1. Creating Personal Wealth - The
Nine Principles
Successful people usually have exceptional skills. They plan properly,
organize efficiently and work long, hard hours in order to succeed. One
would assume that they would create personal wealth with the same
diligence. However, many of them fail to apply their minds to their
personal wealth with the same enthusiasm. They adhere to sound
business principles when managing their businesses, but do not follow the
fundamental principles when it comes to creating personal wealth. Anyone
who wants to create personal wealth should manage their finances
according to the following nine principles:
Develop a purpose in life
A conscious life purpose, whether it is to make money or to reach any
other goal, steers the management process from planning to
implementation. As in business, to be conscious of a purpose helps you to
lay down a strategy and to persevere with it.
Develop positive thoughts
Creating wealth by means of purposeful planning is not a shortcut to
overnight riches. It is a long-term process during which you will encounter
many obstacles that block your way. You could allow these obstacles to
destroy you, or you could transform them into opportunities. There are
numerous examples of successful people who transformed their greatest
obstacles into their highest achievements. A positive mindset is a
prerequisite if this is to happen.
Determine a mission, goals and clear objectives
Decide exactly what your mission, goals and objectives are, and put them
down in writing. A mission is a broad statement of what you want to
achieve, while goals support the mission, providing the strategic routes
that lead to its realization. While these goals are general, they should
nevertheless also be clear, because the objectives are derived from them.
One example of a goal is to retire financially free. The characteristics of
objectives are that they are specific, achievable, measurable, simple and
flexible, and are set down in writing. For example, one of your objectives
could be to increase your net asset value by 10% by the end of the year.
Another could be to create a source of passive income that would be large
enough to fund your retirement so that you could maintain your present
style of living after retirement at 65. Construct a plan to reach your
financial goals and objectives. Divide the plan into short, medium and
long-term goals / objectives and then execute your plans patiently.

2. Increase your knowledge and improve your skills
Anyone whose goal is to create personal wealth should have a basic
understanding of how inflation, interest and taxation influence their
finances. They should also be aware of the basic principles of investment,
as well as of the characteristics of fundamental asset classes, like cash,
shares, property and bonds.
Spend less than you earn
It is much easier to spend money than to earn it. This applies also to
business or personal finances, regardless of whether people have to
manage small amounts of money or large ones. To create a surplus by
spending less than you earn is one of the most important goals in creating
personal wealth.
Let your money work for you
Legend has it that Albert Einstein once said: "Compound interest is the
most powerful force in the universe". Whether or not he really said this is
uncertain. However, what is certain is that compound interest is an
extremely powerful way of making your financial dreams come true. Here
is a practical example: An eighteen year-old who starts to invest $36, 67
per month at an average return of 12% per year,will have accumulated
$1 million when s/he turns 65. Over this period, he/she will have invested
only $20 683 nominally, while compound interest will have taken care of
the rest!
Use property to create wealth
Everyone needs somewhere to live, but the way in which a property's
finances are handled determines whether wealth is created or destroyed.
People who borrow money from their mortgage to increase their standard
of living destroy wealth, while the opposite is true of those who reduce
their outstanding bonds. It is amazing how a small additional payment to
your mortgage bond can save you interest. With an additional payment of
$727 per month on a $1-million bond, and an interest rate of 12%, you
will save $389 054 in interest and repay a 20-year bond in 16 years
Create a passive income
To attain financial freedom, it is necessary to earn a passive income that
you don't physically work for. For instance, you could let a property or
invest in shares that pay dividends. Small business owners normally do
not belong to pension funds. They should therefore consider different
alternatives, such as retirement annuities. These structures are "pension
funds" for individuals and could also be part of a portfolio aimed at
preparing for financial freedom in retirement.
Protect yourself against risks
After working hard to create wealth, you should also do your best to
protect it. The first rule of the greatest investor in the share market of all
times, Warren Buffet, is not to lose money. His second rule is to follow

3. the first! Risk planning should thus feature in any financial plan. The nine
principles should not be a burden, but should become integral to the
frame of mind in which small business owners approach their personal
finances. Initially it needs a concerted effort to adopt the habits necessary
for creating wealth, but wealth creation soon becomes a way of life.