If you want to be serious about creating wealth – start today

It’s not what you earn that’s important, it’s what you do with what you earn.  Thankfully I learned this from a very early age.  My Dad did not spend.  My Mother understood investment – time, innovation, business and external assets (outside the business).  My eldest sister was predominantly influenced by our Father.  I was learning from my Mother.  In the 60’s Stockbrokers were harder to understand than the Masons.  High School never touched the subject of finance.  The Funds Management industry was 20 years away.  But I knew about interest rates and property and business and tax – before I left High School – from my parents.  I had my own car at age 15 and kept it for 10 years, a Morris Minor.  My next car was bought with cash, it was a Morris Oxford, hardly a status symbol.  From 1967 to 1996 I contributed to company subsidised superannuation as well as owning various properties and personal superannuation.  I had a Hemi Chrysler Valiant by age 27, paid for with cash, and was mortgage free by 30, married with three children.

But I wish I had known about equities a lot earlier, although the late 70’s until the mid 90’s my Supers did have an equity portion.

What’s the message?  Start investing – and never stop.  I mean investing – not simply contributing to KiwiSaver, that’s a given.  I could easily have saved $10,000 by the time I was 25.  So could most people if they put their mind to it – but they choose not to.  So be it – I have no beef with choice.  But it’s the ones looking to create wealth that I can influence – whether through business or investment or both.

If we look at a boring ETF with an after tax return of 8%.  $10,000 at age 25 without another dollar invested will accumulate to over $200,000 by age 65.  I cashed in some personal Supers and Whole of Life insurance policies at age 60 and built an outdoor heated swimming pool.  The $100,000 ‘expense’ was a reward for over 30 years of saving and insuring.  And bringing up three children. 

Alternatively – we become ‘educated’. The only problem here, is that so are other ‘intelligent’ kids and most have

1. Absolutely no idea what the education curriculum is going to deliver as far as a job goes or
2. Achieve average grades sufficient to ‘pass’ – without merit or honours.  What the hell good is that- apart from racking up a large student debt and having a good time for most of the time over 3 – 4 years of “cut and paste’ study.  Hardly going to build the next great start up with that – create an app or become a brewer who’s timing matched the millennial demand for Kraft booze and bohemian behaviour.

But a PHD in Physics or Chemistry or Engineering – that just might show an attribute to electronics or communications or algorithms.  Or a Masters in Psychology or Business – you might be worth talking to by a leading corporate.  A BA or B Com – it might show discipline but hardly displays ‘value’ to a future employer.  You’ll end up with an OK job! – but spend the next few years focused to debt repayment and a desire to travel, like most of your peers.

Successful investors are risk takers.  Successful business builders are risk takers.  Entrepreneurs are risk takers.  You cannot generate a high return with low risk.  A 3% after tax return – using the same criteria previously explained – would achieve less than $30,000 at age 65 – yet most ‘oldies’ ‘invest’ in cash or at least tell their kids to do so because of their own lack of financial capability.  They’ll struggle to achieve 3% after tax – over the medium to long term.  Loss of purchasing power and tax will mean a seriously depleted lifestyle, so ‘property’ becomes the beacon and everyone is rushing for the great El Dorado – creating a serious anomaly for first home buyers and a golden egg in a basked for recent Auckland/Tauranga investors, ignoring the fundamentals and attracted by euphoria.

Can a PhD student be a budding entrepreneur?  Absolutely.  Are they common – not likely, but Silicon Valley is full of them – and most are millionaires or billionaires.

So what’s your take on this.

If you do the Uni thing – perhaps less debt at the end of three or four years would be good.  (your call).

If you do the Uni thing – is it good enough just to pass?

If you don’t do Uni – why not think like an investor or an entrepreneur – immediately.

If you don’t do the Uni thing – perhaps you could at least behave like an investor or entrepreneur.

If all this sounds to hard – give up and go work for someone who is choosing to be an entrepreneur and/or investor – you just might see the light, and learn something.  Thankfully in the Wellington region we do have many small and medium businesses with a technology/ entrepreneurial or arts bent.  The property market has at least maintained value with rental growing in line with capital appreciation and outer suburbs offering first home buyers the first rung on the property ladder.  Opportunity abounds with the right mind set; just be careful from whom you take instruction.  What’s their track record or their motive?  Mind set and good advice combined can be powerful, just ask the ‘greats’ – you’ll find mentors and managers are always acknowledged when the success stories are retold.