5 Keys to Wealth

from "The 5 Lessons a Millionaire taught me about life and Wealth" by Richard Evans.

I always enjoy a good book and I always have this compulsion to rummage through a booksale whenever I see one at the mall. One such side adventure lead me to an astounding little book by Richard Evans. Its hardbound tome decorated by 5 keys on its cover and shares the author's message of building wealth through 5 simple lessons. What's more fascinating is that at the end of the book Evans encourages the reader to share these five lessons to as many people as possible so that the reader may internalize the lessons and enjoy their fruits. To all the bloggers out there I hope you find these "keys" to wealth as enlightening as I did.

The 5 Keys to Wealth.

1. Decide to be Wealthy.
A journey of a thousand miles begins with a single step. In the case of building wealth the "first step" is committing to the becoming wealthy. For Richard Evans , the main reasons why most people fail to achieve wealth is because they don't decide to be wealthy. Commitment is a very powerful force and the mere act 0f deciding to become wealthy causes reality to conspire to make you successful. How do you take that first step? Simply declare your intention by saying it out loud and write it down on a card.... "Today I decide to be wealthy" (piece of cake).

2. Take Responsibility for Your Money.
There is a French proverb that goes " Money makes a good servant but a bad master". If you don't take control of your money, It will take control of you. Before you even take control of the money that you have, you have to take responsibility for it.

You can take responsibility for your money through the following four steps:

First, You have to Know How much Money You Have. Just as in any project, you have to take stock of the your current resources. Begin by calculating your current monetary value. This is the equivalent of stepping on a scale at the beginning of a diet or ticking of a checklist at the beginning of an arts n' crafts project. Second, Know Where Your Money Comes From. Ultimately, the income that we earn can be divided into 3 categories: earned income, passive income or portfolio income. If most of the income comes from earned income, it should cover ongoing expenses. And if you have little or no portfolio and passive income. You should take steps to increase them. Third, Know Where Your Money is Going. This can be summed up in one word: cashflow. Is your money accumulating in your bank account or is it blowing out through an unnecessary luxury or expense. Find the holes in your leaking ship and plug them before you sink. Fourth, Know What your Money is Doing. In order for you to take advantage of the money that you earn, you must also make sure that it is working hard for you. Keep tabs on where you invest your money and what the rate of return the investment is generating.

3. Keep a Portion of Everything you Earn.

Probably one of the most underrated books ever written about building personal wealth is "The Richest Man in Babylon" by George S. Clason (see "5 rules of Gold" in earlier post). Clason stated multiple times in his work " I found the road to wealth when I decided that a part of all I earned was mine to keep". This might at first, sound like a bizarre statement because we definitely keep all that we earn. However , if you think about it we don't usually "keep" what we earn because it all goes to our expenses like clothes, rent, cellphones, etc. So the best way to ensure that we Keep a portion of everything we earn is to pay ourselves first every time we receive our paycheck. How much should we pay ourselves? According to Evans ,"You should shave a minimum of 10 percent of your own going salary and 90 to 100 percent of your side earnings." This translates to 10% of your paycheck and 90%-100% of your Midyear bonus/Project bonus/13th month pay etc. Take note that it's not the size of the paycheck or bonus that matters. What matters is the habit of putting money away.

4. Win in the Margins.

You can win in the margins by either reducing your expenses or by increasing your source of income . Evans recommends that you do both. Reducing expenses is easy. All you have to do is to make a monthly budget and get rid of your unnecessary luxuries. "Unnecessary Luxuries" may sound like a redundant term but it also good to keep some sort of balance in your life. It's OK to keep a few personal luxuries as a reward for sticking to your wealth building activities. In the end it will pay off because you'll be motivated to achieve your goal of financial freedom.

The second way to win in the margins is to increase your source of income. This may be a little trickier for most of us. Here in the Philippines one example would be John Gokongwei Jr. In his now famous speech at Ateneo on entrepreneurship, he mentions how he sold soap ,thread and candles in his early days. He would "win in the margins" by finding a need in the market and meeting that need. I also observed that some co-workers here at the office also make the move to "win in the margins" by selling pre-paid SMS credits . The point of this key to wealth is to increase your "personal profit margin" by finding multiple streams of income. Once you set up multiple streams of income you can then allocate this to high yielding investments.

5. Give Back.

Some people might think that tithing is a wealth subtractor , when in fact it is a wealth multiplier. On a spiritual level, giving money away makes perfect sense because being generous defeats the emotion of greed. Furthermore , it gives meaning to your goal of becoming wealthy.

On a more pragmatic level, giving money way also makes sense because the more money that is tithed translates to more money circulating in the economy. When more money circulates , and is available to people , more goods and services will be bought. This then results to lower prices , economic growth and investment growth. A nation that has a growing economy and low prices will generally have a population of wealthy and happy people. So, if you're part of that nation, you'll be one of the wealthy and happy people =) Isn't that a great reason to donate to a worthy cause?

Antione de Saint-Exupery, the author of "The Little Prince", said: "A designer knows he has achieved perfection not when there is nothing left to add, but when there is nothing left to take away." If this is true the 5 millionaire lessons of Paul Evans must be pretty close to perfection in the way that it brings all of us closer to unlocking great wealth.

I think that we all deserve a shot at wealth and happines; it is my hope that by sharing my thoughts on these 5 keys you'll be able to take YOUR shot.

Good luck on your first step!!

Larry Buan