The Wealth Creation Process​

Overview

This module is your first step in understanding where investment fits into your financial life and at what point it is a good idea to start saving and investing.​

By the end of this module, you will be able to answer the following questions:​

• What is the Wealth Creation Process?​
• What are sources of income?​
• When do you start saving?​
• When do you start investing?​
   

The Wealth Creation Process

The wealth creation process is the journey that a person follows to build their personal wealth over time. Wealth creation is about making sure that you make enough money to pay for your bills and expenses, and also put money aside for the future. Growing personal wealth is an important part of making sure that you are financially stable so that you can cover all expenses, and have money to put towards your future goals such as owning a nice house or sending your kids to university.​

Before you can start to build your personal wealth, you need to make sure that you have the following 3 things in place:
Making sure that you have money to save and invest is the first step in the wealth creation process. You should strive to create a habit around saving money each month, or each time you receive it, in order to create a pool of savings for the future or to use that money for investing.​

It is also never a good idea to take a loan out in order to invest as there is no guarantee that you will have enough money at the end to pay back your loan.
 

Sources of Income

​Having an income means that you have a source of money coming into your bank account.  ​

There are 2 types of income that a person can make: ​
Earned income: Earned income includes the taxable income you get for work that you have done either as an employee or an entrepreneur, and is your first source of money in the wealth creation process.  ​

Passive income: Passive income comes from the money earned with minimal activity such as investments. It is possible to earn further down the wealth creation process line once you have sources of income and savings in place. ​
When making income from your job or self-employment, there are a few important things to think about and plan for to make sure that you maximize your income source:​

• Is this work something that you can see yourself doing for the next 20 years?​
• Is there work you can do or a business that you can start that is in line with your talents and interests?​
• What will your earned income look like in the future?​
• How much do you need to earn to meet your needs and save long-term?​
• What education and training do you need to do well in your job and/or business?​

It is important to put aside some money every month when your source of income comes in, so as to build a habit of saving and investing in your journey of wealth creation. ​
 

Save Money

Saving money is easier said than done. You may make enough money to cover your expenses but you are still not saving enough at the end of each month. Why does this happen? ​

People find it difficult to save when their needs and wants cost more than what they earn. The most important step to take when saving is deciding what you really need and what you want but don’t need eg: school fees (need) vs a new jacket (want). ​

Finding simple ways to save money starts off with creating a decent budget so that you have a good idea of what you can or can't do with your money when it comes in. Saving money doesn’t stop with making a budget and sticking to it, other means could be as simple as shopping on sales days and turning your geyser off when you aren’t using it. These small savings can help to keep your expenses down and give you some extra money to start growing your savings stash.  ​

Deciding on how big you want your savings to be has a lot to do with your current and future needs and goals. A good measure to keep in mind is having a savings of 3 – 6 months' worth of your earned income as a safety net in case something unexpected happens.​

Another good system you could develop in becoming a saver is deciding on a percentage of your earned income to save each month or when it comes into your bank account. For instance, you could decide to start off saving 5% of your earned income and you can choose to grow this percentage as time goes and your needs and goals shift.
 

Invest Money

We’ve spoken about having enough money and about savings, now what about investing your money as part of the wealth creation process? Investing is about putting money into an asset or an endeavour (such as a business or project) for a medium-long period of time (5 years or more) with the expectation that the money will earn more money or profit without you being able to use it on day-to-day living such as with a bank. ​
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The money that you invest is not for you to use on expenses, bills, and wants that you have now. It is for you to put aside to grow so that when you do get the money, it can help you buy a big reward like a car or house, or your child’s education. It is about investing in your future. 

There are many ways to go about investing your money and many types of investments out there for people to get involved in. It is important for you to learn about trading, investing, and what kind of investor you are before diving in and investing all of your money without having enough information to get the most out of your investments.