Even small savings from your salary can make you rich and wealthy, learn how this can become a reality.

You may know how to earn money. You may be in a job with a comfortable salary or own a business that can afford to pay you quite well. You may even be in a job that is finance-related, such as an investment advice or accountancy. It does not mean you know how to create wealth. Most people mistake earning a good salary or having the correct job title with being able to create wealth or worse still ‘being wealthy’. The two are worlds apart. How much can you keep of what you earn? James, a banker, is earning $50,000 per month. His expenses inclusive of a home mortgage and car loans he is servicing add up to $43,750 per month. He is able to save $6,250 every month. Jennifer, who works as a farm manager, earns $6,250 a month. Her expenses add up to $3,750 so she is able to save $2,500 per month. It may look like James is saving more but in comparison to his lifestyle he is not. He is saving only 13 per cent of his salary while Jennifer saves 40 per cent.

How fast you can grow it so that it can accumulate to something that can eventually support you? James is busy and has therefore opted to leave his money with a fund manager to place in unit trusts. Jennifer has decided to pool her $2,500 per month in a joint savings account with four other people. They therefore raise $12,500 per month. In three months, they are able to get enough funds to lease some land and start growing tomatoes. After all expenses are paid, including hiring a manager, the project generates an income of $3,750 per month. They have decided to retain the money in the business for the next five years, continue with their monthly contributions, acquire more land and continue growing tomatoes. With Jennifer’s expertise, they expect to be earning, on a conservative estimate, $31,250 per month by then. This means each person will be taking home $6,250 per month at that time.

The true wealth creator is Jennifer. In those five years, she will have put aside a total of $150,000 as her contribution to the project. She will then start making $6,250 (which she can actually live on) per month and will have recouped her investment in two years. After that her project, will be giving her an income as long as it is in operation. James, despite his commercial know-how of finance, has not made use of it for his benefit but has instead taken a very passive approach to his personal investments. Even if his investments were to give him a 15 per cent return per annum, in five years he would accumulate $562,500. Based on his lifestyle, he would only be able to survive on this for about a year. It is not generating an income for him so he still needs to keep pouring in more and more money, so it will take longer for it to work for him. Remember it is never about what you earn but what you can push yourself to do with it. A little can do a lot, and there is always somewhere to start.