Did you say, How to Build Wealth?  What?  Me build wealth?  Don’t say that.  If you’ve just started earning a salary, you have over 40 years to build wealth (see the table/calendar above).  Yes, you can do it.  And each blog of this series actually took you a step closer towards wealth.

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Money, in the form of notes or coins, ALWAYS loses value.  (This is one of the main reasons for increasing prices.)  To increase the value of money, you need to convert it into something durable, very quickly.

In the last blog we discussed HOW TO KEEP OUT OF DEBT.  Do that successfully, and you’ve taken an essential step – because clearly, you can’t build wealth if you are in debt.  Recall how compound interest could work AGAINST you, by increasing your debt?

• Compound interest will work FOR you if you save every month, even if it’s a little, for as long as you can.
• To benefit from the time factor (duration), you must start saving from the time you start working. You don’t earn too little to save; if you think you earn a little, save a little.  (It’s more about the habit than the amount.)
• You are likely to be charged interest at 9% if you buy a house. But your house may increase in value by 12%.  So you’re increasing your wealth by 3% (that’s 12 – 9).  As a tenant, you’re likely to be paying off your landlord’s bond.  He’s increasing his wealth by 3%.  A house loan could be seen as “good debt” because it buys something that (mostly) increases in value.
• Precious metals (think of gold and silver) normally increase in value too.
• It is worth learning about the stock market. If you own shares (say) in a company like MTN, you actually own a small part of that company.  Your shares are likely to grow in value.
• If you use your monthly money to buy an asset (like a house or an investment plan) that increases in value, you are likely to create wealth.

In the list above, we frequently said, assets normally or are likely to grow in value.  There is always the risk of assets losing value.  It is your responsibility to monitor the value of any asset you own.  That’s your business.

When using money to build wealth, there is always risk.  Higher returns are always attractive, but higher returns are nearly always linked to higher risk (of loss).  The younger you are, the more risk you can accept.  (If you lose money, you have time to recover).  As retirement approaches, your risk appetite should reduce; you should be more concerned about the long-term security of what you have accumulated.  So you should choose the safer, lower return.

The best way to build wealth is slowly and steadily.  If anyone promises anything different – slow down!  Can you hear the alarm sirens?  If not, you haven’t slowed down enough.

Jay Pillay’s first two critical decades were spent where his first decade began – in Pietermaritzburg. After studying at ML Sultan Technikon in Durban (anyone remember that place?), he then joined the sugar industry, working in Tongaat, Durban, and Xinavane – a sugar mill village 120km north of Maputo. Oh yes – there was a brief period of unfaithfulness, when he flirted with aluminium in Richard’s Bay. Upon retirement, he and his wife Dorothy – settled in Southport.

Jay began writing about salary management (for ordinary people living on a salary) in the early 2000s. Many of his articles were published by The Ripple Effect, a Durban-based corporate newsletter. In all his writing, Jay says he attempts to emphasise the big picture in salary management: it’s not just about making it to your next payday – it’s about making it to the end of your working life. It’s not just about your working life – it’s about your retirement too. It’s not just about the cost of living – it’s about the cost of dying too. It’s not just about you as a salary manager – it’s about your dependants too.

This 16-part series is being published here for the first time. It would be invaluable for salary managers in the early years of their lives – who realize that salary management is a lifetime business. Finally, it’s not just about reading stuff on salary management – it’s about careful thought (that means time, well invested), and then taking appropriate action.

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