put this into the stock market, government bonds or a cash deposit you’d earn between 3 and 20% per annum. That’s five to fifteen years to double your cash. If this was a deposit on a R1m house, and the property market kept up with inflation at around 5%, you’d be earning R50,000.00 in capital gain if you neglect interest and CGT. A far quicker way to grow that capital base. If you’re renting the property out, there’s even more upside for you.
The last little bit of insider info I can share is that because you’re in the rat race, the other rats are competing for similar returns, so you’ll need some way of differentiating yourself and giving yourself access to some upside event in the market that few other people could participate in. Considering your skills and network of contacts, look for a small business, investment club, or advisory role you might be able to fill, that you’d enjoy. If you’re backing the right business that adds value to the market, run by a passionate jockey that’s desperate to succeed, and you’re adding value in a way that you enjoy, your venture is sure to earn above-market returns.
With these simple steps, given time and the ability to wait for your work to bear fruit, you’ll be set up for great financial success and be able to live out your days with a house in Clifton.
Got any interesting thoughts yourself on how how to make a bar? Please share in the comments..