Wealth Creation

Do you want to know about wealth creation?

How much wealth have you created?

Or to put it a different way – what have you produced – that has created wealth for you and your family?

Or even another way – how have you used your knowledge, skills and experience in the pursuit of wealth creation?

Is it all working out the way you expected?

Business Wealth Creation

Business wealth creation is the net output from the business minus the input into the business.

Or profit after expenses.

Or money in the bank after costs.

All businesses are in ‘business’ to make a profit (or should be) and it’s the overall net contribution that is ultimately the wealth that’s created.

Wealth creation is the overall gain just for added emphasis.

Why we need Entrepreneurs for Wealth Creation

Entrepreneurs are wealth creators.

They seek opportunities and take risks. In the process, they are pivotal in the pursuit of wealth creation as they generate new products, systems, services and ideas.

Ultimately, they take their ideas and through passion and drive create something new.

The knock-on effect of this is to create employment for others, who then consume products and services and help make a thriving economy for a country.

The chart below shows how the Gross Domestic Product (GDP) has grown since 1500. Note the steep increase since the beginning of the Industrial Revolution in the 1800s.

As GDP has increased so has everybody’s ‘slice of the pie’ or wealth.

In the grand scheme of things this wealth has been ‘created’ in very recent history (especially in the overall timeline of human existence) and we’re currently locked into a progressive wealth bubble of a magnitude never before experienced by humankind.

Just, take a moment to think about that.

The Industrial Revolution that started in Great Britain really was an original ‘kickstart’ to the pathway to fairer laws, equality and a wider distribution of wealth. Prior to this there had been world exploration and the opening of trading routes, but it really was the Industrial Revolution that got ‘masses’ of stuff made at a fraction of the price, and led to more and more products for consumption.

Credit Image: H. T. Alken [Public domain]

Moreover, it’s important to note that there wasn’t a ‘pot’ of wealth that was opened like some treasure chest. Contrary to popular mythology there never was a definitive ‘pot’ if wealth that was ‘taken’ or ‘stolen’ from somewhere else. Instead, wealth creation (via industriousness, ambition, creativity and networking) has lifted us from abject poverty to the ‘dizzying’ heights of wealth that we’re all beneficiaries of today.

Did You Know…..

Between 1820 and 1900 the world’s income tripled!

In little more than 50 years from 1900 it had tripled again!

25 years on from that and, yep, you guessed it the world’s income had tripled again.

And so on.

Can you imagine how much the wealth will equate to in 2050?

Wealth Creation Strategies

For some of us wealth is given on a plate.

It’s hard not to feel a little envy for those that are born with a ‘silver spoon’ in their mouth and the associated privileges that go with that, but that type of resentment will get you nowhere. There are many other great examples of self-made wealth creators that create businesses, buy and sell assets (such as property and investments) and create wealth.

Some use a combination of wealth creation strategies and others stick to what they know, and what creates wealth for them.

The common denominator is that there is a wealth creation strategy.

If there’s no planning, opportunities won’t just happen.

All wealth creation strategies use a combination of knowledge, ambition, experiences, opportunity and timing.

Below are a few generalised examples of areas where wealth creation strategies work:

Property

Paying a relatively small deposit and buying property and then renting it out has been a great wealth creation strategy for many people. Ultra low interest rates have made borrowing easy and with little threat of ‘normalised’ interest rates appearing anytime soon – what can go wrong?

Just sit back and watch the capital growth!

In the UK the appetite for ‘buy to let’ borrowing has been enormous as demand for rented property has soared. Effectively, taking into account capital growth (house price rises) and never-ending demand this has been (and continues to be) a one-way street of money-making. The UK property market had been an attractive investment to those from Asia for a very long time. But these property opportunities are not limited to the UK.

Elsewhere around the world ultra-low interest rates have spurned a property buying frenzy and many have become wealthy from their property portfolios.

There are many that oppose such opportunistic wealth creation and the social consequences are visible for us all to see. But unless property crashes, which is more likely given current economic circumstances, property wealth creation will continue, at least for some anyway.

Investing

For tips and advice on investing, google Warren Buffet. He’s one of the most successful investors of all time and the web is full of his videos, quotes and tips. Of course, there are innumerable other sources but start with Warren. His ‘folksy’ approach and bulging profits make any other ‘expert’s’ look like pale contenders (wannabes).

Investing is such a vast area and caters for so many different types of investor.

At one extreme you may be a ‘novice’ investor that has benefitted from a windfall (inheritance or lottery win) and need ‘help’ as you take your first tentative steps. At the other extreme, you may be a ‘seasoned’ investment portfolio ‘pro’ who probably knows more about markets, economics, risk-taking and profit than any ‘wall-street’ or ‘city’ slicker (but not quite as much as Warren Buffet!)

In a lifetime the accumulation of wealth via investing will enhance the comfort level of your life and leave a lasting legacy to those you leave behind you.

Trading

Trading for a living is tough. Trading isn’t investing (that’s covered below). Consensus estimates put that less than 5% of active ‘traders’ are profitable traders that make ‘big money’. Realistically, many ‘traders’ suffer with extreme emotional ‘burnout’ and spend most of their days ‘sitting in the seat of their pants (or knickers)’

However, of the small number of traders that do make ‘big money’ when they make it – they make it big!

Moreover, there are different types of traders!

Trading appeals as a wealth creation strategy because it enables professionals from other disciplines (such as law and medicine for example) to pursue a way of living that offers them the freedom to do what they want to do (when they want to do it). That’s not to say it’s just lawyers and doctors that step up to the ‘trading challenge’. Anybody from a high paying field with some savings to fall back on can give ‘trading’ ago.

The web is awash with ‘how to make money trading stocks’ and ‘become an instant millionaire by this evening’ but the reality is that most lose.

Wealth Creation – Do you have what it takes?

Entrepreneurs ensure that through their continuous efforts economies thrive and we all benefit from the associated social progress. Whilst some are given a head start many are not. This is great news if you have the drive, ideas and capabilities to get ‘wealth creating’ today.