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12 May 2022

WEALTH BUILDING: THE WHY

This is a “wealth building secrets” series. In the previous post we looked at how to create wealth. Wealth creators continuously learn from their own financial independence journey, other people’s financial freedom journeys and from the financial environment around them. Personal finances are actively managed. This is why:


  • Unfortunate Periods. The recent pandemic taught us that things can and do change drastically from time to time. Unfortunate and unexpected events such as these require proper planning. An emergency fund comes to mind. Never be caught unawares. Most importantly, the constant effort to change our circumstances for the better can never be replaced. In great times we prepare for the not-so-great events. The culture of saving and investing should be maintained. Even if this time proved to be your worst, learn from it and be assured that there will be better times to grow again.

  • Economic Cycles. The economy in its nature fluctuates. There are periods of economic expansion and economic contraction. The changes are positive during the periods of expansion with higher employment rates and high consumer spending. During the contraction periods even interest rates are not favourable. We are not in control of the economic conditions, but we can try and manage the impact. During the expansion period, we invest as much as we can to take advantage of the growth that happens in the corporate world. We buy stocks and other investments and take advantage of the favourable economic environment. The contraction periods like recession and depression are guaranteed. Those are the times when we tap into the reserves to get some relief. Always store as much of your harvest as you can in the reserves. I tell my 19-year-old to invest 50 percent of his income. And when he gets unexpected monetary gifts, he often invests 80 percent. Because the culture needs to be cultivated.


  • Changes in Economic Factors. Economic factors constantly change. These include interest rates, policies by government, tax, inflation, employment, etc. All these factors are not in our control but determine how our investments perform. We look at the economic history to predict where these are going. Often, the pattern does not change. But no one knows without any doubt how the economy is going to behave. Our efforts to build our wealth to survive the storms should be constant. We save and invest irrespective of the economic conditions. We do this because of the uncertainty.

  • Changes in Government Policy. Policies such as monetary and fiscal policy will keep changing and thus affect the personal finance decisions of individuals. Interest rates and tax are some of the factors that government will keep changing to stabilise the economy. A lot of these policy changes can discourage saving and investing. But there are some that favour the investors like the tax-free savings account. This is one tool that should be maxed every year. Keep informed in order to identify what profits your portfolio and what does not. A financial plan should be flexible to allow the changes as new laws get introduced. Strategies change with the change in the environment but building wealth is constant. We actively manage our personal finances to lower the costs that come with the policy changes and maximise the gains.

  • Globalisation. Have you noticed how the international events affect how we do things? We suddenly think in dollars. Our finances are shrinking due to the decreasing and fluctuating values of our currencies. We also experience the world in international currencies. Also, more concerning is that the crisis that happens in other parts of the world manages to hit at the individual's wallet in a different territory. Case in point, the conflicts between foreign countries. There is a case for a geographically diversified portfolio. Personaly, my family typically invests in local stocks, Asia, US and other emerging markets. Geographical diversification does help in minimising risk. Developed markets give more stability whilst the developing markets usually provide higher returns. Do try to keep up to date with the global markets.


What is the “WHY” of your wealth creation journey? Have you started yet? Ask us any questions. Please share the article.

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