The stats read that only 6% of South Africans are able to retire financially free. This is a scary statistic that sends shivers down my spine.
What is financial freedom I hear you ask? Financial freedom means you have enough money saved and / or invested that generates sufficient income so that you don’t need to work anymore.
How much is enough to reach financial freedom? The rule of thumb says 20 x your annual salary at retirement, but this will differ from person to person depending on your personal circumstances.
How do you calculate your current level of wealth? Net Asset Value (NAV) is the ultimate measure of your wealth and you can calculate this by adding up the market value of all your assets and subtracting your total liabilities. This is what you are currently worth and is the number you need to regularly measure and set goals against.
Here are the 4 Steps to Wealth Creation with the ultimate objective of becoming financially free:
1. Earn or make the Money
Your business is the perfect vehicle for you to make money. If you are not currently making money from your business you are wasting a massive opportunity and are missing out on Step 1 of creating wealth for yourself.
If you are not making the money you desire, you need to get to the root cause of why? Is it because you don’t have enough leads coming in, are you not converting enough leads, are your margins too low, and do you not retain your customers?
It is impossible to move to Step 2 if you do not get step 1 working.
2. Save the Money
Once you have made some money, you need to be disciplined enough to save some of this.
Some basic rules when it comes to spending and saving are as follows:
- You must spend less than you earn (whilst so obvious, this rule is often broken).
- Save first and spend what’s left, not the other way around.
- Other than “good” debt, your house and possibly car, if you don’t have the cash you can’t afford it.
- Avoid debt at all costs. Short-term/unsecured debt in particular is very expensive.
3. Invest the Money
Once you have saved your targeted amount, you now need to decide where to invest it. The three asset classes that give both capital gain and income returns are businesses, property, and shares – your personal preferences will dictate where you decide to invest. Your financial advisor will be your go-to person in terms of giving you the correct advice based on your personal circumstances.
4. Manage your Investments
You will now need to manage your investments. The choice of your asset classes will determine how passive your investments are. You do need to keep track of your investment growth and returns to ensure they are trending in the desired direction.
Need some Guidance?
As Business Coaches, we cannot help you with Steps 2, 3 & 4 but we most certainly can with Step 1. We are experts at helping businesses make more money through our proprietary tools and strategies facilitated by our experienced coaches.