Five steps in creating wealth

Would you love to be financially free? I assume your answer is YES!

When it comes to creating wealth, often, people will focus on asset building if they want to be financially free. Now take note, there are other areas to focus in building wealth. You should take a holistic view on your wealth.

Step 1: Goal setting

The task of goal setting is the first and perhaps the hardest step. It is very important to know where you destination is and when you want to get there.

Imagine going on a holiday without knowing the destination. Would you pack your swim wear or would you pack your winter woolies? Should you fly there or drive? If you don't know where you're going, you won't know what to bring and the best way of getting there.

Once you know what your goals are and you wil be able to put a number to your dreams, and you will know what action you need to take now.

Step 2: Saving and Debt management

There is no magic formula, it is not rocket science - the only certain way to create wealth is to save. In addition, the earlier you start saving, the sooner the miracle of compounding interest works for you.

It is so simple, yet many people find it hard to do it.

Keeping a budget will help identify areas where you can cut back. You will be surprised by how small changes to your lifestyle can make a huge impact in creating wealth.

For instances, instead of getting your daily lattes from international coffee chains, you could switch to more inexpensive alternatives at smaller coffee stalls or even the percolator in your office pantry.

Cut down these expenses, and be discipline to save that extra money. Creating wealth requires a bit of sacrifice initially.

You cannot build your bank balance if you are saddled with debt. Work towards reducing your debt, reduce the use of credit cards. Pay cash all the time. If you are short of cash, then don't buy the next up and coming gadget.

Debt is not always bad: it can be an excellent way in creating wealth. For instance, getting into debt to buy an investment property to give you a positive monthly cashflow is good.

Step 3: Investments - Growing your wealth

Saving is very important, but it doesn't stop there. You need to invest your savings to grow your wealth; and you need to invest sensibly. Do not just leave everything to your funds managers or financial planner.

Do your own research, understand the market, understand the different investment vehicle. Read up on the company or funds that you are eyeing.

Do not trust everything that your financial advisor tells you, make your own decision. Remember, you are responsible for your own money. Your funds manager or financial will not be accountable for it.

Step 4: Insurance - Protect your wealth and dependents

Insurance protects your wealth and ensures that your dependents maintain their standard of living should anything happen to you. When it comes to insurance, you also need to ensure that you do not only focus on one aspect of it. Very often, people have a number of life insurance policies but little or no medical cover.

The three areas to look at are life, health and income protection. These three should be well balance for your protection. You want to have a peace of mind while building your wealth, isn't it?

Step 5: Wills

If you do not make a Will, you cannot control who will inherit your assets after your death. Upon your death your property will be distributed according to law which may be against your personal wishes.

By making a Will you can determine precisely who will inherit what and let your loves ones know that you have considered their needs.

Equally important, you can determine who will handle your affairs after your death and who will act as guardian for any minor children

If you die without making a Will, the management of your affairs is then placed in the hands of administrators who are appointed by the court and who are likely to be close members of your family. The administrators distribute your estate according to the law.

Focus on other areas as well. Look at the holistic view of creating wealth.

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