Individuals and families who are in the wealth creation phase of their financial lifecycle may be missing out on opportunities to increase their net worth by failing to unlock the full potential of their assets.
Yashika Rambujan, KZN Regional Head, FNB Premier says, unless you get a windfall or inheritance, there is no quick fix solution to take your wealth status to the next level. Wealth accumulation often manifests over time as part of a diverse and long-term strategy to increase your net worth.
Furthermore, many individuals and families often take upon themselves the ongoing responsibility to actively manage their wealth to consistently grow and sustain it for future generations. They want to leave a legacy.
“Although there is an influx of strategies to grow wealth, there isn’t a one-size-fits-all approach, as every family and business is unique. However, it is important to understand the values that govern wealth generation and apply them to your own unique strategy,” says Rambujan.
She unpacks some of the guiding principles for growing wealth, which constitute mastering the art of using money and assets to increase wealth:
- Expert advice – as a starting point, seek advice from a reputable banker or advisor who will be able to assess your current position and guide you on your wealth journey.
- Leveraging – this involves strategically using good debt, assets and money at your disposal to reach your wealth aspirations. For example, lending against an existing asset could unlock funds that can be used to purchase other assets and broaden income-generating opportunities.
- Business opportunities – entrepreneurship continues to be a significant driver of wealth creation. The ability to develop a concept, dominate the market and scale up a business to the next level of growth continues to be rewarding. Furthermore, there is also an opportunity to identify aspiring entrepreneurs and invest in their ventures as an angel investor.
- Property ownership – property is one of the common investments that many individuals and families use to grow their wealth over a period. This can be in the form of physical property or listed property shares.
- Diversified investments – as the adage goes, ‘do not put all your eggs in one basket’. This investment principle has ‘stood the test of time’ as part of a broader wealth creation strategy.
“Any asset of value you own such as property, share portfolio, business assets, equity and trust funds, amongst others, can be potentially leveraged to grow and sustain wealth,” says Rambujan.
Ester Ochse, Product Head at FNB Integrated Advice, also adds that understanding the overall cost of owning an asset is important. “Once you have a clear understanding of your assets and liabilities, draw up a personal financial statement that gives you an idea of your overall net worth.
“Consumers can use tools like My Net Worth on the FNB app to check their net worth. This process will also assist them in making sure that they have the right risk cover in place for any eventuality.
“A personal financial statement shows the assets you own as well as your liabilities or the money you owe. It’s a great tool to determine your financial standing and for you to determine how you can leverage your assets to build further wealth within your household.”
“Keep in mind that it is possible to turn an asset into a liability and vice versa. A property can be a great asset to leverage as an additional passive income stream, but it can also become a liability if you cannot afford its upkeep and take on additional credit with higher interest rates to maintain it.
For example, if you have extra space in your home, you can rent it out to help pay off your bond quicker. If you have a holiday home that you don’t use, you could rent it out for the months that you don’t need it to help repay your bond,” concludes Ochse.