The Blue Roof

 Sometimes we are “overcome by success.” We have a strategy to build wealth, we follow it and then, one sunny morning, we wake up and realise: “I have done it.”

 I always joke that for the first 3 months babies cry because of cramps and wind. But fortunately that is only the first 3 months! Then after 3 months and 1 day they start crying because of teething! In the same manner, when you realise: “I have achieved my goal,” new problems start.

 First of all, creating wealth is not a goal as such, it is rather a journey. When you start out, the challenge is to create wealth. As your wealth grows, it is not only creating it, but also maintaining it. You have to look after what you already have!

 The problem with this “being surprised by wealth” scenario, is that we suddenly realise that we need structures and methods to protect our wealth and to limit our tax liabilities!

 Way back in the time when I still did financial and estate planing I often experienced this. Then you have to set up trusts and find ways to limit estate duty and capital gains tax and ensure continuity. Doing it after the fact is more expensive and not so simple. It is so much easier to structure everything while you are building your wealth. Just think of building a house. It is much easier to plan it right than to alter afterwards.

 So today’s rule is this:

 Once you have a wealth vision and goal, believe in yourself and your ability to achieve it. Then find somebody that is reliable and ask him or her to help you plan and structure your wealth so that you minimise tax, protect your wealth for future generations and have continuity into the future.

How do you ensure that you live while you are alive for as long as you are alive? The balance we discussed yesterday?

 You start a regular, preferably automated, savings plan. Every month you set aside a specific amount that you invest for financial freedom.

 I prefer the term financial freedom to retirement. I belief financial freedom is a better goal than retirement. And I define financial freedom as the point where your income from assets is equal to or more than your income from a salary. I have written so much about this, that I am not going to repeat myself.

 This saving should first of all focus on building cash flow before building capital.

 The benefit of a system like this is that you can be safe in the knowledge that you are looking after the future while you enjoy the present. You can buy that book, music, camping gear, shoes (what-ever it is that you cannot live without) without feeling guilty or putting your financial future at risk.

 A last thought, you should not borrow money for this long term saving! Listen carefully – there is no sense in saving R2 000 per month and then going into overdraft by R2 000 every month! Or increasing your credit card debt by R2 000 per month! If you do that, then you are borrowing money to save and you are actually going backwards!

 That does not imply that you cannot borrow money to buy more assets. But that is something else, is it not?