25/05/2020
To build real wealth, you need to do 5 things:
- Make a lot of money
- Spend less than you make = save
- Invest what you save
- Compound your investments
- Protect your wealth
Every advice I have read from books, webinars, interviews with the wealthy boils down to these steps
These steps are not negotiable.
Every advice you've ever heard revolves around these steps.
Also important to note that Rich =/= Wealthy
This is why it is so difficult to point to a lot of inter-generational wealth in Nigeria. We confuse riches for wealth. So we chase riches
We think of wealth (a flow) as riches (a stock/quantity) so we try to stock up instead of creating channels.
This is why when we say it starts with a mindset, we are not trying to aspire to perspire.
Once you break out of that mindset that you need to accumulate, instead... ..you start thinking of how to convert a stock into a flow.
And I do not mean how to convert your embezzling/other illegal riches into a flow
Instead, how to create channels & flows, then how to grow those flows over time, then move on to other wealth creation steps.
Once you've created flows/streams, then you need to curtail spending, not by living cheap but working with budgets. Cheapness can create expenses of its own because you're always fixing, repairing the low-quality stuff you bought. You can put your life at risk by being cheap...
Compounding sounds like something magical but it is the real key to wealth and it is also the toughest part because it takes time. You can't bypass it, you can't run from it.
You can't have a baby in one month by impregnating 9 women. It will still take 9 months. No short cut
This is compounding:
If you save N5k every month for 10 years, that's N5,000 x 12 months x 10 years = 600,000.
Let's say you earn 5% every year as interest, you'll end up with N630,000 (without compounding)
but with compounding (every year), you end up with N736k.
But...
if you compound quarterly by buying 90-day t-bills for instance (compounding means rolling over both principal and interest) then you'll end up with N786k instead
