Lesson 6: CREATING WEALTH

Lesson Objectives:

At the end of this lesson, you will be able to:

• Describe the basic concept of wealth creation

• Explain how one can protect wealth

Getting Started:
What does wealth mean to you? In what conditions would you consider yourself
wealthy? Is wealth creation always part of your goal setting?

Discussion:
Wealth is the accumulation of capital. It gives us command over resources
which we can use to make life more enjoyable. Wealth is different from income.
Income is the monetary return on labor or investments. One can potentially have
a high level of income without having much wealth. For example, someone who
has a large monthly salary but has excessive debt is not wealthy.
BASIC CONCEPT OF WEALTH CREATION
Wealth creation means anything which could be owned and controlled, and
have a monitory value or have the potential to create the monitory value. Assets
could be tangible like a car, a house, furniture, machinery etc., or intangible like
goodwill, copyrights, patents, trademarks, etc. For a company, the land, the
building, the machinery, inventory, etc. are the wealth creation strategies.

Wealth Creation = Consistency

Time

Innovation.
Innovation is certainly one of the best ways to build long-term wealth, but it is
also something that cannot be rushed or forced. You may find you have a lot of
decent ideas throughout your career, but very few have what it takes to catch
on. After identifying an idea that stokes your passions, take some steps to test its
viability in the marketplace. Here are steps on how to take your innovative ideas
to the next level:
 Competitive Analysis – Start y researching the web, reading articles, and
signing up for industry association mailing lists which may be able to offer
trends, surveys, statistics, and so on.
Market Reasearch – Your next step should be to set up a landing page of
your own online. Essentially, this is a teaser for your forthcoming business.
Example: Create a Google AdWords campaign to ensure your page gets
in front of the right clientele and include an option for visitors to sign up for
updates and information.
Customer testing – Take this a step further and reach out to set up
interviews with potential clients who either signed up on your landing
page or whom you are able to identify through research or your personal
network.
Practicality – You have to ask yourself how practical your concept is. A
few things to consider include: whether your production will be logistically
feasible and affordable, where the product will be manufactured, how
expensive and accessible are materials, and whether you will need staff.
STRATEGIES OF WEALTH CREATION

Receiving a high-quality education in the right field is perhaps the most obvious
way to build a long-term wealth. Starting a successful business can also be
among the best wealth creation strategies. Investing money wisely is yet
another way to create wealth that lasts a long time.
Pursuing educational training – getting into top academic institutions and taking
up programs that will generate a surplus of income that can be saved and
invested
Starting a business – associated with challenges such as employees, taxes and
legal wrangling, but can be started with less-out-of-pocket expenses and not
necessarily a brick-and-mortar storefront (i.e. online business)
Saving and investing – If a significant portion of the income is committed to low-
risk investment, compound interest over the decades will eventually amass a
hefty sum. A long-term investment strategy for most people is focusing on small
but steady returns with limited chances of financial loss. Mutual funds and bonds
are a great option for a long-term investor.

Building and Maintaining Wealth

• Live below your means.
• Pay off debt as quickly as possible.
• Be a great employee, work hard, and enjoy your work.
 • Make long-term buying decisions.
• Don’t live in a high status high-consumption neighborhood.
• Choose contentment.
• Minimize your taxable income.
• Your home is not an investment.
• Convert non-income producing assets or cash payments into investment
assets.
• Make wise long-term investment decisions.

Budget to Save
Budgeting and saving money do not come naturally to many people, for
obvious reasons: it is easy and tempting to spend money on non-essentials, even
if your budget is tight.
Here are five steps you should take to reorganize your finances, prioritize
your spending, deal with any debt you may have, and trim your taxes. These
strategies, taken together, have the very real potential to improve your financial
situation.

• Get Your Budget on Track

You are not going to get ahead financially until you develop a
reasonable budget one that allows for both some indulgences and
for emergencies and then stick to that budget.
• Learn to Reduce Spending
Developing your budget will help you spot areas where you
are spending more than you realized. But the next step is more
difficult: cutting your spending on unnecessary items.
• Deal with Your Debt
Few people get far in adulthood without accumulating some
form of debt: credit cards, student loans, car loans, and mortgage
payments are common. In fact, debt can be a good thing (who has
the money to buy a house outright?), but the key is to use them
wisely.
Credit cards and other forms of debt can be an essential part
of your financial toolbox, but you must exercise care when using
these tools.

• How to Save Money

To build wealth, you have to start somewhere. Therefore, the
ability to save money is the cornerstone of building wealth.
• Make Sure to Trim Your Taxes
Nobody likes paying taxes, but they are an important aspect
of any financial plan. Even if you do not make much money, you
 might be surprised to learn how certain tax strategies and decisions
can impact your finances.

Save and Invest

Saving is a key principle. People who make a habit of saving regularly, even
saving small amounts, are well on their way to success. It is important to open a
bank or credits union account so it will be simple and easy for you to save
regularly. Then use your savings to plan for life events and to be ready for
unplanned or emergency needs.

Steps for Save Money

Saving money provides a cushion for short-term costs, such as a large car
repair. You also need money for bigger items, such as buying a house or paying
for college.

• Call your credit card companies and request that they lower your
interest rate.
• Shop around for better phone, Internet and cable services rates.
• Pay more than the minimum on card balances to cut down on
interest costs.
• Use cash instead of credit cards. This helps you control your budget
and avoids building debt.
• Cook from scratch and grow some of your own produce to save
money on groceries.
• Never pay full price for clothing. Buy your new clothes on sale, at
seasonal clearances, from consignment shops or discount stores.
• Comparison shop for electronics and big ticket items such as
appliances. The time spent looking for the best price is often worth
the effort.
• Save up and pay for a used vehicle rather than financing your
transportation. The amount of money spent on financing costs is
often very high.
• Save when banking. Look for banks with no fees on checking
accounts. Withdraw cash from bank branches, in-network ATMs or
during debit transactions at grocery stores or other retailers to avoid
a surcharge.

Tools for Saving

 A good first step toward saving is to open a savings account at a bank or
credit union. With a savings account, you can:

• Take advantage of compound interest, with no risk.

• Keep your money safer than in your pocket or at home.
• Take advantage of direct deposit of your paycheck.
• Monitor your balance online.

Investing

Personal investing is one of the more important components of personal

finance. Essentially, this type of investing activity centers on the investment activity
that is undertaken by an individual. Often, the investing efforts are focused on
creating a secure financial cushion for use in later years, and may include
investment activity such as Certificates of Deposit, savings account, participating
in pension plans, and the purchase of stocks, bonds and other options.
Since the focus of personal investing is often a key part of retirement
planning, many people choose to create a personal investment portfolio that is
composed of several different options.
For investors who wish to earn a high return and willing to accept a greater
risk, there is always the possibility of fleshing out the investment portfolio with highly
volatile investments. This can include such opportunities as buying shares in a new
and as yet uproven business, taking a chance by investing in a new type of
technology that shows promise of becoming extremely popular, or getting
involved with the fast-paced trading that is common with currency trading.

Build Credit and Control Debt

Carrying large amounts of high-interest debt cuts into your ability to save to
meet other needs. On the flip side, keeping debt in check and ensuring that your
credit score stays solid makes many things easier, including getting a job, a loan
or even insurance.

Don’t let debt get out of hand

Debt hurts your financial security in two ways. It is obvious that it slows down
your accumulation of wealth for retirement, But what may not be as easy to see
is that by building up debt, you get used to an inflates lifestyle and that makes it
even harder to change your behavior when you commit to paying it off and living
within your means.

Here are some steps to help you get your debt under control:

• Aim to pay off debt using incoming cash flow, not savings.
 • Make all minimum payments on time.
• Pay down debts with the highest interest rate first.
• Evaluate paying off low-interest debt versus saving more.
• Save money by paying off your credit card each month.

Application:
If you don't have the money you want, start with your mindset! Wealth begins by
visualizing that you are a MONEY MAGNET. Begin by creating a WEALTH VISION
BOARD. It could be a collage of printed photos or a collection of drawings. See

sample photos below.

Mechanics:
1. Create your wealth vision board on a 1/8-sized illustration board. Be sure to
utilize all the white spaces.
2. If you wish to print photos, be sure that they are not blurry or pixelated. If
you wish to draw, you may use any medium of your choice. Make your
artwork colorful.
3. You may include texts such as labels, quotations, a list of words or reminders
to yourself, but don’t make the board too text-heavy. Be sure the text is
readable.
4. Take a photo of your wealth vision board upon completion, print the photo
and paste it on a separate sheet of paper for submission. Please double
check the photo quality.
 5. Your board will be graded according to the following rubric:

Summary of the Lesson:

Wealth is the accumulation of capital. It gives us command over resources which

we can use to make life more enjoyable.

Wealth creation means anything which could be owned and controlled, and
have monitory value or have the potential to create the monitory value.

Deposits and Investments are those assets which make money grow without
much involvement of the owner.

Budgeting and saving money does not come naturally to many people, for
obvious reasons: it is easy and tempting to spend money on non-essentials, even
if your budget is tight.
Saving is key principle. People who make a habit of saving regularly, even saving
small amounts, are well on their way to success. Personal investing is one of the
more important components of personal finance.