Forward Planning: Create wealth with a bit of wisdom and determination

Wealth creation is a new trend empowering ordinary people with the understanding of money and how to make more of it. It involves strategies, financial planning and having a better control on personal finance.

In this part of the world, money often comes with a guilty feeling as it is considered to be a mean and not a goal or objective. Still many millionaires and wealth creators here used some kind of wealth creation strategy or system, one way or another.

In the US, seminars and classes are held involving millions of people seeking wealth and the chance of becoming rich. Recent surveys revealed that 70 per cent of the people in America thought that they are in their way of becoming financially secured although the research done on the ground showed that only 5 per cent of Americans could reach financial independence and security.

One method for the creation of wealth depends on our net worth, which is assets minus liabilities. Assets are what we own inclusive of shares, bonds, money in saving accounts, retirement account and real estate property. Assets that are creating wealth are those that earn money or appreciate with time. Liabilities are what we owe to others inclusive of credit card balance, loans, home mortgage, car loan, and other debts.

The aim here is to make your net worth - which is your wealth - be in the positive and aimed to reach a future calculated and realistic figure. This practice is called "establishing own personal balance sheet" and is step one.

Step two is budgeting with the object of saving. A detailed budget must be realistic and goal oriented including all spending and establish priorities in order of creating a systematic spending control.

We don't really need all that we buy and if we buy smart, we can save some. Saving to keep and not to spend are good financial virtue and discipline. Saving regularly through monthly automatic bank deduction will definitely guarantee that saving comes first and spending is minimised in a systematic way.

Wealth creation also involves investing by buying shares and bonds, establishing retirement and pension accounts and buying our own dwelling which generally represents our biggest investment.

Understand the power of compound interest by leaving your investment to accumulate and earn more money instead of cashing the dividends or spending the profit.

Debt elimination is most important and the best way for the reduction of loan interest is the debts consolidation under one financial institution with a lower interest rate and affordable installment payments.

Earning an extra income is for many people another way of making money through a small home based- or an internet based business. In this case, a business plan must be drafted and followed for the guarantee of success and preventing business failure.

Remember also to always negotiate, discuss and compare before buying because sometimes it's not the final price, there is a discount, there is a special deal, the other outlet has a lower price, the shopping festival is around the corner, etc. And finally don't buy for the sake of buying.

We must educate ourselves about money, its value, what to do with it, how to handle it, save it, invest it, make more of it, spend less of it and budget for it as it never grows on trees.

Have realistic financial goals and objectives and create a financial plan which will lead to financial security and independence. Research and study investment opportunities, utilise the services of qualified and licensed financial consultants and advisers and always get a second opinion before taking financial action.

Your financial plan must match and meet your life goals and objectives through proper control and management of your personal finance.

So wealth creation is possible today and with a bit of wisdom and determination some of us will indeed be among the 5 per cent of the population who reach financial security and independence.

It's just a matter of willing and seriously doing what it takes.

The author is a UAE-based insurance consultant and director of Gulf Insurance Consulting