Intentional Wealth 2.0: Building with The Pentagon Wealth Model 9789988327767, 9988327765

Table of contents :
Copyright
Table of Contents
Introduction
Overture Wealth, Poverty and Money
Wealth Creation
Wealth Accumulation
Wealth Management
Wealth Protection
Wealth Distribution
Conclusion
Acknowledgement
About the Author
Bibliography
Index
Connect with the Author

Citation preview

Intentional Wealth 2.0

Building with The Pentagon Wealth Model

COPYRIGHT © 2021 BY DR. EVANS DUAH All rights reserved. All rights reserved. No part of this book may be reproduced in any form or by an electronic or mechanical means, including information storage and retrieval systems, without permission in writing from the author

Intentional Wealth 2.0 Building with The Pentagon Wealth Model

Printed by: The DUAH Printing Press

Printed in the United States of America First Printing Edition, 2021 This paperback edition first published in 2021 ISBN 978-9988-3-2776-7

To God Almighty To all the people who have helped me to reach where I am in this life journey To all my cadres, especially the hardworking partners who surround me always with encouragement

Most importantly, To Mon Amour, Chris my Super Boys, Evans, Bryan, and Ryan, for their love and immense support

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Table of Contents

Introduction Overture Wealth, Poverty and Money .................................. 1 Poverty ............................................................................................................. 5 Wealth in General ........................................................................................... 12 Money ............................................................................................................. 15 Principles of money ........................................................................................ 20 Money, Wealth and Poverty ........................................................................... 24 Connecting the Dots ....................................................................................... 30

Wealth Creation .................................................................. 37 MIPPS Wealth Definition ............................................................................... 41 1.

Materialistic ......................................................................................... 42

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Independence ...................................................................................... 47

3.

Physical and Psychological .................................................................. 53

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Social ................................................................................................... 56

What then is wealth to you? ........................................................................... 58 WCAA Wealth Equation Quadrant ................................................................. 60 Wealth Creation ............................................................................................. 68 Key Factors of Wealth Creation ...................................................................... 72 Wealth Creation Equation .............................................................................112 Pathways to Wealth Creation and Accumulation ..........................................119 Wealth Creation Model ..................................................................................127 The Heptagon Wealth Creation Model ..........................................................129

Wealth Accumulation........................................................ 131 Personal Economics .......................................................................................137 Wealth Planning ............................................................................................142 Income ...........................................................................................................145 Expense .........................................................................................................151 Savings Fund .................................................................................................155

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Wealth Acceleration...................................................................................... 160 Wealth Protection ......................................................................................... 160 MIPPS ........................................................................................................... 161 Wealth Planning Model ................................................................................ 162

Wealth Management ......................................................... 187 Financial Literacy .......................................................................................... 194 Five Key Financial Literacy Dimensions ....................................................... 197 Five Core Concepts of Financial Literacy ...................................................... 200 Financial Planning ........................................................................................ 208 Financial Discipline ...................................................................................... 232

Wealth Protection ............................................................. 245 Key Loss Exposures ....................................................................................... 249 Dimensions of Wealth Protection ................................................................. 257 Wealth Preservation...................................................................................... 258 Wealth Conservation .................................................................................... 266 Asset Protection ............................................................................................ 272

Wealth Distribution .......................................................... 287 Wealth Plan................................................................................................... 291 Estate Planning ............................................................................................. 301 Individual Final Wish .................................................................................... 305 Provision of Permanent Incapacity ............................................................... 310 Wealth Transfer ............................................................................................ 312

Conclusion Acknowledgement ............................................................. 333 About The Author ............................................................. 335 Bibliography ...................................................................... 337 Index .................................................................................. 341

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Introduction

“A bright future will not just happen! You must work for it. You must invest in it. The more you invest in your future, the more you will reap.”

A lot has been said and written about wealth, yet, wealth still seems distant to many. Most people believe that wealth is a preserve of a few - the fortunate ones in society. Others believe that there are secrets and mysteries clouding the creation and accumulation of wealth. Undoubtedly, there are many myths surrounding wealth but wealth is not mysterious. There is absolutely no secret ingredient or wealth potion that one drinks and ends up wealthy overnight. Wealth is built over time. Wealth is a choice. It is about working consciously to create and sustain legacies of values. Wealth is intentional. Intentional Wealth 2.0 - Building with the Pentagon Wealth Model asserts that wealth is practically possible for anyone. However, not everyone will be wealthy. The reason is that many want a meaningful result in life but a few are willing to pay the price. Successful people reach their personal, professional, and

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financial goals not simply because of who they are but more often because of what they do. This book thus provides relevant models with the practical knowledge needed to develop a new mindset and cause the behavioural changes that are required to help you on your wealth journey. In this wealth classic, you will learn The MIPPS Wealth Definition Model which will help you redefine wealth. The book will help you understand the key factors underpinning the concepts of wealth and the different pathways. You will be introduced to The Duah Wealth Creation Equation and The Heptagon Wealth Creation Model. With The Pentagon Wealth Model, you will be equipped to build the capacity to not only create and accumulate but manage, protect and effectively distribute wealth. Destiny is not only a destination. The detour, the bumps on the road, the roadblocks, and the lessons from the journey are all vital parts of the whole. Why do I have this conviction that this book will become an important part of your journey? Are you ready? Dream. Believe. Build. Become.

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Intentional Wealth 2.0

Building with The Pentagon Wealth Model

Overture Wealth, Poverty and Money

INTENTIONAL WEALTH 2.0

DR. EVANS DUAH

“The man who does not know what he is looking for, will not know when he finds it. And to the man who does not know where he is going, anywhere is a destination”

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re you aware that half of the world's net wealth belongs to the top 1%? In fact, 85% of the global net wealth is held by the top 10% of adults, while the remaining 15% is held by the bottom 90% of adults. The top 30% of adults hold as much as 97% of the total wealth. This is according to a report in 2018 by Credit Suisse. (Infographic Pyramid follows). Many of us aspire to prosper, however, only a handful do see that prosperous end we desire. As human beings, we hardly desire or subscribe to failure - we are created and “The top 30% of knitted to yearn and desire for adults hold as more and better. Yes! That is much as 97% of our nature. the global total wealth.” Yet, our desires and dreams alone will never be enough to be prosperous. In fact, it takes more than just that. Our desires and dreams are like castles in the air, but why let them stay there? We do not have to lose these castles our dream works - up there. In reality, that is where they should be. All that is needed is to put the foundation under them.

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Characteristically, one must know what one is looking for and be ready to pay the price for it. It is one thing to desire or dream, and another to work on that dream to become a reality. To corroborate the earlier discussed thoughts, these questions come to mind: ‘How strong are your dreams?’, ‘How clear is that dream you see?’, ‘What are your plans toward that dream?’, and ‘How ready are you in paying the price for it?’. Rejoinders to these questions make up the difference between the few who are able to actualise their wealth and those who fail or fall along the way. Coupled with 3

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that, our individual understanding of what money, wealth, and poverty are, equally plays a key role in shaping our thinking and, consequently, bringing us into the right perspective. This book is, therefore, about the many who wish and the few who live their wishes. Though many people are seeking their wealthy place, a few actually know what that is and, “This book is, thereby, only the few reach it. therefore, about the many who

Moreover, many want to be prosperous and wealthy, but who actually live few know what wealth and their wishes” money are. This overture is precisely designed to equip the reader to have a clear idea of what money, wealth, and poverty are. In addition, it aims to prepare the mind of the reader to appreciate the synthesis of the subject of Wealth as the author delves into details. wish and the few

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Poverty According to extant studies, wealth and poverty are not defined nor represented in the same manner for the poor and the rich. In the 1990s, the World Bank consulted with the ‘true experts’ on poverty, that is the poor themselves and the survey outcome was surprising. “According to the research by the world The research was bank, the poor were conducted among over more inclined to 60,000 poor people from describe wealth and 60 countries in order to poverty in define what poverty psychological and meant to them. It was social terms while the discovered that those rich tended to from rich nations tended define wealth and to define wealth and poverty in terms of poverty in terms of material things” material things, while those from poor nations described their situation using words like shame, humiliation, fear, dependence, isolation, depression, low self-esteem, among others. The poor were more inclined to describe wealth and poverty in psychological and social terms. Poverty, therefore, is not simply a material condition for them,

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and as such, a more holistic view of the situation is needed to comprehensively address it. The state of poverty can be as complex as human societies and nations, as usable or disposable income can vary from one country to another, depending on its purchasing power. Poverty can be classified into absolute and relative. Absolute poverty is a lack of basic necessities, based on a set income level. Per World Bank guidelines, people living on less than $1.90 a day are considered to be living in extreme poverty. This generally applies to people in low-income “Absolute countries. For lower-middlepoverty is a income countries, the delineation lack of basic is $3.20 a day. For upper-middlenecessities, income nations, the delineation based on a set is $5.50 a day. income level” These delineated standards account for differences in economies since a poor household in a rich economic bloc is substantially more economically privileged than one in an economically deprived bloc. Thus, a discussion of poverty in an advanced economy has to take into account that absolute poverty might not be readily applicable to people in that economy.

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On the other hand, relative poverty refers to individuals or entities that do not meet minimum standards versus others in the same area, place, and time. A lot of “Relative poverty poorer economies can refers to individuals have both absolute and or entities that do relative poverty affecting not meet minimum their respective people. standards versus others in the same

Relative poverty generally

area, place, exists more in advanced and time” economies. Poverty thus turns out to be defined differently depending on who you talk to. As discussed earlier, traditionally, people thought of the poor as those who were suffering an unhealthy level of deprivation. Terms like “insufficiency” and “a lack of basic necessities” crop up frequently in dictionary definitions and descriptions of the condition of folks living in poverty. This understanding of poverty is often referred to as “absolute” poverty. However, in recent decades, an alternate definition has gained currency, particularly within the broader “social justice” community. This newer approach to understanding poverty defines it as a condition of “relative” privation. In other words, you 7

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are poor if you are significantly less well off than most others in your society, regardless of your actual standard of living. While every poor person’s situation is unique in some “Poverty thus respects, some commonalities turns out to might allow us to group people be defined into categories, understanding differently that there will be considerable depending on blurring around the lines. who you talk to” Human existence and the extraordinary variety of human experiences constitute an incredibly complex mosaic. While we understand that the human condition is messy and does not fit into neat compartments, we also find some similarities and patterns that can help us with explanations. According to a 2019 report by the Fraser Institute written by Christopher A. Sario, there are three (3) useful and broad categories of explanations for poverty.

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Three Main Explanations for Poverty

Bad luck

Bad choices

Enablement

1. Bad luck: Poverty for some people is situationally induced. Born into a war zone; living in extreme weather events (droughts, floods, earthquakes, etc.), or even living under maniacal autocracies where choice is severely limited or non-existent are all examples of poverty by bad luck. This explanation is about the context that causes poverty and impoverishes a person or group of persons.

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2. Bad choices: As much as poverty can be contextual or situational, some people are also poor by the wrong decisions made over time. Some people are poor because of their own perspectives rather than that of the external observer. In other words, they are poor because of the decisions and actions they have taken over the period. Thus, they are now living the consequences of their [bad] choices. These bad choices are what tend to nudge them off the path they wish to pursue. The emphasis here is on the poor persons and their choices, rather than the situation or contributing factors. 3. Enablement: As bad luck can cause poverty, so can excessive support do the same. When the poor are excessively supported, it tends to create overdependence on the system. The poor often become complacent and end up doing little for their financial freedom and independence. This is called enablement. This happens when systems and structures put in place to support people, rather end up creating an adverse effect of discouraging the kinds of efforts 10

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that people would normally make to avoid poverty. The objective of the systems and mechanisms is to reduce or eliminate the consequences of bad choices, however, the convenience and comfort, somehow end up undesirably making them even more likely. What these mechanisms do is to assume that poor people are incapable and irredeemable and, therefore, pay them what they need to survive. This places barriers to the achievement of independence, and as such enables poverty.

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Wealth in General When talking about wealth and poverty on a national level, two terms are important, per capita “One of the most income and gross domestic effective ways to lift product (GDP). The a country out of standard measure of wealth poverty is to or poverty in economic continually increase terms is per capita income. the amount of Per capita income is the goods and services total market value of that country everything produced in a produces” nation in a year divided by the number of people in the nation. Generally speaking, the higher the per capita income, the wealthier the people in that nation. GDP is defined as the market value of all final goods and services produced in a country during a period of one year. The size of a nation’s GDP is the main factor that determines a nation’s wealth because per capita income is calculated by dividing the GDP by the population. If the GDP rises while the population stays the same, then per capita income will also rise and vice versa. GDP rises by increasing the production of goods and services.

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History shows convincingly that one of the most effective ways to lift a country out of poverty is to continually increase the amount of goods and services that “Based on the country produces. Using understanding of GDP this strategy, lowand per capita income, income nations can be the challenge therefore lifted to become middlefor every nation is to income nations, and discover which goods subsequently, become and services it can high-income nations. create that people both inside and outside of

Research has shown that higher per capita incomes are strongly correlated with:

their nation want and are willing to pay for”

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longer life expectancy

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lower incidence of disease

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higher literacy rates, and

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healthier environments

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The challenge, therefore, for every nation is to discover which goods and services it can create that people both inside and outside of their nation want and are willing to pay for. Poor nations also need to be willing to address mindsets and practices that have kept them impoverished for generations. For example, poor nations have a high-level of dependence on foreign aid, and there are religious and cultural practices that cultivate a worldview, which focuses only on the present with no regard for the future. In the same way, individuals desiring to be wealthy, would have to know, apply and respect the principles of wealth.

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Money Money is an economic unit that is legally accepted as a means of exchange for goods and services. Money has equally been defined variously as ‘anything generally accepted as a medium of exchange, a measure of value, or a means of payment’. The concept of Money has been in existence ever since human civilization began. Money has since time past allowed people to trade with what they have in exchange for what they want or need. The terms Money and Currency at a glance would appear to be synonyms but they are not. Yet, many people do not understand that there is a huge difference between money and currency. Most people consider that they are the same thing. This is far from the truth. For something to be considered as money, it must have the following functions and properties:

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Functions of Money •

Medium of exchange: It is must widely accepted as a medium of payment

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Store of value: It should maintain its purchasing power

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Unit of account: It is the common way in which market values are measured in an economy

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Standard of deferred payment: It must be acceptable to make purchases today that will be paid in the future

Properties of Money §

Fungible: Its one unit is equivalent to another

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Portable: It can be carried along and exchanged

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Durable: It can be used a number of times without degrading

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Divisible: it can be divided into smaller units of value

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Recognizable: Its authenticity and quantity should be readily ascertainable to the users

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Stable: Its value should be relatively constant or increasing over time

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Scarcity: its supply in circulation must be limited

Money vs. Currency The paper or coin currency in wallets and bank accounts are not money; they are simply coin and paper currency and numbers on a screen. Currency is portable, “Currency does not divisible, a medium of have a storage of exchange, fungible, and value because there is interchangeable. It is also more and more of it known as Fiat money, that can be printed and does not have every day, making intrinsic value. It does it less and less not represent an asset in valuable” a vault somewhere. Currency does not have a storage of value because there is more and more of it that can be printed every day, making it less and less valuable. Its value comes from being declared "legal tender", which means, it is an acceptable form of payment by the government of the 17

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issuing country. In this case, we accept the value of the currency because the government says it has value and other people value it enough to accept it as payment. This is the only thing that is different between the currency in a citizen’s pocket and the Monopoly game money. It is the fact that the government has decreed that this paper and coin is the legal tender to be used in the country and as such it has value. Fiat, therefore, refers to a promissory note that is presented in the form of currency. Fiat money gives central banks greater control over the economy because they can control how much money is printed. Most modern paper currencies, such as the U.S. dollar, are fiat currencies. In summary, currency is a medium through which money comes alive. The following is a recapitulative and comparative table between money and currency:

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Money

Currency

•Money can be a store of value and it is intangible in nature

•Currency cannot be a store of value although it is always tangible in nature

•Money refers to the actual value of goods or services that are traded for

•Currency is just a medium that we keep in our pockets to increase our purchasing power

•Money has intrinsic value

•Currency does not have intrinsic value

•The value of any goods or services can be derived in the form of money and it can be quoted in a certain currency

•Value of any goods or services cannot be derived with the help of a certain currency as it is just a medium

•Money can perform various functions and it has its own importance in any economy

•Currency is any form of money that is circulated in public

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Principles of money Now that we know what money is, its functions, and its properties, next, we examine the key principles. These principles have been well elaborated by Rob Moore in his book – Money.

“The rules of money as currency, was changed when the U.S. dollar stopped being money (backed up by gold) and became an instrument of debt in 1971”

First, money as currency devalues over time due to inflation. Money is supposed to be an exact real value, and should not decrease nor increase. However, the rules of money as currency were changed when the U.S. dollar stopped being money (backed up by gold) and became an instrument of debt in 1971.

The currencies of almost all nations today, are fiat currencies. That means, essentially, that they have no inherent value other than what somebody says they do. Sadly, in many economies, many try to cut back on expenses to save money, while the Government keeps printing new currency notes and coins, which destroy the purchasing power of the savings.

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Creating money out of thin air by the central bank is called Quantitative Easing (QE). It is simply a complex and interesting name for “printing money”. This brings inflationary effects and the money loses its value. This implies that money saved without investing is still subject to a decrease in purchasing power. It is, therefore, key to save in assets that keep their intrinsic value over time such as real estate. Second, money flows from those who understand and value it least to those who understand and value it most. The more you understand and value money, the more you try to earn, and also try to spend less than you earn.

“The more you understand and value money, the more you try to earn and the less you try to spend than you earn.”

Those who do not understand and value money perceive money as a spending means and thus, create more outflows than inflows of money to them. Third, those who value money the least have relatively higher expenditure than receipt as opposed to those who value it the most who have a relatively higher receipt than expenditure. Once money is valued and its importance understood, one knows the more one receives the more one can do, and as such, strives to have more money inflows than outflows. 21

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Fourth, money is economic energy that is neither created nor destroyed, it exchanges from one form to the other. That is, the intrinsic value of money is not created nor destroyed but exchanged. Intrinsic value is what an asset truly is or perceived to be worth, instead of just dealing with the current market trading pricing of the asset. This implies money can be effectively used as money only as long as it has real or perceived value. So, the promissory note paper currency can be exchanged into account balance on screen after deposit, or a drawn bank draft among others. Last, money tends to flow more towards service and value than “Money tends to work and time. Adam Smith in flow more towards his book - Wealth of Nations service and value emphasised that the stream of than work and money is like a communication time.” line, unlike factories and stores. For its function is not to produce or exchange goods or services, but to facilitate their production and exchange. Money, therefore, is only a means to an end. It is simply a medium of exchange. That is, the value of work and time are relatively perceived depending on the end product or the outcome thereof. On the other side, service and value are already inherent as an outcome based on the demand’s true worth. Hence, money flows readily more towards value and 22

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service such as produced high-demand goods or delivered highly expected service, than just time offered or work. In other words, money flows directly towards value and service, and subsequently part of that flow moves to work and time. In a nutshell, the five principles of money in terms of devaluation, flow, expenditure, and receipt, economic energy exchange, and direction are as follow: Principles of Money 1. Devaluation: Money devalues over time due to inflation 2. Flow: Money Flows from those who understand and value it least to those who understand and value it most 3. Expenditure and Receipt: Those who value money least have higher relative expenditure than receipts and those who value it most have higher relative receipts than expenditure 4. Economic Energy Exchange: Money is an Economic Energy that can neither be created nor destroyed, it exchanges from one form to the other 5. Direction: Money tends to flow towards service and value, not work and time 23

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Money, Wealth and Poverty Many a time, people cloud the subject of money and wealth. Most people associate wealth with money, which is somewhat true. However, the word Wealth originates from two old English words, that is, weal meaning well-being and th meaning condition. When these two (weal and th) are combined, it literally translates to the condition of wellbeing. The original meaning of Wealth is well-being or welfare, whereas other dictionaries also define it as “prosperity in the abundance of riches or possessions and happiness”. The definition of Wealth in its original context shows that it does not emphasise solely on money, even though money constitutes a balanced part of the greater equation. For instance, a lot of people, especially those with virtually no monetary or material wealth usually indicate that Wealth is not all about money, which to some extent remains true. However, those who claim to have recourse

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“The definition of ‘Wealth’ in its original context shows that it does not emphasise solely on money, even though money constitutes a balanced part of the greater equation”

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to other forms of Wealth, equally require money or monetary wealth to support them. Wealth in its holistic and precise definition combines financial, emotional, material, and spiritual aspects of life that see to the well-being as well as the prosperity in caring for oneself and others. Similarly, wealth can be traditionally defined as the abundance of valuable material possessions or resources. In economic terms, Wealth is created by an individual, business, or organisation when they add more value to their outputs than the cost of all of the resources used to produce these outputs. The word poverty, comparably, goes beyond not just having money to meet the needs of life. Per the World Bank Organisation’s description, “poverty is hunger; poverty is lack of shelter; poverty is being sick and not able to see a doctor; poverty “Poverty goes is not having access to school and beyond not just knowing how to read; poverty is having money to the fear for the future and so meet the needs of survive a day at a time”. The list life. Poverty is a continues. state of lack and less accessibility to basic needs”

There are great differences between people living in poverty as compared to their 25

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wealthy counterparts. Poverty is a great hurdle for many. Poverty is a great enemy to human happiness. Nonetheless, everyone is essentially wealthy or capable of being wealthy. The only problem is each individual’s wealth comes in unique forms. Everyone is wealthy precisely in each person’s highest value and what the person considers most important in his life. We are all uniquely genius and abundant in being ourselves. Yet, it is only a few of us who have been able to convert this wealth into significant assets, capital and cash. To achieve this, we must first become knowledgeable of our individual values. Next, we need to add the formula for wealth to it, to figure out how we can monetise our uniqueness and transform from one form of wealth to Monetary Wealth. Every single individual has wealth, however, that wealth might be latent – it is our responsibility as individuals to know where we hold our highest value so we can focus on and leverage that for monetary wealth. Thus, where focus goes, energy flows, and results grow.

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Many people hold diverse beliefs when it comes to Money. There are several myths around money and most of these myths hold people back from getting or making money “The myths people hold or reaching their full about money hold them potential of becoming back often from getting wealthy. In one way or the or making money or other, we all can relate to reaching their full some of these myths. potentials of becoming wealthy”

We may have heard people say a lot of things about money. For instance, people normally say “money does not make one happy”. Also, others believe money is the root of all evil. But is money evil? Or the uncontrollable addiction to have it - without principles – that is evil? Well, our mindset and understanding of money divide us into two; the rich and the poor. Whereas the rich see money as a tool for creating legacies of value and lasting wealth, the poor see money as a spending means. A research conducted by the economist, Angus Deaton, and psychologist, Daniel Kahneman, from Princeton University, shows that there is a correlation between a person’s annual income and his/her happiness. According to the study, there is an annual income benchmark above which people feel happy, and below which they feel unhappier. The outcome of the study suggests that as long as people are not having 27

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less wealth, they remain happy and vice versa. Thus, one’s happiness is highly correlated with how much they have, whether more or less. The research, therefore, asserts money makes people happy. This is not a truism, but at least we know to a certain degree that money can make one happy. Yet, the mindsets of many have been culturally influenced, with regards to money, and they have come to believe these myths as the reality. As indicated earlier, the rich are ahead of the poor because of what they feed their minds with. They are aware of the principles of money and so leverage them, while the poor play victim. “The wealthy are ahead of Under no circumstance should you the poor allow yourself to believe in these because of culturally influenced myths, like “the what they feed rich get richer, and the poor get their minds poorer”; “money does not make one with” happy”; “making money is hard”, inter alia. These myths tend to make one more close-minded with narrow outlook on opportunities in this regard. For instance, the argument: “the rich get richer and the poor get poorer” holds many down from going in the direction of wealth and money. Naturally, objects move easily in the direction they are already going. Once you set your mind on something and begin to pursue it, even if you do not get to 28

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the level you desired, you would be different from the person who did not pursue it at all, and in a positive way. “Once you set your mind on something and begin to pursue it, even if you do not get to the level you desired, you would be different

Most poor people are living in poverty not only because they are born as such, but because they have succumbed to the notion that they can never be wealthy or they are far from ‘Wealth’.

from the person who

It is in the interest of this that we have painstakingly it at all - in prepared this material to a positive way” enlighten as many people as possible, who desire ‘Wealth’ irrespective of their background. did not pursue

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Connecting the Dots How do we find wealth and arrive at our wealthy place if we do not know exactly what we want and where to find it? How can a man who does not know what he is looking for, know when he finds it? To the man who does not know where he is going, “Your Intentional anywhere then becomes a wealth 1.0 is destination. For your intentional your wealth wealth journey, let us begin with story. This book your Intentional Wealth 1.0. Your aiming to wealth story is your Intentional enhance and wealth 1.0. What do you know organise your about wealth so far? What has pursuit of wealth, formed your wealth reality? presents Intentional Have you considered the powerful Wealth 2.0” influences the books you have read, seminars attended, television shows watched, courses taken, latent attitudes, and direct advice from friends or family, etc have had on your financial life? They certainly have made a real or potential impact on you. Are you aware the impact your childhood had on your core memories has subtly formed your wealth story? Your wealth story is also referred to as your money script or money story. It excludes what your parents or the people who raised you tried to teach you. 30

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Money story starts earlier than perceived by many - around age three or four. It crept into your mind and formed its perception as you watched, listened, and absorbed each day. It was the fact that there was or was not tension in the air on payday, during holidays, at bonus time, and family “Your money story events. starts earlier than perceived by many -

What was the attitude of your parents or guardians four. It crept into your when one was not pleased mind and formed its with the way the other perception as you handled something? A watched, listened, and child’s first view of how absorbed each day” something is handled typically becomes, in their minds, the way something should be handled or not handled. around age three or

Now let us look at these four ways a child learns. First, children learn by imitation. They do as they see happening. Second, they learn by listening. They believe the words they hear are true. Third, they learn by specific experiences. The incidents, arguments, moments of joy and displeasure create experiential perception. For example, if fee and bill payments, resulted in arguments between your parents or guardians, then money becomes a tool of contention for you later on in life. Last, children learn by absorption. Children tend to absorb the emotions and temperament of their parents or guardians. 31

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Now you know the impact your childhood has on you and how this influence may have shaped your life. What if you decide to journal your money story today? How do you think it is affecting you in life today? Is it helping you or hurting you? Whether it is hurting or helping, this book has the intent to expose you to paths with a higher possibility of reaching your wealthy place and finding your wealth. This book intends to improve your understanding and enhance your perceived value of money and its role in your life. It helps you to build your own Intentional Wealth 2.0. To begin with, first, you will need to ascertain your wealth story. This is where you identify your Intentional Wealth 1.0. and try to align them in the light of the concepts shared in this book and further challenge yourself to do more. Next, is to learn the money language. Every area of life has its unique language and those who succeed therein are those who understand the language. The import of understanding the language is for both proactive and reactive purposes such as being deprived or being defrauded. We need to learn the money language. The objective of this overture is to help the reader understand wealth, poverty, and money. The next chapters would explore how wealth can be created, accumulated, accelerated, sustained, managed, protected, and distributed.

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The book provides a practical exposé to building and sustaining wealth. Developed by the author, The Duah Pentagon Wealth Model also referred to as The Pentagon Wealth Model consists of five interlinked blocks. It begins with wealth creation when alive, to its distribution when we pass away. The model, commencing with Wealth Creation, highlights value-added and creation, fair exchange and leveraging, time, and wealth velocity. Furthermore, we discuss The Wealth Creation Equation and The Heptagon Wealth Creation Model. In the second chapter, discussions are focused on wealth accumulation: the building of a solid, diversified financial foundation from which to expand over time with savings, buffer, emergency, contingency fund, investment, and wealth acceleration. The third block of the pentagon model is wealth management. It is discussed in three folds - financial literacy, financial planning and financial discipline. It is then followed by wealth protection as the fourth block of the model. If life is unpredictable, then wealth preservation, wealth conservation, and asset protection are not optional. This chapter seeks to shed light on consolidating and sustaining wealth acquired, being acquired, and to be acquired. 33

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Lastly, at some point, wealth will transfer to the next generation whether by default or by design. We propose wealth should be transferred by design. This last block of the pentagon model zooms in on wealth plan, transfer, and estate planning.

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The Duah Pentagon Wealth Model ©

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W ea lth V

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The Pentagon Wealth Model Financial Literacy Financial Planning Financial Discipline

Wealth Management

35

cu m ulat ion

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Sav Inve ings Acce stment lera tion

Cr alu ea eC Le tio r e Ve vera atio n lo ge n cit y

INTENTIONAL WEALTH 2.0

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2. Wealth Creation

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“Most people think they are not good at earning money, while actually what they do not know is how to use it.”

H

ow do we create wealth when we do not know what wealth is to us? To some people, living in expensive houses, driving luxurious cars, and traveling around the world is what wealth represents for them. To others, health is wealth, and therefore, good health, peace of mind, and less anxieties depict a wealthy place for them. Wealth can be simple and complex depending on your expectations - grounded in your definition of wealth and its characteristics. So how do you define wealth and how do you acquire it? A story is told of two boyhood friends who became a Monk and a Minister. The monk lived a humble life and the minister was rich and powerful. Years later, both met and began to catch up. The chubby minister in his fine robes and entourage sees the monk and takes pity on the thin and shabby monk. Condescendingly, he tells him: “You know, if you could learn to cater to the king, you would not have to live daily on merely rice and beans.”. Then the monk replies “If you could learn to live on rice and beans, you would not have to cater to the king.” 38

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This parable gives two contrasting views. This is an illustration that what a word means to you may be completely different from what it means to another. That is, the word wealth means different things to different people. And the definition of wealth you choose will make a big impact on how you arrive at your wealthy place. Have you seen in movies, how a heat-seeking missile will follow its target everywhere till it hits it or it is obstructed by something else? That is how our mind works. Have you realised when you decide to buy a certain type of car, such as Toyota Tundra, and all of a sudden, you begin to notice each tundra on the road from thence? Amazingly, at this time you are noticing the Tundras, you would not be paying much attention to the other cars. This is because your mind is focused on Tundra so it “Our minds are removes everything that is not trained to look for important for your search. The wealth as we know reason is the focus of your it and it will ignore mind in action. This applies to everything else.” wealth. Your mind will be trained to look for wealth as you know it and will ignore everything else.

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This is why many with wrong definitions of wealth, are focusing on wrong opportunities and are not gaining any true wealth. How can you find something you are not looking for? How would you arrive at your wealthy place when you do not even know where you want to be? For the man, going nowhere, any place is a destination.

“Once your definitions of wealth are wrong, then similarly, you will be

Therefore, in The Duah Pentagon Wealth Model, it is important you know your wealth definition and wealth equation.

focusing on wrong opportunities and thus, will not be gaining any true wealth.”

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MIPPS Wealth Definition Now, we have established that wealth is a relative term, and to start this journey, you need to define what it means to you. To begin with, let us explore the different categories of what wealth means to many people and classify them. To further enhance our understanding, the author has developed the MIPPS Wealth Definition Model – a practical taxonomy guide - with details as follow:

MIPPS Wealth Definition Model © § Materialistic § §

Materialistic

§

Physical and Psychological

Independence

Social

MIPPS Wealth Definition Model

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Independence Physical and Psychological Social

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1. Materialistic Materialistic © Net Worth = Assets - Liabilities

Materialistic

MIPPS Wealth Definition Model

According to Merriam-Webster Dictionary, wealth is the abundance of valuable material possessions or resources. It is also the abundance in supply. It relates to all property that has a money value or an exchangeable value and all material objects that have economic utility. This definition is about possessions and belongings. If your definition of wealth is materialistic then, wealth is measured in the abundance of valuable material possessions or resources. Your wealth is, therefore, 42

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expressed in the excess of your assets as against your liabilities, which is simply the difference between what you own and what you owe. Some possessions are wealth-creating assets and others are not. A wealth-creating asset is a possession that generally increases in value or provides a return, such “A wealth-creating as an interest-earning asset is a possession account, a retirement plan, that generally stocks and bonds, and a increases in value house. or provides a return, such as On the other hand, some interest-earning possessions such as your account, private utility car, a retirement plan, household furnishings, and stocks and bonds clothes are assets, but they and a house” are not wealth-creating assets because they do not earn money or rise in value. A new television, car, or phone drop in value the second it is bought and taken out of the lot. The car is, therefore, a tool that takes you to your destinations, but it does not earn you money and is depreciating over time in value. A liability, is simply what you owe other parties. It is the money you owe, such as a home mortgage, car loan, hospital, and other medical bills. Therefore, the 43

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difference between your assets (what you own) and your liabilities (what you owe) is your Net Worth. Your net worth then is your wealth.

ASSETS – LIABILITIES = NET WORTH For example, let us assume you are “Kay” and you want to calculate how much you are worth. You proceed with the formula above and then list all your assets and all your liabilities. Then, you begin with your wealth-creating assets, followed by the other assets. For the value of the assets, you use the market value. Subsequently, you list all you owe. And for the loans, since you have been paying, you list them with the current outstanding balances. With this assumption, the following sample balance sheet table shows total assets of $155,300.00 and total liabilities of $60,000.00. Your net worth is, therefore, $95,300 from the difference between the total assets and total liabilities.

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Kay's Balance Sheet

Amount in $

Assets Wealth-creating assets Cash

2,000.00

Savings

1,800.00

Stocks

2,500.00

Treasury Bills, Notes, and Bonds

3,000.00

Retirement Plan

ASSETS

20,000.00

House (Market Value)

100,000.00

Other Assets Car (Market Value)

12,000.00

Household Items (Market Value)

14,000.00

Total Assets

155,300.00

Liabilities Home mortgage (outstanding)

50,000.00

Car loan(outstanding)

8,000.00

Miscellaneous Liabilities

2,000.00

Total Liabilities

LIABILITIES

60,000.00 =

Net Worth

95,300.00

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With such the example earlier given, you can now calculate your personal net worth. Your calculated net worth represents where you are financially at this moment, and it is normal for the figure to fluctuate over time. Your net worth this time provides a snapshot of your current financial situation, but the real value is from making this calculation regularly, that is, monthly or quarterly, or annually. At least, once a year, you should calculate your net worth to evaluate your progress, highlight your successes, and identify areas requiring improvement.

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2. Independence Independence © § § §

Financial Independence Time Independence Location Independence

Independence MIPPS Wealth Definition Model

Many also define wealth from an Independence point of view and the definition still means different things to different people. Some define independence in terms of the financial capacity to do more without waiting for a salary. Others define it based on their freedom of geographical mobility and how they can freely use their time while being able to meet all their needs and even better, being capable of satisfying their wants. 47

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Therefore, we classify the independence perspective of wealth as follows: Three Types of Independence (MIPPS Model) ©

Financial Independence

Location Independence

Time Independence

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a. Financial Independence Financial independence varies from one person to the other. For some, it is simply being self-reliant and not having to get anyone involved to help with money. For others, it is a sense of security that your needs are covered no matter what happens. To others, financial independence is the point they have truly "made it" and not have to work for anyone else. The reason why financial independence looks different for everyone is because of individual financial goals “Financial and lifestyle preferences. independence does not necessarily mean

Financial independence, however, does not necessarily mean you would have to be very rich, or you would have to retire from work. It simply means you are achieving your financial goals permitting you to live the lifestyle you want without financial stress.

you would have to be very rich, or you would have to retire from work. It simply means you are achieving your financial goals permitting you to live the lifestyle you want without financial stress”

The financial goal for you could be possessing enough material wealth that you do not need financial 49

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support from another person and does not require income from employment. This means you can easily meet all your financial obligations such as health, leisure, and education without having to rely on secondary support. In achieving these financial goals, you get to choose to work or spend your time for other reasons such as passion and purpose, without depending on a particular income to cover your expenses. Thus, for you to define wealth from a financial independence perspective, you need to clearly determine your financial goals and lifestyle preferences. b. Time Independence

“Time is a finite resource. You cannot scale time. It is the great equaliser for us all, rich and poor. We all have the same 24 hours in a day”

Time is a finite resource. You cannot scale time. It is the great equaliser for us all, rich, and poor. We all have the same 24hours in a day. With this perspective of the definition of wealth, you measure your wealth in time, not dollars. Wealth in terms of time independence is the ability 50

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to control your own life and how much time you spend on what you want to do. This kind of wealth is not easy to achieve and might not be reached by many. Time independence wealth permits you to live your life the way you want. You have the luxury of doing what you want to and not be bothered about the means to pay your bills. c. Location Independence We are finite beings and we can physically be present at one place at a time. This means that if our wealth creation is limited to where we are or where we ought to be, then we are limited and boxed by our geographical mobility. Location independence, therefore, is a lifestyle that focuses on our ability to live and work or generate income on our conditions, wherever we want. In that, you generate income or create work around your lifestyle, and do not let your work or business create your life. The main

“Location independence therefore, is a lifestyle that focuses on our ability to live and work or generate income on our own conditions, wherever we want”

thing is not being tied to a specific geographical location.

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It means having the flexibility to work or generate income whenever you want and wherever you want whether as an employee of a company, a freelancer, or an entrepreneur. You can be where you want to be, whenever you want to be there. You can travel where you want to explore, whenever you want to explore it. And you can work and generate income from wherever you want to work. You simply have no geographical restrictions as your income or your ability to meet your needs is not tied to it.

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3. Physical and Psychological Physical and Psychological © § Physical Health § Mental Health § Emotional/Spiritual Health

Physical and

Psychological

MIPPS Wealth Definition Model

As per the model above, this perspective of wealth definition is the core and the grip to all other types of wealth and our life put together. Without physical and mental health [and emotional and spiritual health for those who believe in it], we cannot achieve the different kinds of wealth in a long and sustainable course of action. This is probably the reason for the oft-quoted phrase, “Health is wealth”.

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“Without physical and mental health [and emotional and spiritual health for those who believe in it], we cannot achieve the different kinds of wealth in a long and sustainable course of

DR. EVANS DUAH

In this perspective, people define wealth in terms of the state of their physical health, mental health, emotional or spiritual health. For the latter, we discuss it with a progressive mind of honouring all religions, as well as those who do not believe in God.

action”

We also acknowledge that as much as spiritual health is practical to people of diverse religions, it is relatively abstract to those who do not believe. Nonetheless, we can all agree that we all have a practice or way of connecting with and managing our emotions and feelings. If you define wealth by spiritual perspective, then wealth is awareness to you. Your focus will be on how in-tune you are with your beliefs about money and how aware you are of why you are making the decision and choices you make.

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You want to be in constant consciousness of what is fuelling your desire for the wealth you want to experience and pass it down to the generations behind you. You would want to identify what are the distractions and interferences of your efforts towards your wealthy place? And if physical and psychological health is your focus, you will be actively looking after and improving your physical and mental health. To persons, whose definition of wealth is linked to the psychological perspective, peace of mind and less anxiety are key.

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4. Social Social © § Social Status § Self-accomplishment

Social MIPPS Wealth Definition Model

To others, wealth is your social standing, societal relevance and impact, and social connection. In order words, with this perspective of the definition of wealth, you focus on the strength of your relationships, your power of influence, and your sense of purpose and relevance. How you are regarded by society and how you influence society will mean your social status is your wealth. 56

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Building social capital becomes an objective. Thus, you can leverage your relationships and connections to achieve beyond just financial wealth. You can enjoy the financial prosperity of others and capitalise on “When wealth to you their good perception of is about your social you to achieve your set standing, societal goals. relevance and impact, and social connection, From this perspective, then you you aim to reach a focus on the strength milestone where you of your relationships, could use your time and your power of resources to pursue what influence and your is more fulfilling and sense of purpose and purposeful for you while fully covering your needs relevance” without a bother. That is, you reach a self-accomplishment status and live out your purpose or dream with no anxiety about your bills. We all like to have a role for ourselves in life, and having a sense of purpose is important to many of us. On the other side, it also means how you interact within the world. And it is also related to your appearances such as luxury cars, houses, societal power, and influence. Primarily, this perspective is about the personality and the kind of character one creates, and how others perceive it. 57

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What then is wealth to you? With the help of this book’s MIPPS Wealth Definition Model, we understand that wealth is not only financial or monetary. Wealth means different things to different people. It could be one-dimensional and it could also be multi-dimensional. If you define wealth from only one perspective, then you will be sacrificing other components of wealth without your realisation.

“If you define wealth from only one perspective, then you will be sacrificing other components of wealth without your realisation”

First and foremost, we need to adapt the wealth conversation into an expansive and broad spectrum from the usual onedimensional. Defining wealth as materialistic or financial is one obvious way to measure it, however, there is a potential trap here.

We focus on the materialistic and social wealth and thus have an excessive focus on our careers, occupations or businesses, and what others think, that they might end up robbing us of our independence, physical and psychological health.

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You cannot spend all your fruitful years working with no independence (financial/ time/ location) and retire with bad health and no strength nor time to enjoy your labour. You cannot let the pursuit of social status make you lose your sense of purpose and fall into the rat race of ostentatious life, moving from one debt to another, only to impress others. Neither can we also allow our singular pursuit of peace of mind, cause us to be incapable of fending for our families and supporting our loved ones.

“When we focus on the materialistic and social wealth, we tend to have an excessive focus on our careers, occupations or businesses, and what others think, that they might end up robbing us of our independence, physical and

psychological Our definition of wealth health.” should reflect our personal goals. In this our pursuit of wealth and search for our wealthy places, we would realise there may be trade-offs. We would have to determine which of the trade-offs is worth our sacrifices and would have less negative future implications.

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WCAA Wealth Equation Quadrant Now that we have established that wealth is a broad spectrum and should be looked at from an expansive point of view, the next point is to determine your wealth equation and the key elements that make your equation. In other words, what is your mathematical plan to know, create, accumulate and accelerate wealth? Your wealth equation defines the physics of your wealth universe. The wealth equation may vary from one person to the other. Some wealth equations focus on the net worth of the person, others on how wealth can be accumulated, while others look at a continuum of wealth creation and acceleration. Based on these varying equations, WCAA Equation Quadrant classifies the different wealth equations into four:

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Wealth Equation Quadrant ©

By worth

By creation Wealth Equation

By acceleration

By accumulation

WCAA Wealth Equation Quadrant

As part of the key concepts underpinning the theme of this book, we acknowledge variance in pathways, approaches, strategies, and techniques in our wealth pursuit. In that same light, we have summed up all the different wealth equations into four. We consider each taxonomy with its various equations for review before suggesting our wealth equation with examples for your use.

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a. Wealth Equation by worth © By worth Wealth Equation= (10% X Age of breadwinner) X Household income Wealth = Net Profit + Asset Value Wealth = Net Worth = Assets – Liabilities

Wealth Equation

WCAA Wealth Equation Quadrant

When you define your wealth equation focused on your worth, the key variables in the equation would often be about your belongings and income less your obligations. As explained already under the MIPPS Wealth Definition typologies, those who define wealth in a materialistic way, focus on the net value of what they own and owe.

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The following are examples of such equations: §

Wealth = Net Worth = Assets – Liabilities

§

Wealth Equation= (10% X Age of breadwinner) X Household income

§

Wealth = Net Profit + Net Asset Value

The first equation above determines your net worth. The second focuses on the current and potential wealth of the household. The third shifts from just belongings to net cash flow from inflows less outflows and then includes the real value of assets less taxes, depreciation, and amortisation.

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b. Wealth Equation by creation © By creation Wealth = (Value + Fair) x Leverage Wealth = Money + Time +/- Rate of Return – (Taxes + Fees + Inflation)

Wealth Equation

WCAA Wealth Equation Quadrant

When the focus of your wealth equation is to continuously create wealth, then certain key variables such as value, time, rate of return, money, and leverage would remain core in your pursuit. With the examples of equations cited, the first equation places value as the main variable operating within a fair exchange, that is, a legal and legitimate platform for exchange. However, the rate of increase is by the multiplying effect of how one leverages the opportunities, privileges, and network available. 64

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The second centres around monetisation over time in addition to the rate of return less all other costs and factors such as taxes, fees, and inflation. §

Wealth = (Value + Fair Exchange) x Leverage

§

Wealth = Money + Time +/- Rate of Return – (Taxes + Fees + Inflation)

c. Wealth Equation by accumulation ©

Wealth Equation By accumulation Wealth = Income + Debt Wealth = Job + Savings WCAA Wealth Equation Quadrant

When your wealth equation focuses on accumulation, then income, savings, debt, salary among others, would be the notable variables in your equation. The following are examples:

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§

Wealth = Income + Debt

§

Wealth = Job + Savings

The first and second equations accentuate accumulating wealth using income, savings, and debt. With this wealth equation, the surplus from income is used to defray debt and the remaining saved over time. d. Wealth Equation by acceleration ©

Wealth Equation By acceleration Wealth Creation = Savings x Investment. Wealth = Money Velocity = Output ÷ Input Wealth Creation = (Income – Expenses) x Investment

WCAA Wealth Equation Quadrant

When your wealth equation is by acceleration, you focus on multiplying effects, catalysts, and alternative ways of multiplying your accumulated wealth. This implies that the wealth equation by acceleration is a step up from the wealth equation by accumulation. 66

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The examples below, use the accumulated wealth, whether directly from net income or from surplus saved, to invest and seek to increase especially via compound interest. The third equation, however, moves from enhancing the accumulated wealth to a different equation altogether. This equation does not take wealth out of your business or earnings to lock it away for a long period like 30 years. Instead, the core of the equation is about the fair exchange, value, and the movement of your money - cash flow. That is, this equation is dynamic in looking for the best wealth acceleration efforts for you. §

Wealth Creation = (Income – Expenses) x Investment

§

Wealth Creation = Savings x Investment.

§

Wealth = Money Velocity = Output ÷ Input

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Wealth Creation This book is an exposé on how wealth is possible for anyone. There are many people who due to factors such as humble beginnings, poor home, age, country of residence, and economic hardships still believe that wealth for them may not be feasible anymore. However, there are quite many popular stories that prove that anyone can be rich. There is one of these stories that relate to those whose situations, where one has every reason to give up on the pursuit of wealth. Against all odds, a certain young man decided to see opportunities in his hustle and to pursue his dreams. This is the story of Curtis Jackson, popularly known as 50 Cent. His story proves that anyone can be rich, of which the opposite is also true, in correlation with our work input and the decisions we take or how we limit ourselves by our conditions. The story is told of little Curtis Jackson, who was born to a very young single mother [ who was barely fifteen years old]. The mother survives with him working as a cocaine trafficker. Little Curtis was born to the exposure of street hustle and living.

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At eight years old, his mother was gunned down by the criminals she worked with. This boy was then taken to the grandparent to be raised. Considering the background of Curtis, his childhood days were exposed to all forms of criminal acts. Actually, as young as age twelve, Curtis was trafficking cocaine by himself. He was eventually arrested, at that tender age, and was sent to a correctional boot camp. However, upon all the odds, he rose to become one of the globally famous rappers and business moguls. Curtis saw how rap made some of the young people from poor neighbourhoods, popularly called ghettos, very rich. So, with a passion for rap already, he began to add value to his talent, which is rap music, by practising when he returned from the camp. He learnt the depths of rapping, counting bars, writing hooks and choruses, structuring and editing songs, inter alia, after being introduced to Jam Master Jay in 1996. He made his first album in 1999, and from 2003 to 2009, the rapper released 4 successful albums selling about 21 million copies of the albums, making him one of the most influential rappers in history. On top of all that, Curtis was a smart business entrepreneur. In the early 2000s, Curtis came across two different gallons of water in a supermarket, one selling at $2.89 69

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and the other at $0.59. He realised that the huge price difference between the two gallons was basically branding. Upon sober reflections, he decided to venture into the water business after discussing his idea with the manager. Soon enough, he partnered with Glaceau and launched his own Vitamin water brand. The world became acquainted with Vitamin water in a short time, and it became very popular, especially in the sporting industry. In 2007, Coca-Cola company bought the brand for approximately $4.1 billion. Even though it was reported that Mr. Curtis never disclosed the amount he made in that deal, however, according to Forbes, he made approximately $100 million out of the deal, which is a double-up to his already accumulated wealth. In 2015, Mr. Curtis Jackson was ranked the number 4 wealthiest hip-hop artist with an estimated net worth of about $155 million [until he filed for bankruptcy on account of unfortunate decisions he made in the same year]. The story of Mr. Curtis James Jackson inspires many and he is celebrated for his smart career and business moves through the odds. From his story, we understand how he leveraged the trends and opportunities of rap and built his talent around his passion. He created value with his 70

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talent, monetised his works, and built wealth over a period. Does that mean, we all need to have talents like the rapper 50 Cent before we can become this kind of rich? No! We can use our pathways to our wealthy place. Let us examine how practical we can create wealth in our ways. To do this, we have successfully discussed the MIPPS Wealth Definition Model and the WCAA Wealth Equation Quadrant. Your wealth “Your wealth definition definition, therefore, therefore, is is the scope of your the scope of your wealth’s dreams and wealth’s dreams and aspirations, whereas aspirations, whereas your your wealth equation wealth equation is the is the combination of combination of the the key wealth factors key wealth to arrive at your factors to arrive at your wealthy place. Then wealthy place” again, how do we create wealth?

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Key Factors of Wealth Creation First, wealth is created over time. Second, wealth is created when the offered value created/added is purchased. Third, wealth is created when there is a means and medium of fair exchange for the value created/added. Last, the rate of increase of wealth is dependent on the stimulating factors that accelerate or slow down the wealth creation process. Therefore, for our wealth equation, we consider these five factors as the core for wealth creation and the combination thereof key to the outcome. Five Key Factors of Wealth Creation ©

Time

Velocity

Value

Fair Exchange

Leverage

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a. Time © Time •Most Valuable Asset

Key Factors of Wealth Creation

TIME is the most valuable asset we have for wealth building. It is so precious that we can neither buy more of it nor increase it. Time cannot be scaled. Once time is lost, we can never replenish nor recreate it. Time wasted can never be replaced. Each passing time is forever lost and can never be reproduced. This means each passing day, hour, minute or second, that we have, is one less day, hour, minute, or second to use. Time is a finite resource and we are also finite beings, expiring day in day out. 73

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Considering the principle of a finite resource and finite beings in correlation with time and us, as human beings, time passes and we age.

“TIME is the most valuable asset we have for wealth building. It is so precious to the extent that we can neither buy more nor increase. Time cannot be scaled. Once time is lost, we can never replenish nor recreate it”

Passing time is lost forever and our ageing is our expiring. Ageing is simply the process of getting older, and scientifically, it is the impact of the accumulation of a wide variety of molecular and cellular damage over time. This means, not only do we lose time, but we also change with time. In reality, we are dying each passing time.

Time is no respecter of persons. It does not discriminate. We all have the same twenty-four hours in a day. Not even the richest man on earth can buy more time, can slow down time, or can speed time. Time is the great equaliser for both the rich and the poor. Time is priceless to our wealth pursuit, and hence, we have to be very mindful of how we spend it, who we spend it with, what we spend on, where we spend it, and even

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still when we spend it. We have to be intentional in our time usage and ultimately, our time management. Lastly, time perception includes the past, the present, and the future. Our time perception teaches us that we can learn from the past and look forward to the “Time perception future, but the includes the past, the important time is the present and the future. present. In other words, Our time be in the moment every perception teaches us moment, as that is all we that we can learn from have. the past and look forward to the future, The present is always but the most important slipping and the future time is is always actualising the present” and therefore, we ought to make every moment count. This leads us to intentionality. We have to determine how we want to spend this non-renewable resource. As it stands, it is either we run the day, or the day runs us. There is no middle ground. Being intentional about our time is the surest way to guard and optimise it. Being intentional is not throwing actions in the air and hoping for some results. It is about aiming and firing. We 75

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have to set the scope of our wealth pursuit. We have to determine our priorities and we have to arrest the time thieves and reduce time wastage. In comparison to businesses that want to become more profitable, they have two main options available to them. They can either: §

Increase their revenues; or

§

Reduce their expenses.

Similarly, we as individuals, also have two main ways to have more time to do the things we need to do, since we cannot create more time out of thin air, we either §

Look for creative productive; or

ways

to

become

more

§

Reduce the amount of time that we waste away.

Also, considering our energy is also finite, we are limited by how much we can do to become more productive. It is comparatively easier to reduce time wastage than it is to become more productive. The best productive hack is to stop wasting time.

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We often think we have a lot of time on our hands, especially the youth. This thought pattern makes most of us, project our current lives and situation into the future when forming this outlook.

“The best productive hack to guard and optimise time is to stop wasting time. We often, think we have a lot of time on our hand, especially the youth. This thought pattern,

makes most of us, Conversely, there is a project our current lives critical factor we often and situation into the do not consider, future when forming especially the younger this outlook” generation - the fact that as we grow older, we acquire more responsibilities. The more responsibilities, the less disposable time we have to achieve our goals. We, therefore, cannot waste our precious time on things that are truly trivial and irrelevant to our journey. In a nutshell: §

We cannot be everywhere

§

We cannot do everything

§

We cannot be there for everyone

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We, therefore, have to prioritise and focus on what we desire the most with our non-renewable resource - time. Therefore, in our build-up to the key factors, to combine effectively and efficiently towards our wealth creation, we conclude that time is the most valuable asset on the journey to our wealthy place. b. Value ©

Value •Value Creation •Value Added/Created

Key Factors of Wealth Creation

During our earlier foundational build-up to this section, we discussed money - the functions, properties, and principles. Value is a key factor in wealth creation. In the 78

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discussions, the word VALUE was quite predominant as per the following examples: §

Money is a store of VALUE. It should maintain its purchasing power

§

Money refers to the actual VALUE of goods or services that are traded for

§

Money has intrinsic VALUE

§

The VALUE of any goods or services can be derived in the form of money and it can be quoted in a certain currency

Some of the properties of money that include value §

Money as a unit of account is the common way in which market VALUES are measured in an economy

§

Money being divisible means it can be divided into smaller units of VALUE

§

Money being stable implies its VALUE should be relatively constant or increasing over time

Some of the principles of money that include value are: §

Devaluation: Money devalues over time due to inflation 79

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§

Money Flows from those who understand and VALUE it least to those who understand and VALUE it most

§

Expenditure and Receipt: Those who VALUE money least have higher relative expenditure than receipts and those who VALUE it most have higher relative receipts than expenditure

§

Direction: Money tends to flow towards service and VALUE, not work and time

From the examples cited, value can be measured, kept, tracked, and communicated. To understand value, we would look at how value can be defined, created, delivered, and sustained. According to Warren Buffet, “Price is what you pay and value is what you get.” Value defines the services one gives to people as they perceive them. In economics, it is a measure of the benefit provided by a good or service to an economic agent. It combines servicing, solving, and showing concern and care for the people you serve, and in return, you get paid for the value provided and even get referrals in addition.

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For its measurement, it is generally relative to units of currency. The interpretation is, therefore, "what is the maximum amount of money a specific actor is willing and able to pay for the good or service?”. Customers would only purchase if they perceive a consumer surplus [consumer benefit] or else they would not make the exchange. The total value created is the price paid in addition to the perceived value of the consumer surplus. The perceived value of the consumer surplus is referred to as the perceived-use value. It is subjective and defined by customers, based on their perceptions of the usefulness of the product on offer. The perceived-use value is determined individually by each of us and is subject to change at any time. Another measure of value is the exchange value. It is realised when the product is sold. It is the amount paid by the buyer to the producer for the perceived-use value. The amount the customer is prepared to pay for the product is called total monetary value.

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Value is, therefore, linked to price based on its usefulness through the mechanism of exchange. There are two key “Value is linked functions of value demonstrated to price based by the one offering the goods or on its services as perceived by the one usefulness paying for them. through the mechanism of

First, the buyer reveals what he/she is willing to pay for a certain amount of a good. Second, the seller also reveals what it costs him to give up the good. exchange”

This corroborates what Warren Buffet posited, that buyers who are willing and able, pay the price for the goods or services and in return, value is what they get. On the other side, the sellers are also willing to give something valuable to receive something else, that is more valuable to them. In summary, value is defined by the buyer [consumers, customers, investors, and other stakeholders] at a price. Whereas value is created by the seller [individual or business] at a cost using all their resources, capital, and relationships in an integrated way. The value created by the seller is delivered as goods or services to the buyer via a mechanism of exchange 82

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[channels] at an appropriate price. Value is sustained by continuous improvement of efforts and processes of value creation. It is sustained by retaining and protecting value internally and distributing value to external buyers [customers, investors, shareholders, and stakeholders] To put it in perspective, imagine a bare land full of weeds, but after a year, it starts yielding cabbage, lettuce, ginger, and maize among others. What made the difference? It is the work of farmers who used the land, with their equipment, labour, seeds, and care to create something valuable from something that meant nothing to others. The farmers, in this way, are participating in value creation, or creating value from their resources into something valuable to others. This is value creation. Over time, more farmers begin to use their resources to also cultivate the land and have similar yields. This creates competition in the value offering. Therefore, farmers would now focus on the outcome of the utilisation of the resources and their benefits to them. The consumers, exposed to varieties and different value offerings, would now want more from what is offered, and they would want it to come directly from their sellers. This is value-added. 83

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Now instead of only offering lettuce, the seller adds exquisite packaging, easy access, and availability to the buyer at their convenience. The buyer focuses on increasing customer loyalty by personalising the value offering to the buyer via understanding the increasing customer needs and wants. This is value created. The challenging part for sellers is that the buyers do not directly ask for value creation. Most buyers do not even think in such terms. Their focus is that they want a little something more, something different from what everybody else is already getting. This brings us to the difference between value creation, value-added, and value created. As discussed earlier, value is defined by the buyer and created by the seller. Therefore, our focus then is what value are we delivering and which type of value can we increase to sustain the value we are creating and delivering?

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In simple terms, we establish the difference below: §

Value: It is the relative worth of a product or service based on utility and importance to the buyer. It attracts buyer awareness and interest. Value is delivered by the product or service itself and how it meets the buyer’s current needs.

§

Value-added: They are the extra features that go beyond the standard product offering. It magnifies the buyer’s desire and may lead to a purchase action. Value added is delivered by the seller as a marketing tool to incentivise buyers and to gain a competitive edge.

§

Value created: It is separate from the product and unique to each buyer. It focuses on securing long-term buyer/seller relationships. Value created is delivered by the seller through the experience created in doing business with the buyer.

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c. Leverage ©

Leverage •Financial •Social •Marketing •System

Key Factors of Wealth Creation

The word leverage has different definitions and has slight nuances depending on the context it is being used in. In the context of wealth creation, we need to understand wealth requires us to work smarter rather than harder. In fact, we cannot achieve wealth all by ourselves nor by our means only. We need to leverage. Have you ever wondered why it is easier for the rich to make more money than the poor? There is a difference between how the rich build wealth and how the middle 86

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and lower classes build wealth. It all comes down to how they use their leverage. We are not referring to leveraging as only borrowing money [also known as gearing]. Let us look at the scenario to help us understand the concept of leverage in wealth creation. Imagine you have to move a big stone with your hands. You try to lift from the side, from under, try to push the top to get a balance, and yet you are still unable to move this rock. Fortunately, you find a rigid bar close by. You place it beneath with a pivot and with the same manpower, applies force on the other side. And voilà! The stone is moved successfully. You achieved this different outcome with the same manpower due to the mechanical advantage gained using the rigid bar. This is leverage – maximum productivity with minimum effort due to the gained advantage.

“Leverage is the ability to control a lot with just a little. It gives you the ability to utilise more than just what you have or can do. It allows you to effect change much more rapidly”

Leverage is the ability to control a lot with just a little. It gives you the ability to utilise more than only what you have or can do. It allows you to effect change much more rapidly. Leverage is about the optimisation of the 87

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resources, opportunities, and privileges that are available and accessible to you. The more leverage you have, the faster you become on the journey to your wealthy place. If you are not using leverage, then it means you are working harder than you really should to earn less than you deserve. Sadly, this approach is not going to take you to your wealthy place. You can build more wealth with leverage than you could ever achieve alone by utilising the resources that extend beyond your own. Leverage allows you to grow wealth without being restricted by your personal limitations. Nobody gets rich without leverage. Leverage can take many forms. We could use: §

OPM (Other People's Money)

§

OPT (Other People's Time)

§

OPW (Other People's Work)

§

OPE (Other People's Experiences)

§

OPI (Other People's Ideas)

§

OPN (Other People’s Network)

§

OPC (Other People’s Channels)

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We would like to clarify that leverage is not about using people. It is not about simply working harder. It is about making smart business decisions that benefit all participants. It is the approach of responsibly applying other people’s resources to overcome obstacles that limit your wealth creation process. This allows you to achieve greater results with less personal effort.

“Leverage is not about using people. It is not about simply working harder. It is about making smart business decisions that benefit all participants.”

With some of the forms of leverage listed, we would classify the different forms of leverage into four, namely:

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Four Main Types of Leverage ©

Fianancial

System

Leverage

Marketing

4 Key Leverage Types

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1. Financial Leverage ©

Fianancial

Leverage

4 Key Leverage Types

Financial leverage is using other people’s money so you are not limited by the size of your own pocketbook. It is an investment technique of using borrowed money, precisely, the use of different financial instruments or borrowed capital to maximise an investment's potential return. 91

“Financial leverage is using other people’s money so you are not limited by the size of your own pocketbook”

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Also, it refers to the amount of debt a firm uses to fund assets. When a company, property, or investment is referred to as highly leveraged, that means the item has more debt than the equity. Let us assume you intend and have the financial capacity to buy a landed property selling at $400,000.00 in the centre of the city for commercial purposes. Instead of paying upfront the full cash, you decide to contribute 20% (i.e., $80,000.00) and request the bank to pay the remaining 80% (i.e., $320,000.00) as a mortgage loan. This decision is because you can rent it out for more than the cost of the mortgage. Therefore, instead of using your funds, you are using the bank’s money to create more wealth and to acquire wealth-creating assets or build your business. In this case, the acquired wealth-creating asset will generate its cash flow and part of the surplus cash flow could be used to settle the instalment payments of the loan. Concurrently, the unused available funds could be used to acquire more wealth-creating assets. This option of using OPM (Other People’s Money) will accelerate your wealth creation.

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Nonetheless, as you could see from the example, debt was used in acquiring a commercial property which is a wealth-creating asset. This is good debt. Bad debt, on the other hand, is debt that is used to buy things that will not make you any money. For example, using debt to buy the most ultra-modern and expensive television for home use will not make you money and, therefore, it is classified as a bad debt. Good debt is used to create more money than the debt itself like the example stated above. The poor and middle class try to get out of debt. The rich try to create more good debt in the form of leverage. Leverage is fundamental in creating wealth. Fear of debt will keep you from becoming wealthy. For us to reach our wealthy place faster, we need to master the art of using money that we do not have, to build our wealth. This will help us to magnify our investment activities and enjoy enhanced accelerated returns. In simple terms, with financial leverage, we take on more good debts, that is, borrow, gear, or leverage our assets to own even more assets.

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2. Social Leverage ©

Leverage

Social

4 Key Leverage Types

Social leverage, on one side, is using other people’s resources and connections so that you can expand beyond your own. The other side is hiring people to do tasks on your behalf. With Social leverage, you use OPT (Other People’s Time), OPW (Other People’s Work), OPE (Other People’s Experiences), and OPN (Other People’s Network). There are many companies, small businesses, and individuals with enough expertise, experience, and strong social network that are willing to sell to you. You can use the services of an accountant, lobbyist, lawyer, architect, insurance broker, event organising companies, and freelancers. 94

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They will save you time and money. Why will they save you money while they cost you? They save you money because they free up your time to make more money, and their expertise and experiences help you. “Social leverage Next, you can employ other people and leverage their time. This allows you to legitimately capture the time and efforts of many and in return, you pay them a salary.

is using other people’s resources and connections so that you can expand beyond your own and on the other side, hiring people to do tasks”

Also, it is a huge waste of your time and unnecessary to try and learn everything you need to know before you venture into some wealth-creating arenas. You do not need to advance by trial and error all the time. You can learn from the experiences, knowledge, and mistakes of others. For this journey, we have laid the foundation that time is our most valuable asset, thus we have to value our time and learn to leverage our time, putting it to its highest and best use. To put this in perspective, let us assume your time in hourly rate is worth $100 so you hire someone. You can, therefore, employ a competent person and delegate your duties to this person, whose 95

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hourly rate is assumed to be $40 per hour - lower than yours. Once they can competently handle your tasks, it frees you up for more important activities that can help you acquire more wealth. However, the ultimate goal should not be to exploit other people but to recruit team members that share your passion and dedication to your ventures to make a positive impact in the lives of others by co-creating values and sharing the gains thereof. You can leverage their loyalty to your mission and grow your ventures together. It is necessary to build a great team around us. We do not need to be experts in every field if we develop a good network. In fact, in this world it is not only “what you know” and it is not even just “who you know”, it is more about the “what and who you know” knows. The relationships you build and develop are critical to growing our wealth. And it is not only for what they know or who they are, but also for the people they know and institutions that know them, who could also help you.

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3. Marketing Leverage ©

Leverage

Marketing

4 Key Leverage Types

Marketing leverage is using OPI (Other People’s Ideas), OPC (Other People’s Channels), and also OPN (Other People’s Network). It is when you can control and generate or increase your profit using no-cost or lowcost marketing. You can use other people’s magazines, newsletters, radio shows, and databases to communicate to millions with no more effort than is required to communicate one-on-one.

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You can also use franchise and networking to learn and copy legitimately good income-producing ideas. In other words, you can learn proven methods and “Marketing replicate them yourself. leverage is using other people’s

Why build your own company, if you can use a franchise to leverage an established brand? Why will you do only one-onone marketing, when you can easily run a social media ad that is seen 24/7 by a sizeable number of people from all over the world?

ideas, other people’s channels and also other people’s network. It is when you can control and generate or increase your profit using no cost or low-cost marketing.”

Since we are limited by time and space as finite beings, we cannot physically be marketing all day, but our social media ad will work for us all the time. You can therefore leverage OPI, OPC, and OPN and reach millions of people. Thus, instead of authors using only their networks to sell their books, they can leverage online distribution channels such as Amazon.

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4. System Leverage ©

System

Leverage

4 Key Leverage Types

System leverage is about using to your maximum the privileges, disadvantages, advantages, and opportunities by virtue of who you are, where you come from, and where you are. The American and European can easily leverage their capital markets with easy access to funds. While due to high inflation and very difficult access to expensive funds, the West African can equally leverage on the high return on investment, which permits the rich to get richer quicker by investing in wealth-creating assets and owning their businesses. 99

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“System leverage is about using to your maximum the privileges, disadvantages, advantages and opportunities by virtue of who you are, where you come from and where you are”

DR. EVANS DUAH

In other words, you can also leverage the socio-politico systems of a country to your benefit, that is, the power structure, the rules, regulations, and cultures. A system is a set of elements whose interconnections determine their behaviour and the behaviour of the entire system.

Therefore, understanding the interconnections and dynamics in your region, continent, country, state, city, company, tribe, clan or family could be very instrumental to your wealth pursuit and can help you accelerate it. System leverage leads us to system thinking. If we do not use system thinking, we get fixated on parts of a system and we miss the understanding of the whole. An example is the elephant case scenario, where the man who looks at the trunk only, compares the elephant to a snake, while the one who fixates on the legs only compare it to the trunk of a tree, and the one who focuses on the tail, compares it to the rope.

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Until they see the elephant as a whole and approach it from a holistic angle, they will miss the bigger picture. System leverage makes us and our contributions more valuable. We are able to identify the most important places for intervention to effect long-term changes in the behaviour of the system to our benefit. These most important places for intervention are called leverage points.

“System leverage makes us and our contributions more valuable. We are able to identify the most important places for intervention to effect long-term changes in the behaviour of the system to our benefits”

Leverage points are places within a complex system, such as a company, an economy, a city, a family, or an ecosystem, where a small shift in one thing can produce big changes in everything. It is simply a place in the system’s structure where a solution element can be applied. It is, therefore, of immense interest to us, to identify leverage points of the system we seek to produce big changes with a small shift. According to Donella Meadows, there are four key areas we can leverage. 101

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The first key area is the physical leverage points, which are the constants, facts, numbers, and parameters we have to know and understand to use them to our advantage. The second is informational, which represents the structure of information flows with who has access to information. Then, the social leverage point is about knowing the rules and goals of the system. Lastly, the mindset and paradigm out of which the system arises is the conscious leverage points The advantage of leveraging systems is you can get more done with less effort. For example, in siting your business, you can leverage government policies in setting up in free-zone areas or applying for tax holidays. In the same way, your county may decide that for the next ten years, the country would require expertise in certain areas, and therefore, the government is providing full scholarships with monthly stipends to study in Ivy League universities.

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For those who master system leverage, they do not generate only value for solving today’s problems but generate even a far greater value by solving the problems of tomorrow as well. “For those who master system

They identify areas of higher potential, which if changed would ripple throughout the system based on causal links and reinforcing loops. System leverage is a holistic approach to accelerating your wealth.

leverage, they do not generate only value for solving today’s problems but generate even a far greater value by solving the problems of tomorrow as well”

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d. Fair Exchange ©

Fair Exchange •Means •Medium Key Factors of Wealth Creation

When we discussed Value earlier, we shared two key concepts – perceived-use value and exchange value. These concepts suggest that one has to give or offer a product or service or idea that another perceives as valuable enough to pay for it. This means for our value to receive money, there has to be an exchange or transaction. But the keyword here for us is that the exchange or transaction should be fair. We want to make money and build wealth knowing that we are being authentic and equitable. 104

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In the exchange or transaction, if we sell our goods/service far lower than their true value, the goods lose their worth and we the service provider, are reducing our self-worth. Equally, if our services are overcharged than we give or our goods are overpriced than its true value, we falsely increase our worth and our goods will not be “There is a healthy purchased as its worth is balance called reduced by the falsehood. ‘fair exchange’ where you do not There is a healthy balance give something for called fair exchange, where nothing and do you do not give something not expect for anything and expect something for something for nothing. nothing” Fair exchange suggests that there’s an intrinsic price or value on a service or product that can be agreed to, by the buyer and seller. It depends at what price the seller is willing to give or offer the product or service and what the buyer is willing to pay for it. Fairness is in the fact that both parties agree with each other in order to transact. Fair exchange is looked at in two ways – means and medium.

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We explained money is a medium of exchange and a means of deferred payment. This implies that money is the unit of measurement of the value offered in terms of price, and the item is widely accepted as the intermediary between the buyer and the seller. That is, in fair exchange, the unit of measurement of the goods or services should be accepted and agreed by both parties and the medium, which is the fashion by which the transaction is executed should be equitable and just to both parties. Means in fair exchange is about the concept of “what” and medium in fair exchange is about the concept of “how”. In other words, once we give value, it is expected that we receive rewards commensurate to it. Value without fair exchange or transaction will create a financial void in our lives. This implies that anyone who keeps giving value without fair exchange or receipt may build emotional resentment that will eventually reduce value creation. This is not financially sustainable either over a long period when one does not receive fair compensation.

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e. Velocity ©

Velocity • Pace • Direction

Key Factors of Wealth Creation

Have you heard of the notion of turning around or over your money? This is the same principle about sales turnover. Let us assume we have a capital of $100,000.00, we purchase 2,000 shoes at $45.00 [ totalling $90,000]. We spend the rest of the $10,000.00 on direct expenses [such as transport and packaging] and indirect expenses [such as shop rent, payroll, and office utilities].

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We are able to sell the shoes for $70.00 [making a Total Sales Revenue of $140,000.00]. The Total sales revenue less the explicit costs will equal our profit. For accounting profit, it will be the total sales less cost of goods (COGS), operating expenses (OPEX), and taxes. Return on Investment (ROI) is the net profit divided by the cost of goods sold. For this example, we know our total investment was our cost of goods of $100,000.00, and let us assume with our readers from different regimes, our net profit ends up at $25,000.00 (that is total revenue less COGS, OPEX, and Taxes). ROI = (Net Profit / COGS) * 100 = [$140,000.00-($100,000.00 + $8,000.00 + $7,000.00) / $100,000.00] * 100 = ($140,000.00-$115,0000)/$100,000.00] *100 = ($25,000.00/$100,000.00) *100 = 25% ROI = 25% ROI is over a time period, for example monthly, quarterly, or annually. So, imagine in a month, one seller can repeat this sales cycle four times and another twice and the last person once. 108

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With the same trade, same returns, the former has a higher ROI than the latter two. The number of times of the turnover within the period is the rate of turnover. This is the velocity in our wealth creation. Wealth velocity has a dual function – the pace and the direction. The pace is about creating a cycle of higher returns and the direction is about creating more positive and less negative returns. For a better understanding, let us use another example such as banks. Banks are basically in the business of taking deposits from those who have them in abundance and lending it to those in need of it. This is a bank’s core business besides other auxiliary services such as transfers and payments. The bank promises a lower interest to depositors and lends their deposits to borrowers at a higher interest rate. The bank makes its profit from the margin between the lending interest rate and the interest on deposits. However, the overall return is not dependent on the percentage they charge on individual borrowers. Instead, it is on the number of times they can lend the same dollar. This is wealth velocity.

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So, can we think like a bank? Can we create a similar process of wealth velocity? Can we create a faster turnover and get multiple uses of our own money? From what we have discussed so far, let us assume that you have $100,000.00 to invest, per the question below, which option will you be choosing?

Which is the better return on investment, 5% or 15% return? At a glance, 15% looks like the better ROI. But the correct answer is: it depends. It depends on what? Time! In the question, the time factor was left out. What if the 15% ROI is per annum and the 5% ROI is per month. This implies in terms of annually, the 5% ROI will be 60%, which is greater than the 15%. The difference is the pace of the turnover and the direction of returns. The faster investment returns, the faster you can redeploy it. Wealth velocity is, therefore, the pace and direction with which we move towards our wealth. The aim of the game is not to build a nest egg and then eat it.

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We cannot only aim for net worth. Our goal in our wealth pursuit should rather be to build a portfolio of investments that generate more income than what we need to live with. In other words, we should be less concerned about our net worth and more concerned with the velocity of our wealth. Our wealth should not stagnate. Whatever wealth we build, it must move into new places to survive and grow. Wealth velocity is aimed at gaining momentum and building wealth faster with more positive returns by increasing the cycle of returns.

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Wealth Creation Equation From the key factors discussed, time is the most valuable asset we have. Value is the main wealthcreating tool. Leverage is understanding how to work smarter and not only harder by identifying key leverage points where solution elements can be applied to get more done with less effort. We want to make money and build wealth, knowing that we are being authentic and equitable and as such we ensure the means and medium used for the exchange of value is fair and accords the just value to either party. Wealth velocity is simply about creating a faster turnover and getting multiple uses of our own money. It is about letting our money work for us at the fastest turnover possible. The other side of the equation is, one can have fair exchange and great value but no leverage, this can affect the person’s ability to create great wealth. Also, a person can have leverage and great value but no fair exchange. This can affect the passion and profession of the person and consequently can lead to desperation. Another can have leverage and fair exchange but no value. This can also affect the person’s ability to sustain wealth for the long term. 112

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And a person can have great value, fair exchange, leverage, yet have very low wealth velocity. This can slow the wealth creation process if the main income is not significantly higher. Lastly, a person can have all four key factors and yet have very little disposable time due to age or may have leveraged other areas except time leverage. This can lead to frustration as the person is fully aware of the wealth potential yet they are unable to capitalise on it. Pertinent details parallel to these different case scenarios have constituted our arrival at this proposed comprehensive wealth creation equation for your guide. Considering the five key factors for wealth creation discussed, we propose the following practical wealth creation equation:

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Wealth Creation Equation ©

Time

Velocity

Value

Fair Exchange

Leverage

Wealth Creation = (Value + Fair Exchange) x Leverage x [1+ (Return on value/Velocity)] (Velocity x Time)

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Wealth Creation = (Value + Fair Exchange) x Leverage x [1+ (Return on value/Velocity)] (Velocity x Time)

For us to practically understand this equation, let us assume the following figures for each variable for demonstration purposes: §

Our value offering is worth $10,000.00, i.e., Value = $10,000.00

§

With Fair Exchange, it is revalued with an extra $ 2,000.00, i.e., F.E. = $2,000.00

§

With all the resources we have and can use to our advantage that can accelerate our value creation by three times for the period i.e., Leverage = x3

§

Return on the value offered is 20% per annum i.e., ROV = 20%

§

The cycle of return can spin four times per annum i.e., Velocity = x4

§

Time = 2 years

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Scenario 1: Wealth = Value x (1+ (Return on value) Year 1 Wealth = $10,000.00 x (1+(20%) Wealth = $10,000.00 x 1.2 Wealth = $12,000 Year 2 Wealth = $12,000.00 x 1.2 Year 2 Wealth = $14,400

Scenario 2: Wealth = Value x (1+ (Return on value) x Leverage Wealth = $10,000.00 x (1+(20%) x 3 Year 1 Wealth = $10,000.00 x 1.2 Wealth = $12,000 Year 2 Wealth = $12,000.00 x 1.2

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*With Leverage for the Period Wealth = $14,400 x 3 Wealth = $43,200 Scenario 3: Wealth = (Value + Fair Exchange) x Leverage x [1+ (Return on value/Velocity)] (Velocity x Time)

Wealth = ($10,000 + $2,000) x 3 x [1+ (20%/4)] Wealth = ($12,000) x 3 x [1+ (5%)]

(8)

Wealth = ($12,000) x 3 x [1+ (0.05)] Wealth = ($12,000) x 3 x [1.05)]

(4 x 2)

(8)

(8)

Wealth = ($12,000) x 3 x 1.477455443789062 Wealth = $12,000 x 4.432366331367188 Wealth = $53,188.39597640625 = $53,188.40

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As demonstrated by the three scenarios, the factors of wealth creation were progressively added to demonstrate the impact of each. In scenario 1, the key factors are only Value and Return on Value over a period (time). Over the two years, the total accumulated gains are $14,400. In scenario 2, we added a multiplying effect factor – leverage. By the introduction of leverage, the accumulated gains increased from $14,400 to $43,200. Finally, we introduced wealth velocity as another multiplying effect factor and the number of turnovers over the period (time). This new equation further increased the total accumulated gains, that is, total wealth created to $53,200.00 (figure rounded up). The more we understand these factors and use them to our advantage, the greater the wealth we can create.

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Pathways to Wealth Creation and Accumulation You can work hard and even harder, but until you decide your path and aim, you may be firing amiss. Wealth can be created in many ways. Yet, some paths are faster and others slower. As discussed already, two components on your path choice are key: § §

What is your wealth definition? What is your wealth equation?

Maybe you were born into a rich family, and your focus now is more about sustaining your family’s wealth. Even with you, the best way to protect the family wealth is by sustaining the legacies of value by ensuring continuous and improved value generation. However, if you are from a simple home, then wealth can be very hard to achieve depending on the path you choose, but wealth is still possible to anyone. There are many paths, but the key difference is the risk level and your risk appetite. You can start by focusing on what you want to become and then look at which path you need to take to your wealthy place.

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You can decide to start your own business as an Entrepreneur (CEO/Founder) or rise through the corporate ladder and become an Intrapreneur (CFO, CIO, COO, CMO, CSO, etc.). You can also choose to be a Support Team or go into sales or trade. With unique talents, you can become an athlete, artist, actor, or influencer. Yet, we know that not everyone will rise to the top of their profession or will have the risk appetite to start their own business. Some of us will remain middle-level or even low-level income-earners. Others can also become inventors, innovators, or even develop valuable and special skills that make them highly sought after. Whichever option you choose, based on your wealth definition, risk appetite, and wealth equation among other factors, the book seeks to give you a practical and progressive guide to your wealthy place. All these different paths can be categorised into four main groups for the journey to our wealthy place:

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Four Main Pathways to Wealth Creation ©

• Middle Class • Low Class

• Entrepreneur • Artist/Actor • Athlete • Influencer

SaverInvestor

Dreamers

Experts

Corporate Climbers

• Virtuoso • Connoisseur

• Intrapreneur • C-Suites • Executives

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a. Dreamers Some people have the audacity of faith to dream and follow through with their dreams. Some have talents and pursue them to become business owners, founders, actors, musicians, athletes, and influencers. This path does not follow any linear path. This pathway is most probably the most difficult among the four. It requires the pursuit of dreams, passions, and ambitions. As the most difficult among the quadrant, the successful dreamers generate equally wealth faster than the rest. Since it revolves around talents, passion, and ambitions, the dreamers get rewarded for doing what they love and it is evidenced in their bank accounts. Nonetheless, it can be very lonely and may require a lot of failures to peak or breakthrough. This path requires a lot of emotional strength and high-level commitment. The entrepreneur may have to go through many fundraising processes, pitch ideas to investors and face some rejections; the musicians may have to compose several demo songs before they finally get a hit song or the influencers may have to keep posting many contents until they get one viral content that subsequently brings traffic to their site or page.

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This path may require long hours of work, accompanied by initial financial and emotional stress. At the initial stages, it can even be very difficult for some dreamers to make ends meet but when the breakthrough happens, the rewards are often worth their while. This has the highest risk level and that is why it is the most rewarding as well. It is not meant for risk-averse persons. b. Corporate Climbers: Some people may want to continue another person’s dream or an institution’s vision. Others will want to grow and build wealth in their professional career. That is, not everyone will want to be an entrepreneur, an artist, or an athlete, some want to be salaried workers. The focus here is to build a career in corporate life. This can be very rewarding while providing a stable income and good job security. Some individuals choose to devote all of their energy and most of their time to building their professional careers. The aim is to climb the job ladder till one lands a senior executive position. This path is the most secure and safest path and one of the most difficult paths to reaching one’s wealthy place. For this pathway, one needs to develop and build strong relationship-building skills. Networking and building lasting connections with powerful people in the industry are essential. 123

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Similar to dreamers, climbers also have long work hours. However, the financial health of the company they work for and the industry they are in plays a major determining the success of a Climber. Climbers aim to become intrapreneurs (employed but in a position to take entrepreneurial activities for the company) c. Experts: Some people choose to dedicate their time and energy to become the leads in certain areas of expertise. These are the virtuosos and connoisseurs. They are the best at what they do in their profession. This is a path that requires a great deal of time, training, learning and acquiring all the needed formal education, professional qualifications, and fellowships to corroborate your expertise. This means investing huge amounts of money and time before seeing any payoff at all. Once the work begins to pay off, it is a high premium payment for the knowledge and expertise, setting the expert apart from the competition. Common examples of virtuosos are renowned lawyers, Surgeons, architects, and now some religious leaders. To be a virtuoso or connoisseur, you do not necessarily have to be born with natural intelligence. You simply have to

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be ready to spend many years continuously studying and learning. d. Saver-Investor: One may not rise very high on the corporate ladder, or leave a regular job to start one’s business or develop sought-after skills, yet can still have a pathway that leads to one’s wealthy place. This is the easiest pathway to build wealth. Nonetheless, its income is gradual and takes time. It, therefore, requires starting early and the discipline and consistency to carry on the lifestyle to guarantee to amass great wealth. It is a path of earning income, accumulating part, multiplying the saved amounts in investments, and preserving it. This path is often an easy path for the middle-class and low-class, especially the top middle-class. If you opt for this pathway, then frugality is key to your success. Spending and earning are the two main elements coupled with the discipline to commit to financial goals. This path requires living within your means by developing a low-cost style of living with a preference for savings than a lavish lifestyle. One needs to have a wealth plan that respects a certain percentage of income being saved consistently and 125

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regularly. Yet, you cannot get richer by only saving, so, you invest and invest prudently. With this pathway, you do not have to leave your day job. You can develop multiple sources of income and make saving and investing your routine. This path is intentional and requires a lot of financial discipline and long-term commitment.

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Wealth Creation Model At this point, you are building momentum on what your wealthy place should be and how you want to get there. Knowing this gives clarity and direction and avoids shooting amiss. The concept of this book is that wealth is possible for anyone. From the different pathways to our different wealthy places, each one of us can achieve our goal. Therefore, in demonstration of this concept, we would proceed with the easiest path, which is the one with the lowest-risk levels and yet slowest path. This path requires time, patience, and discipline to arrive at your wealthy place. Having designed the following practical wealth creation framework, summed up in the Heptagon Wealth Model, we propose that to create wealth: 1. Use your most valuable asset - TIME – to WORK, to create a 2. VALUE ADDED to the market (your own business or bringing value to the company you work for or to your art) and you are rewarded with:

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3. MONEY/INCOME - with the income you pay your taxes and obligations and spend less than you make, to create: 4. SURPLUS (the 4 steps above are active income), with your surplus, you fill up: 5. SAVINGS ACCOUNT (emergency fund covering at least a year of expenses) then you are ready to: 6. INVEST the rest (being able to assess business models and risk), and your investments create 7. WEALTH (money making money while you sleep concept, passive income, and portfolio income concepts) 8. Then you reinvest the surplus you create from your investments (let your money work for you).

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The Heptagon Wealth Creation Model ©

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3. Wealth Accumulation

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“You are either accumulating wealth or devouring it”

T

he gap between the rich and poor is at its highest for thirty years with the top 10% earning 9.6 times than the poorest 10% [according to OECD report in 2015 on inequality]. This is called wealth concentration. It means wealth is concentrated in fewer and fewer individuals. Though there exist many rich content and resources to help many to attain the wealth level they desire, many still are unable to reach their wealthy place. The challenge is not actually about understanding the simple principles, but rather taking effective action towards this goal. The real challenge is not only in the knowledge but translating the knowledge into meaningful actions. Wealth does not happen overnight - it is a gradual “Wealth does not and continual increase happen overnight; over time. Even for those it is a gradual and who gain it by inheritance, continual increase someone had to first over time” accumulate it for them. In such a world with a widening inequality gap between the rich and the poor, chances are that if you do not take deliberate and purposeful actions towards building your 132

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wealth, you will live from one salary to another and remain in survival mode without reaching your wealthy place. You cannot live life in a default mode, by going through the moments of life without a goal, purpose, and plan, while expecting luck to shine on you. You have to live life by design. You need to be intentional about how you build your wealth by putting the odds in your favour with your actions. This is not about a get-rich-quick scheme. They are simply scheming, often scams aimed at getting one’s hard-earned money. This book seeks to communicate wealth is built over time and is intentional. Wealth is a “This is not a choice. get-rich-quick scheme book. You may not be born rich; nor This book seeks did you grow in a rich to communicate environment; but you can wealth is built plan and take deliberate over time and it actions to actualise your is intentional” potential and realise your dreams. Truth is, even if you do not reach your ultimate goal, you would still be closer to your dream and hopefully farther from your beginning state.

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You cannot arrive at your wealthy place if you are not taking the necessary steps to get there. This means you cannot have a goal without a plan to reach it. You become like a sailboat without a rudder, you will spin in a “You may not be born circle without a definite rich; nor did you direction. grow in a rich environment; but you

The story of Grace Groner, a former deliberate actions to secretary at Abbott Labs, actualise your exposes partly the potential and realise explanation detailed in your dreams” this document on wealth accumulation. Groner in 1931 purchased 3 shares at $60 each from the stocks of the same company she was working with. That is, her initial investment for the 3 shares was $180. can plan and take

Groner patiently allowed her shares to grow and further reinvested in the dividends accumulated over time. In a space of 75 years, her original 3 shares increased to about 100,000 shares on account of dividend reinvestments, stock splits, and appreciation. Again, thanks to her disciplined approach to the investment, she turned $180 into about $70 million over the period. Even though the stock of the company split

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on several occasions, Groner never attempted selling her shares. It is reported that Grace Groner had ‘exceptional restraint’ to the money she makes. She started with what she had while reinvesting her dividends over the period till becoming a multi-millionaire. Creating wealth is not enough, growing it over a period is crucial for sustenance. Wealth accumulation addresses our individual needs, asset allocation, and the suitability of different types of investments in light of our goals and risk tolerance. Accumulation strategies ensure that our investment portfolio remains closely aligned with our overall financial goals as we continue to build our asset base. In the wealth accumulation phase, earned income is saved for both current and future needs and desires. The goal of wealth accumulation is ultimately financial security. Financial security, however, means different “The goal of things to different people. wealth accumulation is

To some, financial security is ultimately retiring early, or being financial security” location independent, or having enough money to pursue their dreams.

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To others, it is being able to leave enough money for heirs and charity or simply being able to meet basic family needs or being financially capable to take vacations and travel the world as at when they want with family and loved ones. What does it mean to you? Like we have established previously, wealth is quite personal and your journey to your wealthy place should be determined by how you define it.

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Personal Economics To further understand and determine our wealth goals with a plan, we would now discuss our wealth accumulation process in light of some key concepts in economics. Resources are scarce and limited. The study of how we direct these limited resources we have to meet our needs is basic economics. In other words, how we direct these limited resources affects how many of our needs will be met, how well, and for how long. Thus, we all run our personal economies.

“How we direct the limited resources in our lives, affects how many of our needs will be met, how well, and for how long”

While we focus on directing our resources to meet our needs, we also create economic profit by combining the inputs needed for the production of a good or service. These inputs are called the factors of productions and they are land, labour, and capital. Land as a factor of production can take various forms from commercial real estate to agricultural land, to the resources from a particular piece and natural resources such as gold, oil, and cultivation of crops by farmers for human consumption. 137

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The value of the land can appreciate or diminish based on the use. For those using it for real estate the value appreciates over time while those using for the natural resources, as the extraction continues and depletes, its value diminishes as well with time. Land creates income in all kinds of ways. You can rent it to others, sell the trees or other resources on the land, farm it, or let it appreciate in value over time. Labour refers to the effort expended by an individual to bring a product or service to the market. Thus, workers are paid for their time and effort in wages that depend on their skill and training. Capital refers to all the resources that can be used, rented, or put to work. There are three types of capital, namely: physical capital, intellectual capital, and financial capital. These three factors generate various streams of income. Some start life with no land nor capital and thus all they have is to use labour to generate income. Others are privileged to have an inheritance in lands and capital and may have to work less or may never have to labour for income.

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The objective of wealth accumulation is to increase and have sufficient land and capital to produce more income to meet our needs for as long as we want. If we are part of the group with only labour to start with, how do we then achieve this objective? The focus will now be to have a plan and develop the discipline and mechanism to direct the flow of income from our labour toward investments in land and/or capital.

“The objective of wealth accumulation is to increase and have sufficient land and capital to produce more income to meet our needs for as long as we want”

When we generate income, we direct them to meet our needs. As there is the concept of need, which is something necessary for survival, there is want, which refers to something desired. Our needs are essential and our wants are optional. Our needs can be classified into past, present, and future. Income generated can be divided into payments toward money borrowed in the past, meeting the needs and wants of the present, and investing part of the income for the future. When we direct our future funds into land or capital, we gradually build up income sources over time, to eventually replace our income from labour. 139

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For this reason, we suggest the following model for personal economics. When we understand this model and how the various factors interact to achieve our ultimate goal of financial security, we do not see financial planning and wealth plan as a pain in the neck but as a critical component of our journey to our wealthy place. Therefore, we accumulate wealth by generating wealth from labour, spending on our past and present expenses, and directing some portion of income toward land and/or capital as our future needs. Once we cannot find ways of investing in the future, then we are stuck with labour as our only source of income. We now truly understand the import of investment which is to store up land and capital that will provide you with a sustainable income. Personal Economy

INVESTMENT S

EXPENSES

INCOME

PAST Earnings from LABOUR

Spending one’s Earnings

PRESENT FUTURE

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Investing as a future expense

LAND

CAPITAL

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To put this in perspective, let us discuss an example of Bryan, who recently retired five years earlier than the mandated retirement age in his country. He kept paying all debts such as school loans [belonging to his past expenses] without defaulting with income from his labour. He then borrowed to buy a commercial property [an investment into the future, capital] which he made a partial contribution. He did a top-up course - a Master's and a Professional programme - using the employer's tuition scheme to avoid further debt. Additional qualifications meant an increase in value and ultimately a salary increase. He lived a moderate life spending within half his salary and directing the rest into savings accounts, buying bonds and shares. His commercial property appreciated in value and rent was increasing due to demand. He did not retire with a net worth of a billionaire, but he retired achieving his goal of retiring early and having enough to cover needs and accumulate for transfer of wealth to his children.

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Wealth Planning This is the building of a solid, diversified financial foundation from which to expand over time. During this phase, the allocation of money for a home, investments, insurance, and educational expenses is coordinated with tax planning strategies to ensure that current and future income is utilised effectively.

“Wealth planning is where we embrace the daily grind and put in all the work. The objective is to construct a solid, financial base sufficient to pursue your financial objectives.”

If this stage were a sport, then this would the athletic prime. This is where we embrace the daily grind and put in all the work. The objective is to construct a solid, financial base sufficient to pursue your financial objectives.

Though many desire to achieve financial security, the first mistake is that most people lack a clear plan to build it. If we are going to reach our wealthy place of financial security then, we need a plan to accomplish that.

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Though the process may seem simple, it does not happen randomly. It only happens when we take action. It is a choice and results from the many small decisions we make every day. Therefore, to build a plan for our wealth accumulation, we need to:

“Though many desire to achieve financial security, the first mistake is that most people lack a clear plan to build it”

§

examine our current circumstances

§

identify our goals and objectives

§

develop a plan to achieve those goals and objectives

§

take action to implement

§

review periodically

One of the most important ingredients for accumulating wealth is planning. Planning to accumulate wealth enables one to work effectively toward one’s goals. Without planning one risks investing considerable time, effort, and resources with sub-optimal results.

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In order to plan, it is important to know which pathway to wealth creation and accumulation we are adopting. We discussed earlier the four pathways namely: Dreamers, Corporate Climbers, Experts, and Saver-Investor. It was identified that the former was the most difficult and the latter the easiest pathway. The dreamer can accumulate wealth and accelerate it faster when their breakthrough happens. Corporate climbers' and experts’ pathways are time-consuming requiring building over time with work and energy. For the saver-investor, it requires starting early and the discipline and consistency to carry on the lifestyle to guarantee to amass great wealth. Since our focus in this book is wealth is possible for anyone, we propose a wealth planning model that can be used by anyone. However, depending on your acceleration level you can accumulate more/less and faster/slower than others but eventually, we will all get to our wealthy place. To comprehend this wealth planning model, we need to understand the following key concepts in the model: Income, expenses, savings, surplus, investment, wealth accumulation, wealth protection, and MIPPS.

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Income Income is often misrepresented and misconstrued. To some people, income is basically what hits their account for work done or the final and remaining funds left in the account after trading. Others also think of their before-tax salary as their income, even though it is rarely the same as what they receive into their hands each month.

“It is useful to define income in terms of disposable income (or income after taxes and transfers). This

gives a much clearer So, for a better sense of how much understanding of our money we actually wealth journey, it is have available to us useful to define it in to spend or save or terms of disposable invest” income (or income after taxes and transfers). This gives a much clearer sense of how much money we have available to us to spend or save or invest. In basic terms, disposable income is the net total of the flow of payments received in a given period. Think of it as receipts (incomings) and expenditures (outgoings). The incomings can include salaries or wages, earnings from investments and rents on properties, and dividends

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from shares. It also includes direct benefits or transfers received from the state such as child benefits and gifts from family and friends. Disposable income can also include non-cash benefits such as education or healthcare by an individual’s employer or the state - an important benefit for many families. The outgoings include taxes and other charges, such as social security for individuals and direct and indirect costs for businesses. As demonstrated with the personal economy, income is the net flow of money or gains going to factors of production (land, labour, and capital). Some examples of income are: §

Wages and salaries paid to people from their jobs

§

Money paid to people receiving welfare benefits such as the state pension and tax credits

§

Profits flowing to businesses and dividends distributed to shareholders

§

Rental income flowing to people who own and lease out a property

§

Interest paid to those who hold money in deposit accounts or who own bonds etc.

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§

Royalty paid to artists, inventors, actors, and musicians for designing, building, or making something unique by people and businesses who use it.

§

Dividends paid to owners of shares in a company

Income is thus the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. We can classify the various types of income streams into three: Three Main Streams of Income Active Income

Income Passive Income

Portfolio Income

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Active or Earned income: It is income received in exchange for doing work for someone else. That is, if you have a job and receive a salary, you make your money through active, also called earned, income. Here you are exchanging time and energy or material participation for money. Active income includes payment in the form of “With active or wages, salaries, tips, earned income, and commissions. In you are the four pathways to exchanging time wealth, we assume for and energy or the saver-investor, material corporate climber, and participation for even the experts money” sometimes, this is the main and first type of income that you earn in our wealth planning model.

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Passive Income: You can earn passive income by acquiring assets that provide consistent cash flow without you being actively involved. In other words, it is income gained from owning assets that require little or no work on your part. That is, passive income allows you to make money without having to be there (save you time and energy). We can earn passive income by receiving “Passive income loyalties from online allows you to book sales; renting or make money leasing equipment; without having to renting properties; be there (save you participating in time and affiliate marketing; energy).” selling independent merchandise from a blog or website; becoming part-owner of a business, and buying a blog or website among others.

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Portfolio Income: Income from investments such as dividends, interest, royalties, and capital gains. To earn portfolio income, you can invest in book or music royalties; you can buy shares; you can open a savings account, buy bills or bonds; you can invest in peer-to-peer loans (P2P) or books; you can do house flipping (buy a run-down home in a nice neighbourhood, renovate and resell for a higher value).

We would like to conclude that portfolio income is a subset of passive income. Therefore, our wealth planning model includes active income and passive income (with portfolio income included).

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Expense An expense is a type of expenditure that flows like income but in different directions. It is deducted from income to arrive at net income. Due to the accrual principle, expenses are recognised when they are incurred, not necessarily when they are paid for. This is what was demonstrated in the personal economy, we spend our income on past, present, and future expenses. Expenses are generally classified into three: fixed, variable, and periodic expenses. We include a fourth group, called whammy expenses. Four Main Categories of Expenses © Fixed Expenses

Whammy Expenses

Periodic Expenses

Variable Expenses

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Fixed Expenses: Any expense that does not change from period to period and we have very little control over as it represents a legal obligation to pay, such as rent, and loan instalments. They occur at predictable intervals [weekly, monthly]. The amounts may vary slightly, which may be the case with utilities, but we know they are due regularly. There is no surprise element as they are predetermined and can easily be budgeted for.

§

Periodic Expenses: Similar to fixed expenses, we have little control over periodic expenses but where fixed expenses typically recur on the same date every month, they do not. In other words, they are not as predictable as fixed expenses in terms of their dates or amounts, but they reliably happen. Periodic expenses are also known as recurring expenses. Some recurring expenses are groceries, car fuel, and eating out. The best way is to ensure there is money in our bank accounts allocated for these types of expenses in our budget.

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Variable Expenses: These are also known as discretionary expenses because we have control over them. These are the expenses that we can influence with our behaviours. Examples are food and clothing we buy and entertainment we pay for. The best way with variable expenses requires gaining a good understanding of where our money goes after we have paid our fixed and periodic expenses. We can achieve this by tracking our expenses for a few months.

§

Whammy Expenses: These are for the most part unpredictable and we have less or no control “Whammy over them. We are expenses are for unable to know when they hit or what they will cost, but its impact is immediately known when they do.

the most part unpredictable and we have less or no control over”

This can be worst-case scenarios such as a car mangled by a tree; roof starts leaking; unpredictable costs for sudden illness and accidents. Whammy expenses are emergencytype expenses. Murphy’s law posits “If anything

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can go wrong, it will”. This means these emergency types of expenses, it is not a matter of if, but when. The whammies can get you at some point. The best ways for such expenses are insurance, contingency fund, emergency fund, or buffer fund.

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Savings Fund When we generate income, we can spend all or part. The concept “living within your means” admonishes that all our expenses should be supported mostly by our income.

“The concept “living within your means” admonishes that all our expenses should be supported mostly by our own

income.” To accumulate wealth, we cannot spend all our disposable income. Learning to spend less than we earn, will create a surplus of income over expenses. The surplus can be put to various use, such as wealth protection, wealth accumulation, and wealth acceleration. While income is a flow concept, wealth accumulation is a stock concept. Wealth accumulation is ultimately aimed at financial security. Thus, there should be a plan to put a mechanism in place where if our active income even ceases, our needs can still be covered and better even our wants covered. This is the goal of not working for money but making money work for us ultimately.

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Therefore, to begin this journey with only labour as our main factor of production without land and capital, we would have to save the surplus towards channelling them in acquiring capital and land which will eventually accelerate our wealth. The savings fund can take many forms but the following are the most important: Three Main Forms of Savings Funds ©

Emergency Fund

Contingency Fund

Buffer Fund

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Emergency Fund: An emergency fund is basically, a financial safety net that protects one from life’s unexpected events. That is, it creates a safety net that can be used to meet unanticipated expenses. Instead of having to rely on a bank account’s overdraft, or having to borrow money from others to help out in a crisis, this crisis fund put aside for such a purpose can be used with no effect on the rest of one’s finances. It is money stashed away for future use, in times of financial distress.

§

Contingency Fund: It is created to meet some urgent and/or unforeseen expenses. Contingency funds emanate from contingency plans by governments, corporations, investors, and central banks. Although contingencies can be prepared for, the nature and scope of such negative events are typically unknowable in advance. Unlike emergency funds, the amount to be reserved and/or contributed to is determined through contingency analysis such as scenario planning.

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§

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Buffer Fund: Unlike the first two, which focus on being safety nets, buffer fund aims to help alleviate the adverse short-term effects of unexpected events. It is like a wall you build between yourself and economic insecurity. It is often not invested in cash, instead, it is invested in safe investment securities such as bonds and bills or other assets that provide a decent return over time. With time, the buffer fund can take on a life of its own. The assets grow to a point where they throw off enough income and capital gains like you have another job except this is happening automatically.

An emergency fund is structuring our lives in a way, that we save the surplus from our income after expenses, so we do not live a whisker away from disaster. A contingency fund is a step further, which is a thoroughly planned action taken to ensure we are financially secured and ensure at least that all our needs can be well covered. Contingency takes into consideration insurances. Buffer funds are not only a safety net but a cushion with a bounce-back effect, that seeks to ensure financial security and financial growth. 158

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In summary, an emergency fund seeks to cover the basic needs; a contingency fund seeks to cover all our needs, and a buffer fund seeks to cover all our needs and cover some wants. The following examples are for practical understanding. A business owner invested his buffer funds in some stocks and lands which are in high demand and can easily be liquidated, when need be, to revamp his business when he has to.

“Emergency fund seeks to cover the basic needs; Contingency fund seeks to cover all our needs; and Buffer

fund seeks to cover An investment banker all our needs and used her contingency fund cover some wants” to buy bonds and bills for the event where her son gets admission to an Ivy league with no scholarship, she would be able to discount them for fees payment. A receptionist keeps his emergency fund of $1,000 in his current account and uses it for payment of short-term unforeseen expenses such as parking tickets, replacing a torn shirt, and buying replacing a screen protector.

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Wealth Acceleration “Making money can be easy, spending it even easier. It is what you do with your money while you have control of

Making money can be easy, spending it even easier. It is what you do with your money while you have control of it that determines how closer you get to your wealthy place.

it determines how

The aim of wealth accumulation is financial your wealthy place.” security whereas wealth acceleration aims to increase the rate of growth of your wealth. closer you get to

Wealth Protection As wealth can be built, accumulated, and accelerated, so can wealth devalue, be lost, and even be destroyed. In our understanding of intentional actions towards wealth, safeguarding our hard-earned wealth is not optional. It is a priority, given how unpredictable life can be sometimes. Wealth protection, therefore, is the adoption of strategies to guard one's wealth.

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The strategies adopted are aimed at prevention of losses, safeguarding assets, providing a buffer for a revamp, insuring lives and assets, and hedging against predatory persons or entities seeking to capitalise negatively on our hard-earned wealth.

“In our understanding of intentional wealth actions, safeguarding our hard-earned wealth is not optional. It is a priority, given how unpredictable life can be sometimes”

MIPPS Every aim has a destination and every goal is a target. Our MIPPS

(Materialistic,

Independence, Physical &

Psychological, and Social) Definition Model is our scope of wealth. It defines our viewpoint of wealth, determines our actions, and ultimately our wealthy place. It initiates our wealth journey and it prescribes the finality of our dreams.

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Wealth Planning Model This book is a practical exposé on how wealth is possible for anyone. That is, whether the reader is a dreamer, expert, corporate climber, middle class, or investorsaver, the proposed wealth planning model can be used as a fundamental intentional wealth strategy to arrive at one’s wealthy place. This means, we assume even in the worst-case scenario with a risk-averse person, wealth can still be built, accumulated, and accelerated. We assume, there is no capital and land but only labour. The intention with this assumption is that, if wealth can be possible for such a person, whose path is that of the investor-saver, then those with more favourable conditions and ready to take other more rewarding paths to wealth such as the dreamers, experts, and corporate climbers can even do better. They can do better in terms of understanding and application of these developed and researched wealth principles. With this, wealth is possible for anyone. In the worst-case scenario, we begin by first working for money and ultimately making money work for us.

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Accumulation Education Real Estate

Acceleration Bonds/Shares Business

Dependents (5%) Diseases (3%)

Damages (2%)

WEALTH PROTECTION (10%)

Security Buffer Emergency Fund

WEALTH ACCUMULATION (20-30%)

M.I.P.P.S

INCOME

PASSIVE

WITH

EXPENSES (40-60%)

ACTIVE INCOME

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The preceding Wealth Planning Model begins with you earning an income. We need money to make more money. To start this journey, you need to earn a regular income, referred to as an active income. This can be a daily or weekly wage or a monthly salary or a regular. The regularity and surety of this income give planning stability beyond the short-term to medium-term. Money earned is eventually spent, saved and/or invested. But how we redirect these cash inflows will determine our level of accumulation and eventually acceleration towards our wealthy place. Therefore, with the same principle of “living within your means”, we will begin by ensuring that all our expenses for our needs and wants are supported by our active income. Then, we will learn to spend less than we earn to save some for future use such as the acquisition of capital and land [as discussed in the personal economy]. Our proposed wealth planning model, therefore, suggests that we spend no more than 60% of our active income. Now, with the next 40% of our income, we suggest we use 10% for wealth protection and 30% for wealth accumulation.

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In this patient way of building wealth, we will move to the next phase of wealth acceleration, by making our accumulated wealth work for itself by acquiring more wealth-creating assets such as real estate, bonds, stocks among others. This will create two streams of income, that is, portfolio income and passive income. Once we reach a regular portfolio and passive income inflow, we can now direct them to achieve our MIPPS wealth destination [or arrive at our wealthy place].

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The Wealth Planning Model in Perspective To put the wealth plan model into perspective, we assume an example with George Albert, who is a civil servant, working for a government agency as an administrator. His net take-home salary [also referred to as disposable income] is $1,000.00 monthly. For the application, we do the illustration below:

Active Income (A.I.) = 100% = $1,000.00 Proposed capped expenses = 60% of A.I. = $1,000.00 * 60% = $600.00

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Wealth Protection = 10% of A.I. = $1,000.00 * 10% = $100.00 § Dependents = 5% of A.I. = $1,000.00 * 5% = $50.00 (Life and Education Insurance Policies) § Diseases = 3% of A.I. = $1,000.00 * 3% = $30.00 (Health Insurance Policy) §

Damages = 2% of A.I. = $1,000.00 * 2% = $20.00 (Home-owner or Rent and Car or Asset Insurance Policies)

Wealth Accumulation = 30% of A.I. = $1,000.00 * 30% = $300.00 Before savings to build capital, we will begin by saving for 6 months to build an emergency fund; then 24months to build our contingency funds, and 30 months to build our buffer funds. This is a 60-month [or 5-year] plan.

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§

DR. EVANS DUAH

First Savings funds

Emergency Funds = (30% of A.I.) * 6 months = ($1,000.00 * 30%) * 6months = $300.00 * 6 = $1,800.00

This is the first and immediately available funds to help out in case of unplanned and unpredictable expenses, instead of having to rely on a bank account’s overdraft or having to borrow money from others. Since it is funds set aside, it can be used with no effect on the rest of one’s finances. §

Second Savings funds

Contingency Funds = (30% of A.I.) * 24 months = ($1,000.00 * 30%) * 24months = $300.00 * 24 = $7,200.00

This is the second-level savings funds available to meet some urgent and/or unforeseen expenses. Unlike the first-level savings funds - emergency funds - this amount reserved is quite significant

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and meant as a second-layer safety net to ensure our financial security is not affected negatively. Since proposed capped expenses = 60% of A.I. = $1,000.00 * 60% = $600.00 Therefore, Annual Proposed capped expenses = $600.00 * 12 = $ 7,200

This implies Annual Proposed capped expenses =$ 7,200 Contingency Funds = (30% of A.I.) * 24 months = $7,200.00

The Duah Wealth Planning Model thus proposes a contingency fund that can cover a whole year of living expenses when the worst happens and there is no more active income. At this point, we have a full-year financial safety net no matter what happens.

§

Third Savings funds 169

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Buffer Funds = (30% of A.I.) * 30 months = ($1,000.00 * 30%) * 30months = $300.00 * 30 = $9,000.00

This third-level savings fund aims to help alleviate the adverse short-term effects of unexpected events. It is like a wall you build between yourself and economic insecurity.

Wealth Acceleration With the proposed wealth plan, all our expenses are covered for a year in addition to other wealth protection strategies such as insurance in place. Our wealth acceleration journey, therefore, begins with our buffer funds. Buffer Funds = Initial Capital Accumulated = $9,000.00 Having discussed interest rate, return on investment, wealth velocity in this book so far, now let us introduce the Law of 72 for easy computation subsequently.

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Law of 72 It is a shortcut or rule of thumb used to estimate the number of years required to double at a given annual rate or vice versa, that is, used to estimate the interest rate needed to double your money over a period. The Formula for the Rule of 72

t = 72 r t = number of periods required to double an investment's value r = interest rate per period, as a percentage Let us calculate with the formula above, at what rate can we double our buffer funds of $9,000.00 in five years t=

72 r

r=

72 t 72 5

r=

r = 14.4% Thus, if we put our buffer funds of $9,000.00 in an investment of 14.4%, we would double it to $18,000.00 in five years.

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Let us calculate the number of years we can double our initial capital, with an investment that promises 24% annual interest. t = 72 r t=

72 24

t = 3 years

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Investment Now that we have capped our expenses at 60%, used a 5year plan to build a strong financial safety net comprising emergency funds, contingency funds, and insurances, we can proceed to accelerate wealth with an investment with our buffer funds. However, it is worth noting that, the investment outcomes will be based on the investment choices made, which are premised on the risk appetite. One may start with a slow-lane path like investor-saver and change gears to a dreamer to be an entrepreneur or focus on becoming a virtuoso or connoisseur. The rate of acceleration will depend on which path one takes as a person and the level of the risk appetite. When the risks are high, the returns are higher and likewise, when the risks are low the returns are lower. This is termed the risk-reward concept. The more conservative we are, the more we tend to look at low-risk investments; and the more aggressive we are in our pursuit, the more we tend to aim for high-risk investments. This is displayed below:

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Thus, we have to first determine our risk preference. We are all different, with different MIPPS wealth definitions, different ambitions, and preferences. Therefore, it is ideal for us to first determine our risk preference considering the many types of investments to choose from. There are two main ways to determine our risk preference: §

Time Horizon: With the time frame, we have to first, determine the total period our money has to be kept invested. Do we want to invest for a short period accumulation to re-invest in a more rewarding investment or do we want to invest for a long period? The riskier an investment is, the greater its volatility or price fluctuations. Therefore, if we 174

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need the funds for urgent use, then we may have to invest in short-term investments such as 91days treasury bills or a 1-year note. §

Bankroll: Each investment should have an amount you start with. This investment fund is about determining the amount of money that one can stand to lose. It is a realistic approach by simply investing only money that one can afford to lose or afford to have tied up for some period of time without any pressure to sell off any investments because of panic or liquidity issues. The more money one has, the more risk one can take. For instance, a person who has a net worth of $40,000 and another person who has a net worth of $40 million. If both invest $30,000 of their net worth into securities, the person with the lower net worth will be more affected by a decline than the person with the higher net worth.

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Investment examples Now we understand the basic rules of investment, by determining our risk appetite, time horizon, and bankroll. At this point, we will discuss and classify some examples of investments that can be considered with their features and corresponding risks and returns for consideration. The subsequent table is a recapitulative table that demonstrates the characteristics of an investment, the risk, and the return. With such an understanding, one can evaluate each investment with these examples: Asset/ Investment

Characteristics

Risk

Return

Cash

The lowest level of risk and return of all the asset classes. Suitable for investors who have a short-term investment outlook or low tolerance for risk.

Low

Low

Includes bank deposits, cheque accounts, and cash management Trusts.

As the investment provides interest only, the investment value may not keep up with inflation.

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Fixed interest Generally, includes incomeproducing assets (Government bonds, treasury bills, notes, fixed-term deposits, mortgage Trusts) although the capital value can rise or fall in certain circumstances.

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Fixed interest is more volatile than cash but still a relatively stable asset class. You receive your initial investment amount back at the end of the set term.

Low/ moderate

Moderate

Investments often do not keep pace with inflation as only a predetermined. A fixed amount of interest is paid on the initial investment. There is an option to roll-over, principal plus interest when the investment matures

Property Includes residential, industrial, and commercial property.

Property investments have a higher risk than fixed interest but less than shares. Can provide taxadvantaged income from rent received and

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can include capital growth.

Shares Involves the purchase of a stake or financial interest in a company, enabling you to share in the profits and future growth of that company.

Shares are the most volatile asset class, but historically over long periods have achieved on average the highest returns.

High

High

Investment sectors include local shares and international shares

Investment Diversification Now based on the risk profile of each security or investment, we can allocate our assets to diversify our investments portfolio. We can classify our portfolio into three distinct tiers as depicted by the following pyramid: §

Base: It is the foundation. It represents the strongest portion of the investment portfolio supporting

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everything above it. This area often consists of investments that are low in risk and have foreseeable returns. It is the largest area and comprises the bulk of your assets. This can consist of bank deposits, cheque accounts, cash management Trusts, bonds, treasury bills, notes, fixed-term deposits, and mortgage Trusts §

Middle: This area is made up of medium-risk investments that offer a stable return while still allowing for capital appreciation. Although riskier than the assets creating the base, these investments should still be relatively safe. Examples are real estate and mutual funds.

§

Summit: It is reserved specifically for high-risk investments. It is the smallest portion of the portfolio and consists of money, one can lose without any serious repercussions. This implies that money at the summit should be fairly disposable so one would not have to sell prematurely due to panic or capital losses. This may consist of shares, options, collectibles, and equity stakes.

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The Millionaire Build-up [Investor-Saver Path] © This is a book that aims at educating, equipping, and setting the tone to make wealth a possibility for anyone ready to be intentional towards their wealthy place. The millionaire build-up is a financial status possibility that seeks to mathematically demonstrate that wealth is indeed possible for anyone. To demonstrate, we would pick up the earlier examples used above for the Law of 72. The examples depicted that at 14.4% per annum, we can double our buffer funds in five (5) years and at 24% per annum, we can double our buffer funds in 3 years. We will, therefore, proceed to our millionaire build-up from these two assumptions. Hence, we assume we want to simply be a millionaire and we would calculate it as follows. The following table calculates how long it will take for us to reach at least $1,000,000.00. Each period of 5years starts from the beginning of that year to the end of the period. Example: January Year 1 to December Year 5

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At 14%, Doubles each

At 24%, Doubles each

5years

3years

Year

Amount

Year

Amount

Year 1

9,000.00

Year 1

9,000.00

Year 5

18,000.00

Year 3

18,000.00

Year 10

36,000.00

Year 6

36,000.00

Year 15

72,000.00

Year 9

72,000.00

Year 20

144,000.00

Year 12

144,000.00

Year 25

288,000.00

Year 15

288,000.00

Year 30

576,000.00

Year 18

576,000.00

Year 35

1,152,000.00

Year 21

1,152,000.00

Year 40

2,304,000.00

Year 24

2,304,000.00

Year 45

4,608,000.00

Year 27

4,608,000.00

Year 50

9,216,000.00

Year 30

9,216,000.00

Year 55

18,432,000.00

Year 33 18,432,000.00

Year 60

36,864,000.00

Year 36 36,864,000.00

The table above is in the event of no further savings or additions but consistently.

simply

investing

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At 14%, one can become a millionaire with the assumed initial capital of $9,000.00 in 35 years. Considering it took us a five-year plan [6month emergency fund, 24month contingency fund, 30month buffer fund], then it means, anyone with a similar savings and returns option can become a millionaire in 40 years. Likewise, the investment at 24%, doubling itself each 3years, will take a total of 26years, that is, 21years [in addition to the first preparatory 5years] to become a millionaire. And when the monthly savings of 30% of the active income, that is, $300.00 is consistently saved and added on at each doubling year of the principal, we reduce the years required to reach $1million. Kindly note that if the savings are added to the principal each year at similar rates, then it will further reduce the waiting period to reach a million.

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At 14%, Doubles each 5years and topping-up with the monthly savings every 5years

At 24%, Doubles every 3 years and topping-up with the monthly savings every 3years

Year

Amount

Year

Amount

Year 1

9,000.00

Year 1

9,000.00

Year 5

36,000.00

Year 3

28,800.00

Year 10

90,000.00

Year 6

68,400.00

Year 15

198,000.00

Year 9

147,600.00

Year 20

414,000.00

Year 12

306,000.00

Year 25

846,000.00

Year 15

622,800.00

Year 30

1,710,000.00

Year 18

1,256,400.00

Year 35

3,438,000.00

Year 21

2,523,600.00

Year 40

6,894,000.00

Year 24

5,058,000.00

Year 45

13,806,000.00

Year 27 10,126,800.00

Year 50

27,630,000.00

Year 30 20,264,400.00

Year 55

55,278,000.00

Year 33 40,539,600.00

Year 60

110,574,000.00

Year 36 81,090,000.00

From the second table, the worst-case scenario is 35years [30 years plus the initial 5 years of savings funds] for George Albert to become a millionaire. This means wealth is possible even for those who play it very safely.

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As it is, the objective of this book is to equip you, the reader, with a broader understanding and tools of how wealth is possible. Those who can and are willing to choose to pursue other faster-lane approaches either than the investor-saver, such as the dreamer approach [by becoming an entrepreneur, artist, actor, or influencer], can become millionaires quite faster using the same approach. The variables here will be the increase in the cash inflow based on the increase in value creation with stronger good leverage and high wealth velocity. Now we know that wealth creation, accumulation, and acceleration are possible for all. Is there a magic trick to these? No! There is absolutely no secret ingredient. However, what we know now is that there are simply, principles and applications of these principles in our journey to our wealthy place. In a nutshell, put in measures to earn more while you spend less, and understand the value of what you acquire and why you own them. You will need to ensure your money is always making money, as money not invested devalues over time. Maybe you are rolling your eyes and thinking but it is still not easy and others may have different advantages than

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you have. That is a fact. It will not be easy and others may be better positioned than you. But that is part of life. The good news is that, theoretically, practically, and mathematically, you now know wealth is possible for you, irrespective of where you are coming from. Wealth is built continuously and gradually over time. The earlier you start the better. Creating multiple streams of income to remove the reliance on any single stream will accelerate your wealth. Yet, there could be many wealth-eroding factors capable of interfering and preventing you from trying to build the maximum wealth possible. Among these factors are cashflow shortage, debt, increasing taxes, inflation, lawsuits, lost opportunity costs, and more. Some of these challenges can be accentuated by utilising certain solutions already mentioned in the first two chapters and the rest in the ensuing chapters.

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4. Wealth Management

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“Anybody can wish for riches, and most people do, but only a few know that a definite plan, plus a burning desire for wealth, are the only dependable means of accumulating wealth”

I

ntentional wealth is about focused actions towards well-defined goals for wealth. The first goal is to create wealth, then amass it, and finally grow more of it. But what then is the essence of gained wealth, if it cannot be consolidated and sustained?

“Intentional wealth is about focused actions towards welldefined goals for

Have we not seen many well-todo people become poor over time and even many rich kids unable to manage their inherited wealth ends up being poor as well?

wealth.”

It is very common especially among celebrities who out of lack of proper management of their careers fall from grace to grass. Some have accumulated for themselves enormous wealth; however, a lack of management saw everything drain to zero. One promising young footballer started life on a very good note. His weekly salary is $28,000.00, save for 188

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bonuses and other income sources. He was in his late 20s and life looked very promising for him. He had a running contract with his team for five good years, which was subject to renewal. Most celebrities are known for hiring financial advisors or managers to oversee their finances so they can focus on building their careers. Good for this young man, he had a financial advisor – however, he was bent on extravagant lifestyle and turned deaf ears to advice. He kept changing from one luxurious car to another, living in plush hotels and lavishly partying week in week out without signing on to any proper wealth plan proposed by his advisor. With such income streams, he still overspent and used his cash flow to incur more debt to meet his ostentatious lifestyle while still flouting all advisory rules from his manager. Sadly, the unexpected happened, he was involved in a motor accident. He had no great coverage for his current lifestyle. This was worsened with losing his contracts and then his debts began piling up as repayments were no more on course. His finances were tumbling and with no financial plan and discipline, the promising life of this young man turned upside down.

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“Wealth management is essentially the practice of chalking out an individuals’ or organisations’ financial standing and goals and the

DR. EVANS DUAH

While our focus is on growing our wealth, the challenges associated with wealth become increasingly complex. This is because we live in a dynamic and fast-paced world, which is changing at a rapid speed in terms of technological advancement,

action-plans to achieve them”

intellectual

awareness, global weather,

financial evolution in many other areas of life.

Our world, with its business environment specifically, is becoming increasingly volatile, uncertain, complex, and ambiguous. Such unpredictability, which can have both a sudden and damaging impact on our investment portfolio, makes wealth management ever more pertinent. Wealth management could simply mean having a longterm strategy in place to grow one’s assets and manage risk within their portfolios. While to another, it may mean to have strategies for dealing with the tax implications that result from the distribution and transfer of the assets they have worked so hard to accumulate.

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Regardless of one’s level of wealth, capitalising on opportunities to preserve, grow, and transfer wealth requires a certain level of awareness, planning, and discipline to help achieve and sustain wealth goals. Wealth management is essentially the practice of chalking out an individuals’ or organisations’ financial standing and goals and the action plan to achieve them. It is a detailed study and understanding of financial strengths and weaknesses, to segregate the finances and gain maximum financial security or benefits. The focus of wealth management, therefore, is first to provide financial stability and security while acting as the portfolio adjusting tool by ensuring steady and reliable income stream(s). The second goal is to develop and build long-term capital growth while building one’s own legacy assets, which hold personal significance in the wealth map.

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Lastly, is to acquire assets for personal use and enjoyment, which are well structured, protected, and funded. In summary, the main purpose of wealth management is to §

Protect wealth (stay rich)

§

Enhance wealth (get richer)

§

Enjoy wealth (enjoy capital)

Wealth management, therefore, is a comprehensive approach of putting the odds in one’s favour by bringing one’s entire wealth into focus and taking control of the future through present planned actions. To achieve this, we need to understand the financial language, know the key wealth management tools, apply these principles and commit unwaveringly to this cause. In a nutshell, this section on wealth management will cover these three cardinal areas:

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Three Areas of Wealth Management ©

Financial Literacy

Foundation Financial Planning

Action Plans Financial Discipline Commitment

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Financial Literacy ©

Financial Literacy Foundation

How can we manage wealth, if we do not understand how money works and how money can work for us: how one can make more money and multiply one’s wealth; and how can one expend judiciously and sustain the legacies of value created? Financial literacy is, therefore, the ability to know the need to make responsible financial decisions and the ability to put that knowledge to good use. It is not simply the knowledge but also the right application of the acquired knowledge.

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Thus, financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources.

“Financial literacy is the possession of the set of skills and knowledge that allows an individual to make informed

and effective As depicted by the three decisions with all of cardinal areas of Wealth their financial Management, financial resources” literacy is the foundation of our relationship with money. It is a lifelong journey of learning and the earlier one starts, the better one knows and can put the knowledge to good use. The reason why building your financial foundation is important is that each day, we are confronted with bills, expenses, need for more income or funds, we are constantly deciding where to open and keep a bank account, which mortgage to choose, where to invest our money and how to plan for retirement among others. Financial literacy is not an option but a game-changer. The more we know, the better we apply to make informed decisions and the fewer errors we make.

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Also, in recent times, financial products and services have become increasingly widespread throughout society. Today, we are exposed to a variety of products and services such as credit and debit cards, electronic transfers, crowdfunding, peer-to-peer, cryptocurrency among others as opposed to the earlier generations who may have purchased goods primarily in cash. To be financially literate is knowing how to manage your money. Money comes into our pockets and money leaves our wallets; bills and financial obligations get due; we need to constantly make the right decisions about major purchases and investments. This is daunting and persistently imperative. Considering that the stakes are so high, one may expect that this would be a skill that gets taught as a core subject in schools. But that is not the case. This implies we need to learn to manage our own money by embracing this responsibility personally. If you remember our discussion on the personal economy from the previous chapters, you would realise that our focus is not only on how to allocate income to ongoing expenses but rather on various goals simultaneously such as savings to accumulate wealth; debt repayment to reduce our financial obligations; emergency fund set-up to cater for unplanned expenses; investing to accelerate wealth; usage of other financial products and tools to 196

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conserve and preserve wealth, and planning for wealth transfer. Our goal is, therefore, to develop a life-long learning journey to continuously improve our financial knowledge, enhance our ability to use the knowledge, and boost our confidence towards financial decisions and actions. To facilitate the understanding, we would propose the following five key dimensions of financial literacy:

Five Key Financial Literacy Dimensions Financial Knowledge

Financial [Decision-making] Confidence

Financial Communication Aptitude

Ability to use financial instruments/tools

Financial [Knowledge Application] Ability

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§

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Financial Knowledge: In financial literacy, financial knowledge is the most obvious, and most common dimension. Thus, to effectively manage money, one must first know at least something about money. Financial knowledge, therefore, is the knowledge acquired about financial concepts and products.

§

Financial Communication Aptitude: It is about the ability to communicate various financial concepts. Rather than focusing solely on how much information an individual has. This presents financial literacy as an understanding of the knowledge acquired and how well one is capable of communicating these concepts.

§

Financial [Knowledge Application] Ability: One has acquired the knowledge, gained the understanding of the knowledge, and can communicate it accordingly. The next most important step is the ability to use different financial concepts and the ability to make good financial decisions. It is gaining the aptitude to manage in an optimised manner our [personal] finances.

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§

Ability to use financial instruments/tools: It is the real use of different financial instruments. Financial literacy cannot be assessed unless it is tested and one’s ability to make decisions using the right financial tools is at the very heart of it.

§

Financial [Decision-making] Confidence: It is the confidence in both previous and current financial decisions and actions. It is also the confidence to plan effectively for future financial needs.

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Five Core Concepts of Financial Literacy As we discuss this foundational stage of wealth management, it is imperative to explain the fundamental concepts. There are many key concepts in financial literacy, but they can all be classified into these five core concepts. Five Core Concepts of Financial Literacy ©

Earning

Protecting

Saving & Investing

Borrowing

Spending

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1. Earning: The first component is to understand your income or revenue streams. This is about the cash inflows from a job, self-employment, or return on various investments. The majority of income earners, earn money via employment in the form of a salary, wage, or commission. Before one can start to spend, save, and invest, it is a must to know how much money one makes. We achieve this by calculating the net monthly income, which is how much money one takes home after taxes. This may include salary or wages, funds from a side hustle, tips, bonuses, and any passive income such as rent payments. 2. Saving and Investing: Like we demonstrated with The Heptagon Wealth Model, once you can determine your net disposable income, the next step is to save the surplus. The surplus saved and accumulated over a period can now be invested into incomegenerating assets such as stocks, bonds, real estate among others.

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The savings should be automated with a savings account with possible either a standing order or threshold sweep into the account. This is the principle of “Saving Early and Paying Yourself First”. As proposed, our first savings will be kept for emergency funds, followed by contingency funds and then buffer funds and then proceed to use the buffer funds for our investment options to accelerate our wealth. 3. Spending: As money comes in as income, money goes out to meet our needs and wants as expenses. Earlier, we discussed the different types of expenses (fixed, periodic, variable, and whammy expenses). At this point, our focus is on the habit, culture, values, lifestyle, and financial behaviour in terms of how we spend the money we generate and are at our disposal to spend. The first step is to learn to identify and differentiate between needs and wants as the basic concept of controlling spending. Then, we learn to plan and track our spending.

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Essentially, knowing where your money comes from is equally as important as knowing where your money goes. A budget, therefore, is the most practical tool to control spending to allow for saving and investing. 4. Borrowing: As discussed earlier, debt is not entirely bad nor good depending on the object of the borrowing. Though one may be a diligent saver, at some point, it becomes necessary and even financially prudent considering the time-value of money, to borrow money to cover a large expense like a house or a business. Some borrow money for education such as student loans. Borrowing is not necessarily a bad thing as long as you know on one side the object of the debt and how to compare the various loan options and can maintain a healthy credit score. In this context of understanding bad debt and good debt, this book seeks to encourage us to focus on the latter. An example of good debt is borrowing to create income-generating assets. Mortgages or loans to

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buy homes are another form of borrowing or acquiring debt to create assets. Business loans to create self-employment opportunities or build a business, and real estate investments, are also good examples of how borrowed money can be turned into assets and wealth accumulation. 5. Protecting: Knowing and applying principles to increase our cash flow and reduce our cash outflow is as necessary as learning to preserve and conserve the wealth acquired and avoid unnecessary losses and financial leakages. Specifically, protecting deals with insurance, ID theft, and retirement planning. The idea is to stay protected at all levels in one’s life; on personal, health, and social levels. This implies we need to understand risk management, insurance coverage, identity theft protection, fraud, lawsuits, and scams, in order to master self and family financial protection in life.

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The objective of financial literacy is ultimately to

develop a life-long learning journey to continuously improve our financial knowledge enhance our ability to use the knowledge and boost our confidence towards financial decisions and actions for sustainable financial well-being. Financial well-being is the wealth state, wherein a person can fully meet current and ongoing financial obligations, feel secure in their financial future, and make choices that allow them the enjoyment of life.

“The objective of financial literacy is ultimately to develop a life-long learning journey to continuously improve our financial knowledge, enhance our ability to use the knowledge and boost our confidence towards financial decisions and actions for a sustainable financial well-being”

This can be summarised by considering financial security and freedom of choice in terms of the present and future as per the table below.

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Security

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Present

Future

Control over day-

Capacity to absorb a

to-day, month-to-

financial shock

month finances Freedom of

Financial freedom

On track to meet

choice

to make choices to

financial goals

enjoy life

§

Security

In the present time, financial security is the ability to exercise control over day-to-day, week-toweek, month-to-month, and year-to-year personal finances. And for the future time, security is to have the required capacity to absorb a financial shock. Security is most visible in the forms of an emergency fund, contingency fund, buffer fund, savings account, or other liquid investments that you can tap into to cover an unexpected financial need. It is the contingency financial plan against any financial shock.

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Freedom

Are we capable to make choices to enjoy life knowing that we have financial security measures in place, in the present time? Freedom of choice, therefore, is what allows us to reach our goals knowing that our wealth is made out of assets and not borrowed funds. Financial security and freedom of choice go hand in hand. One cannot have one without the other if the aim is to create a life of financial well-being. Now we have discussed the key dimensions and the core components of financial literacy and concluded with two key variables of financial well-being. We would then proceed to discuss the second step of wealth management, which is financial planning.

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Financial Planning ©

Financial Planning Action Plans

Managing wealth is as important as its creation. Wealth management is an entire profession requiring certain qualifications and licenses to operate and help clients. However, the focus of this section is to equip the reader with the fundamental and most important tools to effectively and efficiently manage wealth. Therefore, we zoom on financial planning which aims to determine short and long-term financial goals and to create a balanced plan to meet those goals. The objective of financial planning thus is to determine what one wants from the future and how the financial means can help one to get there. Whether it is a one-year plan, five-year plan, or ten-year plan, the key to wealth management is planning to achieve your goals.

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Financial planning is a comprehensive plan, that projects into the future our financial goals. It is a roadmap for all who seek to be in charge of the wealth and not necessarily for the rich alone.

“Financial planning is a comprehensive plan, that projects into the future our financial goals.”

It serves as a safeguard against contingencies while detailing all the cash inflow [income] and cash outflow [expenditures]. It takes into account the existing financial situation and goals, then creates a detailed strategy based on prioritised objectives, with exact plans for spending, savings, investments, debt, and insurance. A personal financial plan is a documented analysis of personal finances which details one’s earnings, liabilities, assets, and investments. Its purpose is to assess the feasibility of the financial goals and to understand the steps needed to take to accomplish them. It should not be a complex exercise to create a financial plan. It can be a very simple process by first assessing one’s current financial status; identifying the important goals, translating them into a financial plan; and then aligning each one with solutions designed to help achieve them.

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The aim is to build a plan that aligns one’s best interest and helps in answering some of the following pressing questions: §

What is my current net worth? [considering all that I owe and own]

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What is my current total cash inflow as against my cash outflow?

§

What are my ultimate financial goals and how can I reach them? Am I taking on too little, too much, or the right amount of investment risk given my goals?

§

§ §

How much will I need to fund my retirement lifestyle? Will my family be protected if something happens to me?

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Will I be able to fund my children’s educations?

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What legacy will I be able to leave my heirs, and what is the best way to transfer assets?

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Can I protect my assets from being drained by long-term care costs?

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However, it is key to note that a financial plan is not a static document. It should change and evolve as one’s life, wealth, and goals evolve. It is a tool to track one’s progress and one should be able to adjust it as life evolves. It is helpful to re-evaluate your financial plan after major life milestones, like getting married, starting a new job, having a child, or losing a loved one. This is the reason why we propose a cyclical five-step financial plan as follow:

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Five-step Financial Plan

Review of current financial situation

Evaluate, Monitor and Adjust

Financial Planning Goals

Creation of a Budget

Prioritisation of Goals

1. Review your current financial situation Before we determine where we are going, by setting goals and developing strategies to achieve them, we need to understand where we are as at now, by determining our current financial situation. When we have a clear understanding of our current financial situation, it helps to formulate realistic and well-informed goals. With a detailed look at our situation, we can identify specific changes that could we can make 212

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to change our situation. This helps at the goalsetting stage in the planning process. To have a snapshot of our current finances, we need to determine the following:

§ Calculate net worth: We calculate it by summing our total assets and comparing them to our total liabilities. Simply put, we subtract our total liabilities from our total assets. Assets are basically what we own that has value. Examples may be cash and cash equivalents, such as physical cash on hand, current or savings accounts, personal property, other real estate owned, a car; and invested assets, such as stocks, bonds, or pensions. On the other hand, liabilities are the value of what we owe such as our current bills, mortgage loan, car loan among others. We gave an example in the earlier chapters on how to calculate your net worth, you can utilise the following charts, as a reminder to calculate your current net worth.

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Personal Net Worth Assets (What I Own) Cash & Cash Equivalents Cash on Hand Checking Account Savings Account Fixed Deposit Life Assurance Savings Bonds Money owed to me Total Cash Equivalents

Liabilities (What I Owe) Current Bills Charge Accounts Credit Card Balances Utilities Rent Insurance Premiums Taxes Other Bills Total Current Bills

Personal Property Estimate Equity in Home

Outstanding Debt Mortgage Loan Balance Automobile Loan balance Student Loan Balance All Other Loan Balances Total Outstanding Debt

Other Real Estate Household Furnishings Automobiles Specific Items of Value Other Personal Property Total Real & Personal Property

Total Liabilities

Invested Assets Stocks & Mutual Funds Equity and stakes in other businesses Bills, Notes, and Bonds Pensions All other retirement plans Total Invested Assets Total Assets

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Personal Net Worth Total Assets

Total Liabilities

Net Worth

Determine cash flow: How can we create a financial plan without knowing where our money is going every day, week, or month? Our ability to document it helps us to see how much we need every month for necessities, how much might be left for saving and investing, and even where we can cut back a little (or a lot). We can do this by skimming through our checking account and credit/debit card statements in addition to any cash payments we do regularly. This is to determine a fairly complete history of our spending. If there is a lot of variances, with our expenses seasonally, then it is advisable to do an annual spending history. We will add up all the expenditures in each category and then divide them by 12months to get an average monthly estimate of our spending. This gives a better representation of our spending so we do not miss out while underestimating or overestimating utilities, or even forget to account for holiday gifts or a vacation.

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2. Set the financial goals How can one get to where one wants to go without knowing where one wants to be? Once you have evaluated your current financial situation, you are ready to move forward in the financial planning process. The next step is developing your financial goals. Setting goals will give you a direction for your plan and a destination toward which you want to head. Where do you want to be in the future? What is the kind of life you would like to live in the future? Do you want to have your own house; complete a master’s programme; get married; have children and start a business? Whatever your aspirations are, the ones you choose to pursue will affect your financial planning. Setting financial goals creates the baseline for the entire plan and becomes the motivation for the pursuit. Most people who have built wealth, do not do so overnight. They got wealthy by setting goals and pushing themselves to reach them.

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At this stage, we set goals that are SMART (Specific, Measurable, Attainable, Realistic, and Time-bound). Based on how soon we may need the money we can plan as follow with sample tables: §

Short-term goals: Goals we hope to achieve in the next five years, such as paying off debt or buying a new car, or pursuing a professional course.

§

Medium-term goals: Goals we hope to achieve in the next five to 10 years, such as the down payment on a home or starting our own business.

§

Long-term goals: Goals that are 10 or more years away, including marriage, children’s education, and of course, retirement.

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Short, Medium, and Long-Term Goals Short-Term Goals (Less than 5years) Priority

Goal

Total Cost

Duration

Monthly Cost

Target Date

Medium-Term Goals (5-10 years) Priority

Goal

Total Cost

Duration

Monthly Cost

Target Date

Long-Term Goals (Beyond 10 years) Priority

Goal

Total Cost

Duration

Monthly Cost

Target Date

3. Prioritise the goals Now that you have an idea of the kind of life, you would like to build up to over the next thirty years, it is important to prioritise your savings goals to match the different stages of your life. Taking the example of saving for a future with a mortgage,

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children, and retirement, your priorities may look like this: a) Save for a down payment on a home b) Save for supporting throughout their lives

your

children

c) Save for retirement Now, of course, some of these priorities can overlap. You could simultaneously pay for your retirement while saving for your children’s Trust funds, but because supporting your kids will (most likely) happen before you retire, it needs to be prioritised. However, if we take the example of wanting to get out of debt and retiring early, your personal financial planning goals might be prioritised as follows: a) Save to get out of debt b) Start saving for early retirement c) Save for travelling around the world

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possible. In this instance, the minute you get out of debt, saving for early retirement begins. However, once you have amassed a solid amount in your pension fund, with regular payments still being made into it, you can start saving for your trip around the world that you will enjoy in your retirement. 4. Create a budget and live by it When one does not know where the next dollar is coming from, then usually one does not know where the last dollar also went. What you track is what you get. When it comes to reaching our financial goals, we are either wishing or doing? The difference between wishers and doers is that doers put action to their goals. And doers are much more likely to reach their goals and achieve their dreams. Once we are doers, we are more likely to: §

Track spending

§

Live within our means

§

Stick to a budget

§

Pay off credit cards in a timely way.

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§

Be on schedule for all loan instalments.

§

Deposit money into savings each month.

§

Accumulate savings to invest.

§

Make regular contributions to retirement savings.

Though at this stage, we have a clear idea of where we are headed, it is important in our planning process to create a system that predicts our income and expenditure based on our history, aligns them to our goals, and assesses the necessity of any invariable cost. This is a budget, and it is the foundation of our financial plan.

“What you track is what you get. We are either wishers or doers and the is that, doers put action to their goals, and doers are much more likely to reach their goals and achieve their dreams.”

When most people hear the word budget, they think of a low-priced item or miserly spending habits. Their perception is only partially correct. Budgeting is not restriction and sacrifice.

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Keeping track of how much you earn and spend does not have to be drudgery. It does not require you to be excellent at math and does not mean you cannot buy the things you want. It simply means that you will know where your money goes, and how much you need to meet your financial goals. A budget allows you to understand where your money goes; avoid overspending, and find the money for saving and investing to build your wealth. To begin with budgeting, you can do the following: a) Make a note of all of your income and expenditures over a 30-day period. It is even advisable to make a note of an annual spending history and then divide the sum by 12months to get an average monthly estimate of our spending. b) Next, group all of your expenditures into fixed, variable, periodic, and whammy expenses. (Type of expenses have been discussed in detail in the previous chapter) c) Assess your variable expenses and identify areas in which you could cut back. Consider using a budgeting app to make this process easier. That is, automate the budgeting to

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avoid lapses, left-outs, and forgotten actions. d) Allocate a certain amount from your variable expenses that you could put away into a savings fund each month. (Refer to the proposed Wealth Plan Model for detailed spending ratios) Review your budget monthly, and make adjustments where necessary. There are bound to be fluctuations in the amount you can afford to save each month. Rather than getting disheartened that you have briefly strayed from your budgeting goals, accept that these ups and downs are all part of the personal financial planning process. Budget can be very tight sometimes, but you can look for ways in which you can either increase your income or reduce your spending. In the previous chapters, we detailed the ways to increase your income, and thus we would focus on how to decrease spending in this section. To decrease or cut spending is another possibility that helps to save money for investment or set you free from debts. This can be achieved by adopting

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a lean budget. Here are some practical steps to help you cut spending seamlessly.

List Expenses

Separate Wants and Needs

Plan To Stop Spending

Examine The Needs and LEAN

Balance Expenses with Income

a) List all of your current expenses over a period, preferably over a year b) Then, sort them by wants and needs c) Formulate a plan to STOP all spending with red highlights d) Examine your NEEDS and find ways to make them LEAN e) Your goal is to strip your budget to the bare minimum to compare and balance your expenses with your take-home income. You can always build your wants back up as your saving gets more significant. There are many good apps for budgeting and you can adopt easy-to-use excel templates. The budget sample that follows, tracks the monthly cash flow comprising the

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total income and total expenses. There is the projected amount – an estimate – and the actual amount spent. The difference between the two is the variance that has to be balanced from time to time, to align with the financial objectives. We can represent the negative variance with red, which implies actual income was less than expected income and actual expenditure was equally less than the projected expenditure. Whereas when the variance is neutral, we can represent it with colour yellow and when is positive the colour can be green.

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5. Evaluate, Monitor, and Adjust You may have done your due diligence at each step along the way and created a solid financial plan. However, one fact remains: life happens. For this reason, it is important to review your plan often and revise it as needed. As depicted from the preceding budget, monitor your actual spending during the month compared to your projected amounts. Where there is a need, adjust in line with your goals. It is important to be realistic with yourself and understand that you may need to make changes that best match your lifestyle. Understand the monthly cash flow, that is, what is coming in and what is going out. An accurate picture is key to creating a financial plan and can reveal ways to direct more to savings or debt pay-down. Once you have a clear understanding of where your money goes, you can easily develop immediate, medium-term, and long-term plans.

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Often, a budget looks typically as an immediate plan. However, it should be done considering, in addition, both medium-term and long-term financial goals.

To evaluate your performance with your budget, you can add up your total spending per category; divide your total spending per category by your net income, and multiply by 100%. Looking at the percentages can be a handy way to understand how much of your money is going where. The sample personal budget depicts as at the snapshot, 62% of income had been spent [expenses] and 15% put into monthly savings with 23% cash balance for other use. At this stage, our spending trend is laid, and therefore, we can proceed to check in with our financial goals and make the necessary changes to

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the budget. Are we spending more than we make? If yes, which areas can we identify and where and when can we cut back? Often, it is easier to cut back on variable expenses than fixed expenses. Nevertheless, if your overspending is vastly on fixed expenses, then it becomes very difficult to adjust that. This is where the style of living may have to be reconsidered. For example, if you spend too much on car maintenance and fuel due to the expensive car you owe, you may reconsider a more “A budget is a moderate car that can living document, equally give you the changing and comfort and capable adapting to serve of similar utility. Or as a guide to our you may be wealthy place.” overspending on rent, you can consider a less expensive housing option. These are tough decisions but the bottom line is always about the financial goals and how soon we want to achieve them.

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Your budget is a living document, so by the end of each period [monthly, quarterly, or yearly] evaluate your budget and make any necessary changes. We need to compare what we spent with what we planned to spend. If the spending is quite different from the plan, we need to find out why. If the plan does not provide for our needs, then it must be revised as well. We cannot live with a spending plan that allows for no food for the last four days of the month. And if the plan fits our needs but we have trouble sticking to it, the solution to the problem may be to practice more financial discipline. With this, each succeeding budget should work better. As circumstances change, our budget will also need revision. A budget like earlier mentioned, is a living document, changing and adapting to serve as a guide to our wealthy place. Reviewing the financial plan, therefore, can help us to gauge our progress toward meeting our goals. Original strategies may vary from the expected results and may require adjustment once in a while, to help us meet our goals.

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The fact is life will change, and our financial plan will have to change too. We will have to be faithful in re-evaluating our plan from time to time to ensure our goals have not changed and that we are on pace to reach those goals.

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Financial Discipline ©

Financial Discipline Commitment Many people are learning and becoming more financially literate by the day. They build financial and wealth plans based on their definition and understanding of wealth and the pathway they choose. Yet a few are able to follow through with their plans to reach their wealthy place. Have you done a new year’s resolution before? When you did a tall list of dos and don’ts, goals and objectives, and then less than half the year, you lose track and are unable to follow through with the plan. Have you found yourself in a pattern of overspending, which has led to a growing and out-of-control debt, along with little to no savings? Do you set a budget every month, but struggle to stick to it?

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We first need to accept this is normal. And being normal is the reason many of us do not get to our desired end. We need to do more than normal to reach our wealthy place.

“Financial discipline is a lifestyle, and like anything worthwhile, it takes practice and it takes sacrifice, but the

rewards are We need to be willing to do countless.” the extra to make sure we reach our desired ends. This will not be easy. But this stick-to-the-plan should not be seen as a punitive action. Rather, it should be viewed as a light at the end of the tunnel. Thus, our ability to push through should be motivated by the desire for long-term success and the fulfilment we hope to achieve in the end. This is a lifestyle, and like anything worthwhile, it takes practice and it takes sacrifice, but the rewards are countless. Our focus should not be on the sacrifices today, but on the greater rewards if we achieve our goals. What will be the essence of all that we have learnt so far if we cannot plan and work with them? Like we have established earlier, no one can plan and build your wealth for you without your involvement. Even if they put all the measures in place and we do not have the discipline to

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stick to the good plans, it will eventually not work well for us. Knowledge acquired will not work itself until we apply it. For us to see the effect of all the knowledge acquired even in this book, we need to decide to take action and apply them. “The man who cannot see the

Each plan will come with its challenges and uncertainties, a slave to the even the temptation to do immediate” otherwise especially instant gratification, but the focus is seeing the ultimate goal. The man who cannot see the ultimate becomes a slave to the immediate. What is the ultimate goal? It is to build wealth, increase it and be able to sustain it. ultimate becomes

Have you seen the stories on most lottery winners instant millionaires one day, penniless the next? Often, this is because the sudden ability to purchase anything they wanted was too great to overcome. They never learnt the skill of financial discipline, which comes with practice, intent, and time. It is a skill we need to learn if we want to become successful financially. This is simply because as we build and grow wealth, we will want not to lose it. Financial discipline is the cornerstone of intentional wealth. Without it, we will not

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arrive at our wealthy place as there will be many temptations, distractions, and challenges along the way. Have you realised how a man who earned $2,000.00 per month, still can be complaining about not having enough to meet his expenses even when he now earns $10,000.00 per month? At the new salary, he can and now buys more expensive gadgets, lives in a more expensive home, eats in fanciful restaurants among others. His expenses are rising to meet his increased income. This is called Parkinson’s Law. The law stipulates that “a man’s expenses will always rise to meet his income and make him stay the same”. This implies that a simple increase in income may not necessarily help us to reach our wealthy place. However, the discipline not to get carried away, resist the temptations, reduce impulse buying, and stay within our plans among other actions - aimed to keep us on course is what will do the trick for us. We, therefore, need to understand and apply financial discipline rigorously because of the ultimate goal we have. There are three key variables at the core of the financial discipline. First of them is our financial goals emanating from our financial and wealth plan. Second is our lifestyle, which includes our habits, attitude to money, and our financial culture. The third is our course of action and pathway to

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our wealthy place. Financial discipline thus refers to how well we can match our lifestyle to the wealth plans that we have set to achieve. Financial discipline, therefore, is a term that describes our “Financial commitment to the goals we discipline is a set. Once we set our financial skill and can be goals, we should have enough learned like any motivation to reach them. It is other skill” our decision to stay strong enough and not to let anything get in our way. There is often a fine line between financial discipline and casual finance handling. We need to develop the strength and skills in order not to cross the line. Financial discipline is a skill and can be learnt like any other skill. We can use the following steps to build and develop financial discipline:

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Five Steps to Develop Financial Discipline

Stop making excuses

Know and understand your Plan

Reward your efforts

Use Automation to Boost Discipline

Be Accountable

§

Stop making excuses There will always be a reason, an excuse, and even a concern [sometimes even by others] why you did not follow through with a plan. But making excuses, blaming circumstances, apportioning blames are all quite easy to do. But following through with your plan, on the contrary, is not.

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“There will always be a reason, an excuse and even a concern [sometimes even by others] why you did not to follow through a plan”

It is high time we stopped making excuses. If we plan and live our lives, then it means we are in the driver’s seat, so we need to take control.

The first step to financial freedom is the decision to stop making excuses and do all we can to follow through with our plans and adjust them accordingly to reach our wealthy place. §

Know and understand your Plan We discussed setting goals and making plans under the financial plan. This means, we need to have a financial plan in place, or else what are we then following through. The financial plan helps us to know how we spend our money with guidelines to follow. We plan, having in mind short-term goals as well as medium-term and long-term goals. In the plan, we create a budget, and the purpose is to know where each money goes and comes from.

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Knowing and understanding our plan is not to prevent us from just spending any money, instead, it allows us to make sure we have money for what is most important to us. This is a motivation and can keep us going. We can use positive self-talk to help give us the fight to earn what we need and want. Eventually, we feel more encouraged once we realise that we are in our corner. §

Use Automation to Boost Discipline Automation is a great way to stay on point “The out-o- sightwhen it comes to out-of-mind financial discipline. We method of saving firmly believe that the money helps grow out-of-sight-out-ofsavings faster” mind method of saving money helps grow savings faster. For example, automating savings helps one to avoid the temptation to spend money on things one does not need because the money never shows up in the general checking account. For example, we can do a standing order of $200 to be saved for the emergency fund every month, and have $200 transferred directly for an

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insurance policy for the children. That way, we will not see it before it leaves our possession. Once the salary is paid, they will go straight to the designated accounts and that will ensure it is never missed. Money sitting idle and in hand is more difficult to save. Therefore, automation might be the way to go.

§

Be Accountable Accountability is about being responsible for “Accountability is our performance and about being actions. We assume responsible for ownership of our our performance decisions, actions, and and actions. We even inactions. And assume ownership one of the ways of of our decisions, being accountable is actions and even to track our spending inactions” in terms of our money management. For example, we can review our spending each week by entering our data into our budget. We can check our spending by sieving our needs from our wants; thinking twice before we make impulse purchases as it will show as a mistake when we review our spending.

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What can be measured can be improved. Set some key performance indicators (KPI) to measure the success or failure of the financial plan. As explained, financial discipline should never be “What can be viewed as a punishment measured can but rather serve as a great be improved” motivation to continue to perform well or to course correct when the financial choices are not yielding the needed results. We can calculate and track financial metrics monthly such as net worth, total savings, total debt, and debt to equity ratio. This can be done easily in a spreadsheet. We can update the metrics when reviewing our budgets. Once we are performing well, the next step becomes very necessary to keep the motivation going. This may require some adjustments where one will have to scale down the budget, work extra hours or have more sources of income, or both. This requires commitment and to assume ownership of all actions by being responsible for the ultimate success of the financial plans.

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We can work with a mentor, a financial advisor, or the concept of a sponsor. A person who knows what our goals are and supports us in our endeavours. He or she is interested in achieving the same goals. This person will hold us accountable when we fail to meet our goals and encourage us when we are struggling to stick to the plan. It is ideal to have a person who is close to us. We can work with a spouse, a family member, or a close friend, or a professional advisor, once trust is established and we are comfortable discussing our finances with him or her.

§

Reward your efforts In our budgeting, we should put in place some incentives for sticking to the plan, achieving a saving amount target, spending within the budget among other actions leading to the success of our financial plan. We can create a list of small and large rewards. It can be anything from lunch at a fancy restaurant, to a new gadget you have been wishing for, to a get-a-way weekend. One can, therefore, grant oneself a wish from the list when pre-defined milestones are achieved.

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Earning rewards creates a habit loop that encourages one to continue making the right choices. It is not fun, for example when one keeps turning down parties with friends and avoids promotional purchases. Financial discipline in itself pays off in the long term, but can also become like a fun game with such a reward system. When we reward ourselves, it activates the rewards system in our brains. We become even more motivated to reach our goals, once we know that we are going to be able to enjoy something we want every period we reach our set goal. For example, if you suspended some entertainment subscriptions, you can give yourself a movie-day-out for being able to achieve that for the period. When you have successfully paid off your mortgage or car loan, you can reward yourself with a short trip out of town.

In summary, we opened up on the key dimensions and core concepts of financial literacy in this block of the Pentagon Wealth Model. Managing wealth is as important as its creation. We further detailed that financial planning is a roadmap for all who seek to be in charge of their wealth.

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Pertinent details on financial discipline were similarly expounded. Key among them was that our commitment to our wealth management. In this pursuit, a stick-tothe-plan component of wealth management should not be seen as a punitive action. Rather, it should be viewed as there will be a light at the end of the tunnel, and our efforts would be worth it. At this point on our wealth journey, we have understood practical ways on: §

how money works and how money can work for us

§

how we can make more money and multiply our wealth.

§

how we can expend judiciously and sustain the legacies of value created

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“The things we cherish most are for keeps”

M

oney making is only half the battle, keeping it is the other half. Imagine having worked so hard and invested carefully over the period to build your wealth, and ending up losing a chunk or close to all to some unplanned events. If we build wealth, then, we want to be able to look after it.

“Money making is only half the battle, keeping it is the other half”

For us to truly enjoy our wealth and be able to pass it on effectively and efficiently, we need to ensure that first, they are properly safeguarded in the meantime. We simply have to protect the fruits of our labour.

You may have heard of the story of the goose that laid the golden eggs. The story focuses on a countryman who owned the most wonderful goose anyone can imagine or wish for. Every morning the countryman visited its nest to find the goose had laid a beautiful, glittering, golden egg. In this fable by Aesop, the countryman sold the golden eggs and acquired a lot of wealth from the gains thereof. He became very rich and his demands in terms of wants 246

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equally kept rising [like according to Parkinson Law]. He gradually grew impatient over time, as the goose laid only one golden egg a day. He wanted to have more than once a day. He began to wonder, if he could kill the goose and cut it open and he could get hold of all the golden eggs at once. He received many warnings from others that it could be a bad idea. Yet, the countryman went on to cut the goose open and to his surprise, he found no golden egg. He realised there are no golden eggs or golden egg machines. Now, his once precious goose is dead and there is no more a golden-egg pay-day. Now, let us assume we are like this countryman. We have a goose that lays golden eggs. What then should we do from here? Our first goal should, therefore, be to put in the measures to keep it healthy and safe for as many years as possible. The second is to be able to optimise its output and build more wealth-generating assets over the period knowing it could die one day. Accumulating wealth and losing everything in a minute to disaster, theft, and akin cases is something common, which we normally see or hear about. Many people have suffered to build for themselves enormous wealth and yet have not put measures in place to safeguard their estates. 247

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Growing up, there was this single mother in the neighbourhood, who toiled all her life to cater to her children. She was a hardworking woman and managed to put up a five-bedroom house for herself and the children. This investment drained her so much that it was the only investment she had left to bequeath to the children in case she passed on. As it is in our part of the world, hardly do people insure their properties against emergencies, or preserve resources, and thus, when disaster or unforeseen contingency hits, all can be lost and gone. Sadly, all the efforts from the hustle and bustle of life can go down the drain in a split. Fortunately for this woman and her children, her story was different. She had an insurance policy covering her property and life. Stipulated in the policy are terms and conditions of the coverage and that, in the event of a disaster, an amount of $300,000.00 (benefit) will be paid to her (beneficiary) to put up a new structure and lump sum of $ 200,000.00 paid to her children. Consequently, when it happened that the family lost their home to a fire outbreak and she passed away, the children had a life backup to fall on.

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Key Loss Exposures Our hard-earned wealth is still vulnerable to potential creditors, lawsuits, taxes, accidents, and other financial risks if we have not put in place wealth protection strategies. If the worst happens, we could lose “In a perfect world, everything. we may have no need for financial In a perfect world, we may vulnerabilities not need financial concern but, in vulnerabilities concern reality, misfortune but, in reality, misfortune can befall even the can befall even the most most careful person” careful person. This is the reality of life and proper forethought and planning can prevent additional stress and safeguard your wealth. In this section, our focus is to identify the main loss exposures and provide an overview on how to implement strategies that are designed to help reduce that exposure without compromising other estate and financial planning objectives. The disclaimer here is that the ensuing guidelines are for legitimate wealth acquired.

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creditors, will be disregarded by the court of law if it is discovered the intent was to defraud. We should be honest with the wealth protection strategies that we adopt. We want to protect our wealth to insulate it legally without engaging in the illegal practices of concealment, contempt, fraudulent transfer, tax evasion, or bankruptcy fraud. In this everyday life, unexpected liability can come from anywhere. What are the pitfalls that can happen suddenly to us that we need to know and plan?

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Key Loss Exposures

Liquidity risk

Tax Authorities Loss Exposures

Creditors, predators, and divorce risks

Health and disability

§

Business, personal property and casualty risk

Liquidity risk Liquidity is the amount of money we readily have available. Liquidity risk is when a person or business cannot meet short-term financial obligations without incurring major losses. One may have a good net worth, and yet be unable to pay their bills or be on schedule with their loan

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instalments as one does not have enough available cash and cash equivalents. The simplest way to lower or mitigate “The simplest way liquidity risk is to to lower or mitigate always hold liquidity risk is to sufficient cash or to always hold sufficient have a regular and cash or to have a reliable income regular and reliable flow to meet income flow to meet financial demands. financial demands” The ability to earn an income is one of the most important assets and if that is negatively impacted, then our liquidity is also affected. As discussed earlier, income can take many forms such as active income, passive income, or portfolio income. Our ability to ensure the inflow of our income streams is safeguarded against adverse events is very crucial. For example, in terms of investment, you can have to avoid buying long-term investments that are illiquid unless you can afford to hold them [as we discussed earlier under the concept of bankroll]. A further example is, you should not buy a 5-year

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certificate of deposits (CDs) or an apartment building if you might need cash in six months. To further mitigate this risk, we can equally insure our capital loss or liquidity risk as well. §

Business, personal property, and casualty risks As wealth is built, we are still susceptible to suffering from a wide range of accidents, threats, and losses regarding our businesses, belongings, and environments. Some of us may be business owners, others may be employees, or selfemployed. The business owner may require to protect his business and personal properties. A business that leases a place will have to protect its personal property while a business that owns the building may have to protect both building and content. Businesses van suffer from workplace casualty which is c capable of racking a lot of wealth gained. Life has a degree of unpredictability and one can never be so sure when accidents, injuries, or other negative events might affect. For this reason, we would need to put in measures that can safeguard our hard-earned wealth.

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Creditors, predators, and divorce risks Can you imagine an inheritance that required a lifetime to accumulate is taken in an instant by a predator, creditor, or divorce after it transfers to a loved one? Any significant wealth gained can be threatened by creditors, predators, and major relationship shifts like divorce. After you have put all the knowledge acquired here and elsewhere into practice; saving your money; sticking to your financial plan against all odds, and investing your funds wisely to accumulate wealth to provide for the wellbeing and support of your loved ones, and your hard-earned wealth becomes a target. Sadly, you can be 1% at fault and yet take a 100% hit. For example, imagine that one of your property managers refuses to rent or lease out a property to a client by saying “We do not deal with people like you”. The client sues you for discrimination. And if the lawsuit is based on race, disability, or similar protected circumstances, then you may not be covered and be fined. What if you married an opportunist who lured you into marriage only to divorce you and claim half of your hard-earned wealth. What if your beloved

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child married in a similar context, how do you protect your descendants from their own bad choices? What measures can we put in place to stop such train wrecks before they happen? §

Health and disability As discussed earlier under the MIPPS definition model, we asserted that “Health is wealth” and our pursuit of other forms of wealth should not lead to the detriment of other areas such as wealth, without which we may not enjoy fully our wealth. And as individuals, we always run the risk of losing our ability to earn a living, not only to downsizing or layoffs but to disability as well. Imagine a surgeon who can no longer perform surgery or a footballer who no longer plays football or a musician who no longer sings due to some permanent illness or accident. Disability is a far bigger risk than many of us realise. Disability comes in many forms and ways such as vision Impairment, deaf or hard of hearing, mental health conditions, intellectual, disability, acquired brain injury, autism spectrum disorder, and physical disability. The self-bias makes us naturally think that disabilities only happen to other people and as

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such we may not take the necessary actions to protect ourselves. But life teaches that we are more vulnerable than we like to admit. Unexpected events can and do negatively impact our health and our wealth. §

Tax Authorities Once we are citizens of our various countries, we all have tax obligations. How we manage, plan and honour our tax obligations are key to protecting and growing our wealth. We all know that it is what we keep, not what we earn, that matters. Taxes can diminish our earnings and our estate significantly. This is something one cannot ignore. Fortunately, there are a number of strategies and measures you can utilise to soften the blow, particularly before major life events and possible mishaps. Our choice of investments and the strategies thereof must be optimisation of aftertax returns. We would have to scrutinise all documents, agreements, contracts, policies, and understandings for them to pay off accordingly.

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Dimensions of Wealth Protection © We can categorise the various wealth protection dimensions into three

Wealth Conservation Wealth Preservation

Asset Protection

Wealth Protection

First and foremost, we need to understand that although preservation and conservation are often used interchangeably for meaning the same thing, they are actually different in some ways. Conservation is about sustainability and preservation is about maintenance. On the other side, asset protection is about guarding and keeping one’s wealth. All these three have a common purpose to protect wealth.

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Wealth Preservation ©

Wealth Preservation

Wealth Protection

Imagine you have built your wealth, adopted a certain standard of living, and now adapted to it, would it not become a total nightmare if a mishap happened and you were no longer able to keep this present lifestyle without incurring more debt? In wealth preservation, we seek to find out if the worstcase scenario were to happen, can one still maintain the standard of living set for oneself and their dependents? How does one then guarantee that one’s wealth acquired over a period can at least be maintained without further loss in value?

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Wealth preservation is therefore providing that financial safety net for oneself and their loved ones. It focuses on maintaining the livelihood of dependents, protecting against the adverse effects of diseases and damages. We refer to these as the 3Ds of Wealth Protection. Wealth preservation, therefore, is to protect the things that we truly matter like our loved ones, our assets, and our lifestyle. To achieve this, we can do the following: Five Wealth Preservation Techniques

Protect income

Keep business or investment running

Eliminate debt on death or disability

Maintain family’s lifestyle

Protect breadwinners

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In trying to maintain the lifestyle adapted to, one needs to put in measures to protect one’s income. Once there is a break in the inflow of income, yet the bills remain constant due to the standard of living one is used to, then one needs to find alternative ways of keeping up. Another key aim with wealth preservation is to produce the best possible investment returns consistent with your time frame and tolerance for risk. We achieve this by keeping business or investment running. Also, as discussed, we can protect our style of living by: §

Savings Fund

§

Multiple sources of income

§

Income insurance

§

Retirement plans

Imagine you financed a lifestyle with debt like a car loan or mortgage loan for your family home and an unfortunate illness or death happens, and without any income inflow for repayment, the only option is to sell the underlying asset to repay the lender, leaving your family without a house.

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How can you ensure that in the event of such mishaps, the adverse effect of debt will be curtailed? Life insurance with lump sum payment benefits can cater for such eventualities as well as other asset protection techniques discussed in this section.

Though you may have insurance for lump sum payment that can clear debts in case of disability or death, how can you ensure your family can cater for their ongoing expenses? How can you maintain the lifestyle of your dependents? You can protect the breadwinners and keep business or investment running. Income protection may cover up to 75% of your income in the event of disability but what if you are a business owner or an investor. You will need to protect all income-generating assets or ventures.

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Insurance If life is unpredictable, then insurance cannot be optional. Wealth preservation requires one to first protect what one has. This can be life itself, health, property, “If Life is vehicles, personal or business unpredictable, expenses among others. This then insurance means for one to benefit from cannot be one’s insurance packages, optional” one will need to plan for sufficient insurance coverage and buy the right products to cover the risks associated with all the earlier-mentioned risks Unfortunately, many people treat insurance as an expenditure or as an investment. However, insurance is rather one’s responsibility. In the same way, we plan for investment, we need to have an insurance plan as well. It is quite a normal self-serving bias that we assume no evil or bad thing can happen to us. Others even see it as a bad omen or an endorsement of hoping for bad eventualities. But do bad things happen to good people? Have you seen a rich man become poor after a disaster or even business gone bad?

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Life has its ups and downs. Life is naturally cyclical. If there is a day then definitely, there will be night. Dry season means there will be a wet season. If good “Unfortunately, things happen then bad many people treat things can also happen. insurance as an Sometimes, it is no expenditure or as longer just about what an investment. will happen, but when. However, insurance is rather one’s We need to have a responsibility” paradigm shift about the perception we have towards insurance. We are mortal. If death is certain, can insurance be optional? If life is unpredictable, insurance cannot be optional. We can categorise insurance into two: §

Life Insurance: Once you are an earning member of a family with dependents, you definitely will have some financial obligations, and death or disability can truncate your provision. Therefore, you will need to have an adequate life cover. As you progress or increase your revenue streams, your personal financial profile changes and

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you may have to enhance your life insurance coverage. There are two types of life insurance: o Term Life: It is the simplest form of life insurance. It is straightforward protection. There is no investment element and it pays out a lump sum in the case of death within a specified period. o Whole-of-life: This provides a cover throughout the entire lifetime. It only pays out once the policyholder dies with a lump sum to the dependents. §

Non-Life Insurance: You may be an individual with no financial dependents, and thus life insurance cover can be optional. In this case, a personal accident plan with permanent & temporary disability benefits and a health insurance plan is a must. In addition to the asset protection techniques in this section, property insurance is primordial.

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How does it work?

Life Insurance

Provides the beneficiaries of your life insurance policy with funds upon your death so that your assets will not need to be used to pay final expenses and estate taxes. Disability Income Pays benefits to replace part of your Insurance earned income while you cannot work due to illness or injury so that you continue to meet your financial obligations. Health Insurance Pays medical expenses incurred as a result Long-Term of an illness or injury, so that you do not need to use your assets to pay for them. Care Insurance Pays for certain in-home and nursing home care expenses, preserving your assets for your heirs Homeowners Pays for certain property damage and Insurance losses that the property can be repaired or replaced without you having to use other assets to do so. Also covers certain liability claims. Automobile Pays for damage to your automobile so Insurance that you can fix or replace it (collision/other-than-collision coverage). Also covers certain liability claims (liability coverage). Umbrella Liability Provides liability protection above and Insurance beyond the basic coverage provided by homeowners and automobile policies. Business/ Pays for certain business losses (e.g., Professional property damage, business interruptions, Insurance liability claims).

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Wealth Conservation ©

Wealth Conservation

Wealth Protection

From our earlier discussions, money not invested and not yielding any returns loses value in terms of purchasing power, due to the principle of time-value of money [with inflation and forex fluctuations as some causes]. If you earn $2,000.00 without any further increase in your salary or complimentary income flows from other sources, with the rising cost of living, then your wealth may be depleting and its value depreciating. In that same manner, income-generating assets may increase in value

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over time. Consequently, the focus of wealth conservation is ultimately about how to replenish, keep yielding, and sustain the cash inflow or the value of the wealth built over a period.

“Ultimately, the focus of wealth conservation is about how to replenish, keep yielding, and sustain the cash

inflow or the value Wealth conservation is a of the wealth built going concern. Anticipating over period” one’s death is an uncomfortable topic. Yet it is rewarding to push past the initial discomfort to pursue the potential rewards of wealth conservation. Wealth preserved is maintained; wealth conserved is sustained and kept. Wealth conservation is an altruistic way of ensuring wealth is sustained and kept ‘where you want to’ and ‘with whom you want’. Wealth conservation is the utmost component of wealth protection that seeks to ensure the following: 1. Preservation and continuous investment of assets to help ensure adequate funds for current living expenses and future retirement needs.

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2. Delimitation of wealth by determining how, when, where, and with whom one’s wealth can be used. 3. Business succession planning by determining and putting in place how business continuity should be done and who to spearhead in one’s absence by death or disability. Simply put, it provides guidelines for what will happen to one’s interest in a business after passing away. It can take many forms such as transfer to a business partner or shareholders, a buyout, sale of the business, or a transfer to one’s loved ones. It protects the investment in business or investments. 4. Longevity planning to ensure wealth acquired have the longest life span possible. It is, therefore, prudent to make financial considerations for medical care, retirement planning inter alia, which can mean investing money in stocks and funds so it can cover these expenses. Longevity planning can also involve purchasing permanent life insurance or putting money into Trusts to cover long-term care costs later.

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Consequently, to conserve wealth, you can do the following: a. Write a Will. Where there is a will, there is a way. You would not want to leave considerable costs and complications, alongside the heartache of grieving. If you want to be sure your wishes are met after you die, then it is important to have a Will. A Will is the only way to make sure your money and possessions that form your estate go to the people and cause you to care about. b. Make a lasting power of attorney (LPA). This permits you to appoint one or more people to make decisions during your lifetime in the event of illness, old age, or accident. Once you have an LPA in place, your attorney(s) can take care of your affairs such as finances, businesses, and properties, as well as make decisions about your health and welfare. c. Plan for Inheritance Tax You can pass assets efficiently to the next generation by planning for the potential inheritance tax bill. It will be unfortunate for

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one’s hard-earned wealth to go waste after one’s death. Without the right financial arrangements, your heirs and successors may have a hefty inheritance bill to foot after your death. d. Gift assets while you are alive. You can make use of gift allowances by making a number of small gifts each year without creating an inheritance tax liability. e. Place Life insurance within a Trust. Life insurance is one of the best ways to protect your family’s future in the event of your death. This policy is a significant asset and putting it in Trust, can ensure your beneficiaries receive their inheritance as you wished and directed. The main advantage is the direct payment to your beneficiaries rather than to your legal estate, which thus, will not be considered when Inheritance Tax is calculated.

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f. Keep wealth within a pension. Per statutory laws, a defined pension contribution is often free of Inheritance Tax. Unlike many other investments, it is hors from your taxable estate. It is one of the most tax-efficient estates planning to keep your retirement wealth within your pension fund and pass it down to future generations.

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Asset Protection ©

Asset Protection Wealth Protection

“Asset protection is the adoption of

Asset protection is the adoption of strategies to guard one's wealth. As a component

of financial planning, it has a goal to protect one's assets guard one's from creditor claims, lawsuits, wealth” taxes, accidents, and other financial risks. Individuals and businesses alike, adopt asset protection techniques to limit the access to certain valuable assets by creditors and even predators. strategies to

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The aim is to insulate assets legally without engaging in the illegal practices of hiding the assets (concealment), contempt, fraudulent transfer, tax evasion, or bankruptcy fraud. It is about how you protect your assets for yourself and future generations.

“Asset protection aims to give you more control over what happens to your assets while alive and when

you pass away” It aims to give you more control over what happens to your assets while alive and when you pass away. One technique is to own nothing, yet control everything. In this book, we will discuss the three main asset protection techniques:

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Three Main Asset Protection Techniques

Insurance

Asset Placement

§

Statutory Protection

Insurance: Insurance is simply a promise of a reimbursement package for a loss in return for a premium paid. After working hard to create personal wealth, one needs to protect it. And insurance is one of the simplest ways to cope with associated risks and can serve as the first line of defence for any financial losses.

§

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About the earlier discussions, we seek to protect our assets from creditors, litigants, predators, and identity theft. Creditors may want to place or even claim a lien or judgment against property, but if it is exempt under the law, then it is protected. An exemption may not offer total protection; however, it offers some shelter for certain assets. The laws that govern each country determine whether a property is exempt or non-exempt in non-bankruptcy proceedings. When looking at exemption laws, be sure to find out how much of an exemption is allowed for a particular type of property – it may be completely exempt, or exempt only up to a certain amount. §

Asset placement: Asset placement refers to transferring legal ownership of assets to other persons or entities, such as corporations, limited partnerships, and Trusts. The basis for this technique is simple creditors cannot reach property that you do not own or control.

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Shifting Assets to a Spouse Domestic Self-Settled Trusts

Corporations

Asset placement

Offshore (Foreign) Trusts

Limited Liability Company/ Partnership

Irrevocable Trusts

Protective Trusts

o Shifting Assets to a Spouse: Maybe due to your occupation or business, you are highly exposed to potential liability, and shifting the assets to your spouse could take them out of reach from predators. If your spouse retains the assets, you can enjoy statutory protection. Now to avoid complications in the event of divorce, you should agree with your spouse on the division of assets in writing. o Corporations: 276

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In case you own a business and are not already a corporation, changing your business structure to a corporation will make it a separate legal entity in the eyes of the law. In law, a corporation owns the business assets and is responsible for all business debts. Thus, incorporating your business separates your business assets from your personal assets. Therefore, your personal assets will generally not be at risk for the acts of the business. However, the limited liability feature may be lost if, for example, the creditor made the directors sign an unconditional personal guarantee with a net worth attached or if the corporation acts in bad faith or engages in illegalities or fails to observe corporate formalities.

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o Limited Liability Company/Partnership: A Limited Liability Company (LLC) is a hybrid of a general partnership and a corporation. Like a partnership, income and tax liabilities pass through to the members, and the LLC is not double-taxed as a separate entity. Accordingly, like a corporation, an LLC is considered a separate legal entity that can be used to own business assets and incur debt, protecting your personal assets from other non-tax claims against the LLC. Professionals, such as doctors, lawyers, accountants, face liability for damages that result from the performance of their duties. While no business structure will protect you from personal liability for your professional activities, a Limited Liability Partnership (LLP) will protect you from the professional mistakes of your partners. That is if one of your partners is sued, and the LLP is also named in the lawsuit, any malpractice judgment is the personal liability of the partner who is being sued, but only a business liability for you and the other partners. Your personal assets are not

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at stake if your partner commits malpractice, although your investment in the business may still be at risk. o Protective Trusts: Are you seeking to protect both business and personal assets from most creditors’ claims, then a protective Trust comes in handy? When you have a protective Trust, it splits ownership of the Trust assets, that is, the Trustee has equity ownership on one side, and on the side, the beneficiaries have beneficial ownership. The example below demonstrates how a protective Trust works: Kennedy, a business mogul, intends to leave one of his properties to Efiya, the daughter. However, being a businessman, Kennedy is afraid that his creditors might claim the property before he dies and that his daughter may not receive the said property. He, therefore, establishes a Trust with both himself and Efiya as the beneficiaries. In this protective Trust arrangement, the Trustee is instructed to allow Kennedy to receive income from the Trust until he dies

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and then to distribute the remaining assets to the daughter. The Trust assets are then safe from being claimed by his creditors, as long as the debt was entered into after the Trust’s creation. Hence, any of Kennedy’s creditors would be able to reach assets in the Trust only to the extent of his beneficial interest. For example, if his interest in the Trust is a fixed-income distribution each month of $1,000, then his creditors can only be entitled to the $1,000 per month if they obtained a judgment. o Irrevocable Trusts: It is a Trust that cannot be revoked nor changed. Once established, the Trust cannot be dissolved, neither beneficiaries changed nor assets removed from the Trust nor terms changed. In summary, once your assets become part of the Trust, you lose control of them. But, because the assets are out of your control, they are generally beyond the reach of creditors. You may further protect those assets from your beneficiaries’ creditors by

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using the spendthrift clause in the Trust. Unlike an irrevocable Trust, a revocable Trust provides the assets in the Trust with absolutely no legal protection from your creditors. o Offshore (Foreign) Trusts: It is possible to transfer assets to Trusts that are formed in foreign countries (certain countries are preferred). While the laws of each country are different, they share one similarity - they make it more difficult for creditors to reach Trust assets. Here is how it works: For a creditor to be able to reach assets held in a Trust, a court must have jurisdiction over the Trustee or the Trust assets. Where the Trust is properly established in a foreign country, obtaining jurisdiction over the Trustee in your country’s court will not be possible. So, the court will be unable to exert any of its powers over the offshore Trustee. Therefore, the creditor must commence the suit in the offshore jurisdiction.

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Taken as a whole, the obstacles in the pursuit have the general effect of deterring creditors from taking action. o Domestic Self-Settled Trusts: The person who creates a self-settled Trust (the grantor) can name himself/herself the primary, or even sole beneficiary. These types of Trusts give the Trustee wide latitude to pay as much or as little of the Trust assets to any or all of the eligible beneficiaries as the Trustee deems appropriate. The key to this kind of protective Trust is that the Trustee has the discretion to distribute or not distribute the Trust property. Creditors can only reach property that the beneficiary has the legal right to receive. Therefore, the Trust property will not be considered the beneficiary’s property, and any creditors of the beneficiary will be unable to reach it.

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None of these techniques is a complete solution in and unto itself, but a mix of these existing techniques is a wise pre-emptive approach that can provide safeguarding for one’s wealth. In summary, to protect wealth via wealth preservation, wealth conservation, and asset protection, you can follow a spread-it-as-you-build-it approach. The intention is to disperse and diversify your wealth across the aforementioned asset classes and categories while mitigating the associated risks. You can follow the following steps: Five Steps to Protect Wealth Set and Prioritise goals

Reduce risk

Have a Plan B

Balance is key

Buy Insurance

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Set and Prioritise goals: Markets can be down, businesses can take a nosedive, the economy can take a hit, therefore, you need to put in measures to ensure a resilient personal finance. To protect your wealth, it is important to first set your goals and get your priorities right. This is for turbulent moments to stabilise while you plan to bounce back. For example, critical goals that cannot wait, such as medical bills or your children’s education, or daily family living expenses should be prioritised over changing a house or a car.

•

Reduce risk: Risk is inherent in all our actions. Therefore, evaluating the associated risks with our actions should be accompanied by well-thought-through choices of actions to reduce risks to the barest minimum possible. Having set and shortlisted the critical goals, it is a good idea to allocate assets for the rest of these goals based on the importance and availability. Ensure you choose the investment product carefully for a critical goal.

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Have a Plan B: If life is unpredictable then having alternative plans cannot be optional. You cannot always predict the outcomes of your goals, but there can always be a possibility of a sudden turn in events that can instantly hamper them. In such scenarios, it is important to fall on savings funds such as emergency, contingency, or buffer funds as ready corpuses of accumulated wealth for critical eventualities. Many a time, people with no plan B’s, fall on funds kept aside for non-critical goals that act as a reserve for critical goals. You can plan with alternatives for diverse scenarios.

•

Balance is key: Diversifying is good but balancing your asset portfolio is key. Ideally, do a regular evaluation of your investment portfolio periodically (monthly, quarterly, and annually) to ascertain their performance. This helps to reorganise the portfolio in respect to high and low-yielding investments, debt-to-equity proportions, and risks to returns.

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Buy Insurance: Wealth protection cannot be done without insurance. Insurance forms part of the core of wealth protection. It can help you save on taxes and act as a financial tool in times of need. You would have to pay periodic premiums to the insurance company, which serves as financial protection for you, your dependents, and damages. As death is inevitable, and life always has a degree of unpredictability, insurance provides that financial safety net to the policyholder beneficiaries such as family and dependents.

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“Someone is sitting in the shade today because someone planted a tree a long time ago.” - Warren Buffet

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asting wealth may be created on the subject of distributing wealth into good hands to effect change in society or ensure continuity from one generation to another of a particular lineage. Thus, for many of us, the ultimate goal of wealth management is to ensure the people and causes we care about will continue to be provided for after we are gone.

“For many of us, the ultimate goal of wealth management is to ensure the people and causes we care about will continue to be provided for after we are gone”

The wealth distribution stage is more conscious than calculated. The creation of lasting wealth that outlives generations is identical to how a person chooses to distribute wealth before the unexpected (e.g., permanent incapacitation and death) strikes.

Wealth distribution constitutes an intentional approach to building a lasting legacy for one’s generation and/or for the well-being of society.

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In the previous chapters, we discussed the first four “The wealth blocks of wealth creation, distribution stage is accumulation, management, more conscious than and protection of the calculated.” Pentagon Wealth model. Viz., after these conscious stages, how does one then ensure that all the wealth accumulated over the years does not get dissipated, or the purpose for which it was accumulated is fulfilled when the unexpected strikes? These are pertinent questions that leap into the mind when intentional wealth comes into perspective. The subject of wealth distribution in this book has been contrived under three pertinent sub-subjects: wealth plan, estate planning, and wealth transfer.

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The Three Key Areas of Wealth Distribution ©

Wealth Plan

Wealth Distribution

Wealth Transfer

Estate Planning

These three have been expounded in the subsequent pages with comme il faut practical examples. The intent of this is to ensure that the journey to our wealthy place is achieved and subsequently that is transferred to the next generation or society on a broader perspective.

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Wealth Plan ©

Wealth Plan

Wealth Distribution

The theme of this book is about intentionality, which asserts that success never happens by accident. For one to reach their wealthy place and ensure continued financial success, a wealth plan is needed as a guide with strategies. Therefore, to distribute wealth without a wealth plan in place becomes practically a difficult one. A wealth plan constitutes an excellent tool for evaluating one’s present situation in terms of the assets, income, liabilities, and expenses against what is needed to achieve the set wealth goals of the person. A solid wealth plan ensures one has a financial strategy that supports their aspirations.

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Essentially, it is parallel to a roadmap that gives direction for one’s wealth aspirations and desires. It tracks one’s finances, coupled with tracking the outflows and “A good wealth the life of the person plan guides one in through a simple analysis of the process of assets and liabilities planning one’s against financial goals. estate and subsequently

A good wealth plan under wealth distribution sets the heirs sustainably tone for estate planning even in the absence and wealth transfer of the predecessor” respectively. By way of explanation, it guides one in the process of planning one’s estate and subsequently transferring same to heirs sustainably even in the absence of the predecessor. transferring same to

Notwithstanding, without a wealth plan, transfers of an estate to heirs can still be done, but sustaining the legacies of the predecessor cannot be promised. A good wealth plan does not only ensure protecting one’s estate and transferring them to the right heirs, but it also ensures transferring these estates into the right hands to sustain legacies. Consequently, the wealth plan forms the basis upon which the subsequent sub-subjects (i.e., estate planning and wealth transfer) are built. It is a

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trajectory for planning our estate and transferring same not only to the right heirs but also into the right hands to fulfil our financial or wealth goals. Wealth plan subsumes judicious consideration of heirs to take over an individual’s wealth or legacies after retirement, death, or permanent incapacitation. This constitutes a key component of wealth distribution, which is of critical interest to building a lasting wealth or legacy. To create financial goals that outlive generations, individuals who are capable of acting in our stead in the future to sustain these legacies cannot be overlooked. With financial or wealth goals on one hand and our assets, on the other hand, we need to make akin decisions repeatedly until the financial or wealth goal is achieved. The wealth plan is to make the complex simple for the persons, especially among heirs, who are capable of managing these legacies or wealth. The wealth plan process begins with first defining and capturing life priorities. This zooms into the immediate needs; goals for tomorrow and future aspirations. This is an evolutive plan that guides you and adapts as life changes. The second but often ignored is the choice of experts, specialists, and institutions to work within your wealth plan. Lastly, we need to have clearly defined strategies for this plan.

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Family and relationships Health and wellness Lifestyle and leisure Community and giving

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Finance and Investment Experts Estate and Trust Consultants Private Bankers Insurance Consultants

Strategies

Career and work

Experts

Life Priorities

The Wealth Plan Process

Wealth Accumulation Wealth Acceleration Wealth Management Wealth Protection Wealth Distribution

Business and Family Wealth Specialists

Life Priorities First, you set your life priorities. As explained in earlier chapters, we are finite beings with limited time and we cannot do everything and be everywhere. We can only be efficient and effective by defining clearly what matters most to us and to what degree they matter. This falls under the wealth definition model you choose from the onset of your wealth journey. Examples of priorities are your career, work, or business; family, friends, and loved ones; your health, wellness, and wellbeing; your lifestyle, standard of living, leisure, and even pleasure; your social status, community engagement, charity, and giving.

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The Experts The second on the steps – the experts – are often neglected as most people think they can assume this role by self-educating. However, the other reason why this step is critical is, you cannot be your bank, insurance, lawyer, accountant, wealth planner, etc. all the same time. Once you have to open an account and another would have to manage your account and transactions upon your instructions, then the choice of these experts, specialists, consultants, and their corresponding institutions and firms should be looked at critically before a final choice is made. The choice can be made with this fivecriteria approach:

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Five-Criteria Approach for Choice of Expert

Experience

Fees and Charges

Proper Licenses

Profile of clients managed

Communication

skills

1. Experience The first and most important criteria to consider is the experience and professional background of the prospective advisor. The experts should be well-qualified and have adequate experience in their field of expertise.

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Preferably, you can ask for references to discuss how they deal with clients. Seek experts who have worked through multiple cycles of their industry. 2. Proper Licenses One mistake you would want to avoid, is to be scammed or handled by an imposter, or confident trickster. You have to request and verify that the consultants have the necessary licenses and qualifications to perform their duties. For example, your stockbroker should have a stock exchange license; your investment banker should have a professional or educational qualification; your attorney should be a qualified lawyer, etc. This is to ensure that you are dealing with certified or/and licensed experts. 3. Profile of clients managed Each expert can be evaluated by past and present clients. Like medical practitioners or researchers, the more they specialise, the better they become in that area. The best advisors carve a niche for themselves and

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have solutions customised for their needs. That is why they called specialists. An attorney specialised in taxation or an investor specialised in real estate would understand their subject area better than a generalist. They will understand your needs better and have frameworks for guidance. You can begin by checking if they are dealing with people, you know or clients who are in a similar life cycle as you are. One way to ensure the experience of a financial advisor is referrals or word-ofmouth recommendations. 4. Communication skills Next, you should check out how they communicate and relate with their clients. As discussed in the previous chapters, your knowledge should be translated into your ability to understand, communicate and use the necessary tools in that area of expertise. The advisor should be patient to listen and understand your concerns to make the appropriate recommendations.

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To check their communication skills, you can test them by their objection-handling strategies. Objection-handling is like the acid test for an expert. If the advisor can handle your objections effectively, half the battle is won. 5. Fees and Charges Lastly, you want quality service without feeling overpriced. The expertise, experience, and service quality are key determinants of fees and commissions. Right from the onset, it is better you know and understand the fees’ structure. How does that align with your goals and budget? Experts charging high fees or low fees does not necessarily mean they are the best or worst respectively. These steps will assist your assessment of the expert. You will have to compare expectations and deliverables. Since trusting another individual with our finances may not be optional, we should ensure that the individuals or the institutions we choose are aligned with our goals and expectations. They should be selected with care.

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Strategies The third step is the strategies in a wealth plan. The Pentagon Wealth Model discussed in this book outlines all the key strategies that could be used in our wealth plan. The key strategies revolve around the following: 1. Build wealth 2. Enhance wealth 3. Manage wealth 4. Protect wealth 5. Transfer wealth

Planning to leave your legacy to your heirs (including charity) can be complex and difficult to face. Anticipating your death is an uncomfortable topic. The issues that need to be confronted are far easier avoided than addressed. However, as explained earlier an effective wealth plan may lessen the likelihood of probable wealth losses, family conflicts, enhance wealth, preserve wealth, reduce estate costs, and reduce taxes.

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Estate Planning ©

Wealth Distribution

Estate Planning

For many of us, the ultimate goal of wealth management and distribution is to ensure the people and causes we care about will continue to be provided for after we are gone. An estate represents all the assets one leaves behind when one dies. It is either we plan for the financial burdens, transfer of asset issues and care of minors or those left behind will have to address them. Sometimes, it is quite unfortunate, that members of the same family go at each other in the fight for assets left behind. Some firms collapse after the demise of the founders while some rich families suddenly become poor after the loss of the breadwinners. Yet, on the other side, 301

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there are some families’ wealth or businesses that outlive three or more generations. These are real-life situations common among us. Many a time, people tell stories of how their “For many of us, the ambitions were aborted ultimate goal of wealth because of the loss of a management is to certain family member. ensure the people and Many labour to acquire causes we care about massive wealth and in will continue to be their absence, all can provided for after go down the drain. we are gone” Conversely, some people are wealthy today thanks to the decisions of certain parents or relatives. Growing up, there was a successful businessman worth about $20million. He was an engineering, procurement, and construction (EPC) contractor. As an EPC contractor, his firm was ranked among the leading real estate companies in the region, and business flourished under his leadership. Then, the unfortunate happened. He died without any estate plan nor a Will for the family and worst no succession plan for the business. There was an immediate impact of his death on the business. Due to no succession plan and next-in-

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command in place, the staff was divided and the other executives were forming clans to take over the firm. This affected the business operations. Subsequently, his unplanned wealth fuelled family litigation as the extended family members filed for litigation against the nuclear family claiming shareholdings in the firm including some pertinent assets of the deceased. The firm collapsed from business stagnation. Interests with penalties on unpaid bank loans kept accruing till some assets were subsequently sold to settle the debts. Some assets were seized over breaches and the remaining being fought over at the court by the extended and the nuclear families. The demise of this man, without an estate plan, destroyed the legacy he had painstakingly built. Again, there was a nurse who left her job to be a housewife. She sadly lost her husband. But prior to the husband’s death, there was their family lawyer who worked with the deceased for years, aiding him with his estate and succession planning. Thankfully, the deceased husband with the lawyer designed and implemented an estate plan. To the surprise of the widow together with the three children, the late husband bequeathed them significant wealth through his investment activities and business interests.

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Hence, upon the death of the man, the family inherited all that he laboured for all the years. What then is estate planning? Estate planning alludes to the allocation of individual assets to heirs in case of death, incapacitation, or retirement. It is regardless of an individual’s age, wealth, health, or marital status. Estate planning constitutes a significant module equally as the other two modules of wealth distribution - wealth plan and wealth transfer. It ensures individual assets are protected and are handed to the important people as the wish of the predecessor. Especially in the absence of the predecessor, estate planning ensures assets are protected from creditors, and taxes on assets do not pile up to negatively affect the heirloom. It certifies the wish of the predecessor is honoured. Yet, estate planning may be affected by factors such as divorce, birth, marriage, changes in tax law, liquidity of assets, inter alia. It is subject to change over time and so it requires adjusting it time and again to meet present situations. Technically, estate planning may have diverse components which can be categorised under two: 1. Individual final wish 2. Provision of permanent incapacity

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Under the final wish, components of estate planning incorporate last Will/Testament, Revocable Trust, and beneficiary designations. Similarly, under the provision of permanent incapacity, components include healthcare power of attorney (HCPA), financial power of attorney (FPA), and physician orders for life-sustaining treatment (POLST).

1. Individual Final Wish a) Will/Testament: This constitutes a valid typewritten document that is dated and signed by a predecessor and a legally competent witness(es). It is a document that spells out the person(s) a predecessor prefers to succeed or take over his/her assets in case of death. A Will/testament helps to ensure proper distribution of assets when a person is no more. In the case where the heirlooms are of young ages, the Will/testament lays out who should serve as the guardian especially when the other parent is deceased or permanently incapacitated. Where there is a will, there is a way. The Will helps to determine how our assets are distributed after death. We can begin the estate plan by properly drafting the Will. The Will allows us to distribute property and assets to beneficiaries of our

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choosing. It is important to note that any property passing through a Will is subject to probate. b) The probate process: Probate is the procedure by which properties or assets are transferred from the estate of a person who has died to the designated beneficiaries. The probate process includes the payment of all estate taxes and liabilities of the deceased. The main reason why some people plan their estate to avoid probate is to save their family members a good deal of money, time, and frustration. The probate process can be time-consuming, costly, and subject to public scrutiny. Any Will is probated and it is a public record. For this reason, many people try to avoid the probate process entirely. The following are some the of ways by which we can bypass the probate process:

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Ways to Avoid the Probate Process Creation of a Trust

Property ownership

Revocable Trust

Marital Trust/family Trust plan

Beneficiary Designations

I. Creation of a Trust: As discussed earlier, the Trust agreement creates a Trust and establishes the rules that control the Trust’s management. It is legally binding and prepared by an attorney. Trusts may not be for everyone but can provide a variety of options and flexibility, including control, privacy, continuity and, potential tax savings.

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II. Revocable Trust: It is the legal arrangements made to hold on assets for a particular beneficiary or beneficiaries. The person setting up a Trust can decide on the type(s), when, and how a beneficiary or beneficiaries are to receive the assets as laid out in the document. It assists one to avoid probate on one’s assets. III. Beneficiary Designations: The deceased may have some insurance policies and retirement accounts and therefore, state clearly the persons and their quota to be received from his/her benefits when they are no more. This supersedes a Will/testament and hence it must be reviewed as regularly as possible. That is to say, incorporating beneficiary designations in our estate planning is as equally important as reviewing the same intermittently. IV. Marital Trust/family Trust plan: Also known as a credit shelter Trust, an exemption equivalent Trust, a bypass Trust, or a residuary Trust aims to reduce estate taxes assessed. The exemption equivalent amount can be used to fund the Family Trust. The remaining assets can fund

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the marital Trust or pass to the spouse outright. The result for any married person to use this plan is to leave an unlimited amount of assets to their spouse at death with no tax. V. Property ownership: Certain forms of property ownership designation can assist in avoiding the probate process such as joint ownership with rights of survivorship and community property. The former refers to the property owned as joint tenants for spouses with rights of survivorship passing to the other outside of probate at death. The latter is when the spouses each own a one-half interest in assets acquired during the marriage. The main difference is that community property does not pass automatically to the other spouse upon the death of one of the spouses. When one dies, the survivor continues owning half of the assets. The deceased spouse needs a Will or Trust to transfer his or her community property share.

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2. Provision of Permanent Incapacity a) Financial Power of Attorney (FPA): This is a legal document of power of attorney (POA) needed to grant a person the power to make financial decisions on behalf of the predecessor. Mostly created concurrently with a Will or Testament, FPA permits a person to act in the stead of the principal, matters concerning his/her finances. Akin to the other POAs, a principal refers to the person who creates the financial POA or simply put the person whose money is being protected. An attorney-in-fact or an agent also refers to the person acting in the capacity of the principal on financial matters. b) Healthcare Power of Attorney (HPA): Functioning similarly to the FPA, healthcare power of attorney (HPA) handles the medical decisions on behalf of the principal. Simply put, HPA is about asking an attorney-in-fact to make decisions about the healthcare of a principal when he/she is unable to do so. Under HPA there are two main documents to highlight. First is the living Will, which constitutes a written statement that makes

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provision of a set of instructions by the principal should in case he/she becomes incapacitated. The second is the health care proxy, which also designates an agent who will act in the capacity of making medical decisions on behalf of the principal should in case the person becomes incapacitated. c) Physician Orders for Life-Sustaining Treatment (POLST): Unlike HPA, POLST is simply not for everyone. POLST constitutes an end-of-life planning tool, mostly initiated when one’s physician expects one to live a year or less. POLST is different from HPA in the sense that decisions on medical treatments under POLST are between the principal and his/her medical team. POLST considers decisions like receiving cardiopulmonary resuscitation (CPR), getting admitted to the hospital, receiving medically-assisted nutrition, inter alia. And as indicated these decisions are solely limited to the ‘principal’ and his/her medical team, and nothing like an agent in the case of HPA.

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Wealth Transfer ©

Wealth Distribution

Wealth Transfer

Building wealth takes a blend of hard work and passion. Most successful people have gone the extra mile to achieve “Building wealth or attain what today is seen as takes a blend of a success. Nevertheless, as hard work and nature has designed, there passion” comes a time when one cannot carry along one’s wealth, so where will one want one’s wealth to go? This is when one must pass on all that one has built to one’s heirs or loved ones. Our legacy is the opportunity to pass on our wealth in the way that best fulfils our goals

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and reflects our values. Touching the future in this way can only be accomplished by thoughtful wealth transfer. The passing on of one’s wealth to beneficiaries upon a circumstantial event like permanent incapacitation and death, or retirement from agile activities through proper wealth and estate plans which include life insurance, Wills, Trusts, inter alia, is referred to as wealth transfer. Planning of one’s assets or wealth transfer determines how one will divide one’s wealth or assets, which encompasses a number of activities that will confirm the person has put things in order as things are directed as intended. It establishes: §

who gets what?

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how do they get it?

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when can they get it?

Even though, anticipating the circumstantial event like death and permanent incapacitation remains an uncomfortable topic for many, however, it is far better to plan it if only we think about building lasting legacies for our generation. A proper wealth transfer may prevent unnecessary family conflicts and reduce estate costs and taxes among others. 313

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These major decisions have significant implications on what happens to what one has laboured for all the years. The entire family or loved ones’ benefits are put in place for wealth transfer before the unexpected strikes. Wealth transfer can be summarised as follows: §

Transfer priorities regarding heirs and charity

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Gifting considerations such as type (i.e., Trusts), timing, and amount

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Business ownership succession

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Alignment of estate planning documents with transfer priorities

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Effective strategies for funding charitable giving

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Maximising your asset transfer, while minimising tax implications

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Next-generation financial education

Now, having gone through all the hustle and patience of building legitimate wealth and legacies, you will want to ensure that as little of it as possible ends up in the hands of the tax authorities, creditors, predators, and all unwanted persons susceptible to lay a claim on what you leave behind.

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This is feasible and you can start with the wealth plan and estate planning to take preventative action to either reduce or mitigate your beneficiaries’ Inheritance tax bill or mitigate it altogether. These are some six key techniques to consider in your wealth transfer: Six Key Techniques in The Wealth Transfer Process

Will

Tax Plan

Allowable Gifts

Periodic Contributions

Assets Giveaway

Trusts

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1. Draft Your Will: The Will ensures one’s assets are distributed in accordance with one’s wishes. The Will is quite critical to secure the wishes of the deceased especially when there are dependents such as spouse and children. However, if a spouse dies intestate - without a Will - there could be tax payable for transfer between spouses. Once there is no Will in place, the estate of the deceased falls under the laws of intestacy. This means the estate may be divided up in a way different from what the deceased person wanted it to be. Yet, a Will, on the other hand, ensures that the deceased’s wishes captured in the drafting of the Will are duly executed. 2. Make Allowable Gifts: Gifts are part of the smart techniques to transfer one’s wealth. In each country, there are allowable gifts. In the United Kingdom for example, it can be worth up to £3,000 in total cash or gifts each tax year and these will be exempt from Inheritance Tax when one dies.

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Often small gifts of up to a certain allowable amount can also be made to as many people as one wants. 3. Give away assets: Why wait till your death when you can even help your children with funds to buy their own home? As a parent hoping to bequeath your inheritance to your children, you can buy assets for your designated beneficiaries while alive. This means these assets automatically move outside of the estate for Inheritance Tax calculations, irrespective of size as long as it was done within an acceptable period as per the law before one’s death. 4. Use Trusts: You will want to transfer your wealth with less or no Inheritance taxes possible. This can also be achieved when you place assets in an appropriate Trust. Any asset in appropriate Trust will no longer form part of the estate. Some available Trusts and asset placements can be set up simply at little or no charge.

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In a Trust, there are the settlors - the parents who invest a sum of money. Next, the Trustees are set up, with a suggested minimum of two, whose role is to ensure that on the death of the settlors, the investment is paid out according to the settlors’ wishes. The Discretionary Trust is the most widely used Trust, which can be set up in a way that the settlors still have access to income or parts of the capital. Sometimes, while the settlors are alive, they can unwind the Trust in the event of a family crisis and funds can be returned to the settlors via the beneficiaries to salvage the situation if need be. 5. Periodic Contributions: The income-over-expenditure rule is often used in this case. It is when one decides to make monthly contributions into certain savings or insurance policies instead of merely putting lump sums into an appropriate Trust. These monthly contributions are potentially subject to Inheritance Tax, but if the person can prove that these payments are not compromising their standard of living, then they can be exempt.

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6. Provide for taxes: Sometimes, no matter the techniques used, one can be in a position where one cannot avoid taxes. In such an eventuality, the best alternative approach is to make provision for paying Inheritance Tax when it is due. The executor cannot use any funds from the estate until probate is granted. This implies, they may have to borrow money or use their funds to pay the Inheritance Tax bill. If there are any life insurance policies written in an appropriate Trust, then they can now have access to them and use them in this case. If the policy is in an appropriate Trust, then it does not form part of the estate. The lump-sum pay-out can be used to pay any Inheritance Tax bill without the executors needing to borrow where they do not have sufficient funds of their own.

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At this point, we have successfully discussed the wealth plan, estate planning, and wealth transfer. Our discussion threw more light on the basics including setting priorities, choosing the experts, clearly defining the strategies, drafting the individual Will, setting up revocable and irrevocable Trusts, and establishing powers of attorney for healthcare and property. This serves as a guide to ensure our wealth left behind ends up with the people, we want and in the best conditions possible with little or no extra charges to pay in terms of taxes or appropriation by the beneficiaries. The following is a sample of a Will with the key areas it should capture

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Last Will and Testament of MR. PRINCE PERKINS, I, Prince Perkins, resident of ____________________, County/District of ____________________, State/Region of ____________________, being of sound mind, not acting under duress or undue influence, and fully understanding the nature and extent of all my property and of this disposition thereof, do hereby make, publish, and declare this document to be my Last Will and Testament, and hereby revoke any and all other wills and codicils heretofore made by me. I.

EXPENSES & TAXES

I direct that all my debts, and expenses of my last illness, funeral, and burial, be paid as soon after my death as may be reasonably convenient, and I hereby authorize my Personal Representative, hereinafter appointed, to settle and discharge, in his or her absolute discretion, any claims made against my estate. I further direct that my Personal Representative shall pay out of my estate any and all estate and inheritance taxes payable by reason of my death in respect of all items included in the computation of such taxes, whether passing under this Will or otherwise. Said taxes shall be paid by my Personal Representative as if such taxes were my debts without recovery of any part of such tax payments from anyone who receives any item included in such computation. II.

PERSONAL REPRESENTATIVE

I nominate and appoint Christian Edwards, of ___________________________, County of ________________________, State of ______________________________ as Personal Representative of my estate and I request that (he/she) be appointed temporary Personal Representative if (he/she) applies. If my Personal Representative fails or ceases to so serve, then I nominate _____________________________of __________________________, County of ____________________________, State of ______________________ to serve. III.

DISPOSITION OF PROPERTY

I devise and bequeath my property, both real and personal and wherever situated, as follows: 1st Beneficiary _______________________ [full name], currently of _______________________ [address], as my _______________________ [relation] whose last four (4) digits of their Social Security Number (SSN) are xxx-xx-_____ with the following property: ______________________________________________________________________

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2nd Beneficiary _______________________ [full name], currently of _______________________ [address], as my _______________________ [relation] whose last four (4) digits of their Social Security Number (SSN) are xxx-xx-_____ with the following property: ______________________________________________________________________ 3rd Beneficiary _______________________ [full name], currently of _______________________ [address], as my _______________________ [relation] whose last four (4) digits of their Social Security Number (SSN) are xxx-xx-_____ with the following property: ______________________________________________________________________ If any of my beneficiaries have pre-deceased me, then any property that they would have received if they had not pre-deceased me shall be distributed in equal shares to the remaining beneficiaries. If any of my property cannot be readily sold and distributed, then it may be donated to any charitable organization or organizations of my Personal Representative’s choice. If any property cannot be readily sold or donated, my Personal Representative may, without liability, dispose of such property as my Personal Representative may deem appropriate. I authorize my Personal Representative to pay as an administration expense of my estate the expense of selling, advertising for sale, packing, shipping, insuring and delivering such property. IV.

OMISSION

Except to the extent that I have included them in this Will, I have intentionally, and not as a result of any mistake or inadvertence, omitted in this Will to provide for any family members and/or issue of mine, if any, however, defined by law, presently living or hereafter born or adopted. V.

BOND

No bond shall be required of any fiduciary serving hereunder, whether or not specifically named in this Will, or if a bond is required by law, then no surety will be required on such bond. VI.

DISCRETIONARY POWERS OF PERSONAL REPRESENTATIVE

My Personal Representative, shall have and may exercise the following discretionary powers in addition to any common law or statutory powers without the necessity of court license or approval: A. To retain for whatever period my Personal Representative deems advisable any property, including property owned by me at my death, and to invest and reinvest in any property, both real and personal, regardless of whether any particular investment would be proper for a Personal Representative and regardless of the extent of diversification of the assets held hereunder.

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To sell and to grant options to purchase all or any part of my estate, both real

and personal, at any time, at public or private sale, for consideration, whether or not the highest possible consideration, and upon terms, including credit, as my Personal Representative deems advisable, and to execute, acknowledge, and deliver deeds or other instruments in connection therewith. C.

To lease any real estate for terms and conditions as my Personal

Representative deems advisable, including the granting of options to renew, options to extend the term or terms, and options to purchase. D. To pay, compromise, settle or otherwise adjust any claims, including taxes, asserted in favour of or against me, my estate or my Personal Representative. E.

To make any separation into shares in whole or in part in kind and at values

determined by my Personal Representative, with or without regard to tax basis, and to allocate different kinds and disproportionate amounts of property and undivided interests in property among the shares. F. To make such elections under the tax laws as my Personal Representative shall deem appropriate, including elections with respect to qualified terminable interest property, exemptions and the use of deductions as income tax or estate tax deductions, and to determine whether to make any adjustments between income and principal on account of any election so made. G. To make any elections permitted under any pension, profit sharing, employee stock ownership or other benefit plan. H. To employ others in connection with the administration of my estate, including legal counsel, investment advisors, brokers, accountants and agents and to pay reasonable compensation in addition to my Personal Representative’s compensation. I. To vote any shares of stock or other securities in person or by proxy; to assert or waive any stockholder’s rights or privilege to subscribe for or otherwise acquire additional stock; to deposit securities in any voting trust or with any committee. J. To borrow and to pledge or mortgage any property as collateral, and to make secured or unsecured loans. My Personal Representative is specifically authorized to make loans without interest to any beneficiary hereunder. No individual or entity loaning property to my Personal Representative or trustee shall be held to see to the application of such property. K. My Personal Representative shall also in his or her absolute discretion determine the allocation of any GST exemption available to me at my death to property passing under this Will or otherwise. The determination of my Personal Representative with respect to any elections or allocation, if made or taken in good faith, shall be binding upon all affected. VII.

CONTESTING BENEFICIARY

If any beneficiary under this Will, or any trust herein mentioned, contests or attacks this Will or any of its provisions, any share or interest in my estate given to that contesting beneficiary under this Will is revoked and shall be disposed of in the same manner provided herein as if that contesting beneficiary had predeceased me.

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VIII. GUARDIAN AD LITEM NOT REQUIRED I direct that the representation by guardian ad litem of the interests of persons unborn, unascertained or legally incompetent to act in proceedings for the allowance of accounts hereunder be dispensed with to the extent permitted by law. IX.

GENDER

Whenever the context permits, the term “Personal Representative” shall include “Executor” and “Administrator,” the use of a particular gender shall include any other gender, and references to the singular or the plural shall be interchangeable. All references to the Internal Revenue Code shall mean the Internal Revenue Code of 1986 or any successor Code. All references to estate taxes shall include inheritance and other death taxes. X. ASSIGNMENT The interest of any beneficiary in this Will, shall not be alienable, assignable, attachable, transferable nor paid by way of anticipation, nor in compliance with any order, assignment or covenant and shall not be applied to, or held liable for, any of their debts or obligations either in law or equity and shall not in any event pass to his, her, or their assignee under any instrument or under any insolvency or bankruptcy law, and shall not be subject to the interference or control of creditors, spouses or others. XI. GOVERNING LAW This document shall be governed by the laws of the State/Country of _____________________. XII.

BINDING ARRANGEMENT

Any decision by my Personal Representative with respect to any discretionary power hereunder shall be final and binding on all persons interested. Unless due to my Executor’s own wilful default or gross negligence, no Executor shall be liable for said Executor’s acts or omissions or those of any co-Executor or prior Executor. I, the undersigned ________________________, do hereby declare that I sign and execute this instrument as my last Will, that I sign it willingly in the presence of each of the undersigned witnesses, and that I execute it as my free and voluntary act for the purposes herein expressed, on this ____ day of ________________, 20____. ________________________________ Testator Signature

___________________________________ Testator (Printed Name)

The foregoing instrument, was on this ____ day of ________________, 20____, subscribed on each page and at the end thereof by ________________________, the above-named Testator, and by (him/her) signed, sealed, published and declared to be (his/her) LAST WILL AND TESTAMENT, in the presence of us and each of us, who thereupon, at (his/her) request, in (his/her) presence, and in the presence of each other, have hereunto subscribed our names as attesting witnesses thereto.

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________________________________

___________________________________

Witness Signature ________________________________

Address ___________________________________

Witness Signature

Address

TESTAMENTARY AFFIDAVIT STATE/REGION

OF

____________________

COUNTY/DISTRICT OF __________________, SS. Before me, the undersigned authority, on this day personally appeared ___________, testator, ____________________, witness and ___________________, witness, known to me to be the testator and the witnesses, respectively, whose names are signed to the attached or foregoing instrument, and, all of these persons being by me duly sworn, the testator declared to me and to the witnesses in my presence that the instrument is the testator’s last will and that the testator has willingly signed or directed another to sign for him/her, and that the testator executed it as the testator’s free and voluntary act for the purposes therein expressed; and each of the witnesses stated to me, in the presence of the testator, that they signed the will as witnesses and that to the best of their knowledge the testator was eighteen (18) years of age or over, of sound mind and under no constraint or undue influence. ______________________________

______________________________

Testator Signature

Witness Signature

______________________________ Witness Signature Subscribed and sworn to before me by the said testator and the said witnesses, this ____ day of ________________, 20____. ________________________________ Notary Public/ My Commission expires:

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BUSINESS ENTITY

Creditors cannot reach business owner’s personal assets

CREDITORS OF THE BUSINESS ENTITY

BUSINESS ASSETS

Creditors can only reach business assets

Business property is transferred to business entity

The business owner creates the business entity

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BUSINESS OWNER

How Corporations, Limited Liability Companies & Limited Liability Partnerships Protect Personal Assets

BUILDING THE PENTAGON WEALTH MODEL

The following are diagram demonstrations of how good wealth protection strategies work to protect estates.

GRANTOR

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Creditors cannot reach property in Trust

CREDITORS OF THE GRANTOR

Creditors can only reach business assets

Trustee pays income to beneficiary

IRREVOCABLE TRUST

Grantor creates an irrevocable Trust and transfers property to the Trust. Grantor may retain beneficial ownership

How an Irrevocable Trust Protects Assets

INTENTIONAL WEALTH 2.0 DR. EVANS DUAH

GRANTOR

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CREDITORS OF THE GRANTOR

Creditors cannot reach Trust assets because creditors can only reach property that the grantor has the legal right to receive. The grantor has no legal right to receive Trust property if the Trustee has wide discretion over distributions.

WITH

Creditors can only reach the grantor’s beneficial interest.

Trustee has discretion to distribute or not distribute Trust property to the grantor

DOMESTIC SELFSETTLED TRUST

Grantor creates Trust and transfers property to the Trust. Grantor can name himself or herself sole primary beneficiary

How a Domestic Self-Settled Trust Protects Assets BUILDING THE PENTAGON WEALTH MODEL

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COURTS OF FOREIGN JURISDICTION

Trustee has discretion to distribute or not distribute Trust property to the grantor

OFFSHORE (FOREIGN) TRUST

CREDITORS OF THE GRANTOR

Trustee pays income to beneficiary

Creditors cannot use United States courts attach Trust assets; they lack jurisdiction over Trustee and Trust assets

GRANTOR

Grantor creates Trust and transfers property to the Trust

How an Offshore (Foreign) Trust Protects Assets INTENTIONAL WEALTH 2.0 DR. EVANS DUAH

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Conclusion “Once you set your mind on something and begin to pursue it, even if you do not get to the level you desired, you would be different from the person who did not pursue it at all and in a positive way.”

Are you still wondering and asking introspectively can I create lasting wealth and sustain legacies of value? Certainly, You can! The power of a secret is in its usage! Now you have been exposed to the deep realities and the practicalities of creating lasting wealth and sustaining its legacies of value. You have neither the excuse nor the exception to be anything less than wealthy. At the least, you now appreciate that wealth creation is neither mystical nor mysterious, and that there are pathways, right ways, and the Pentagon Wealth model ways of progressively achieving wholesome wealth. Now, the very thing standing in the way of this new transformation is no longer the needed information, but your decision, the intentional decision to pay the piper and dance to the tune of your desired wealth and fulfilment.

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In a time where most people live their lives based on the whims and the caprices of societal pressure without purpose and focus, being intentional is unconventional. But Intentional Wealth 2.0 has elucidated with facts, figures, and even with controversy that intention is the mother of rewards. Being intentional about wealth is singularly the most important step towards the inevitable, irrespective of the individual’s background and different wealth pathways. In this book, we demonstrate that anyone anywhere can build legacies of abiding values to generations even yet unborn.

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Acknowledgement “No one who achieves success does so without acknowledging the help of others. The wise and confident acknowledge this help with gratitude.” - Alfred North Whitehead

I am in deep gratitude to all who have contributed in one form or another towards making this publication a success. Above all, I thank God for my life and that of my family and loved ones. Thank you to the larger family of mentors, parents, friends, and colleagues for the support and words of encouragement. Again, I will like to acknowledge every author who I read and has inspired this write-up and to express my sincere gratitude to the people who gave me their full support and believed I have something valuable to share with the world. Special thanks also go to those who assisted with proofreading my manuscript, assisted with layout designs, and the entire publication process – their honest suggestions and inputs coupled with their advice assisted in refining the creative process of this publication. I say thank you for your support and individual contributions.

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Finally, I will acknowledge with gratitude, the love and support of my family, especially my wife and kids they put up with me for the late-night studies and research. I am grateful to ‘Mon Amour’ and my ‘Super Boys’.

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About The Author Dr. Evans Duah is a French and English-trained business expert. He was trained in France (Europe) and Morocco (North Africa) and currently works in Ghana (West Africa). He is an Associate Chartered Management Accountant (ACMA, CIMA-UK), Chartered Global Management Accountant (CGMA, AICPA-USA), a Chartered Global Investment Analyst (CGIA, USA), a Fellow of the Chartered Institute of Leadership and Governance (CILG, USA), and a Member of the Institute of Directors (MIoD, Ghana) He holds an EAP Certificate in Entrepreneurship and Financing from The Wharton School, University of Pennsylvania, USA; a Doctoral Degree in Business Administration in Strategic Management and Entrepreneurship, and a Masters in Applied Business Research in Entrepreneurship and Innovation from Swiss Business School, Switzerland; an MBA in International Business, and a BBA in Strategic Management from Ecole Nationale de Commerce et de Gestion (ENCG) - Agadir in Morocco. He was trained as a professional banker in International Business, Credit Management, Project Management, and Corporate Social Responsibility (CSR) by the Bank Société Générale with Business and Retail Banking experience in France, Morocco and Ghana.

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He is currently a lecturer in Strategic Management, Finance, and Entrepreneurship for BBA, MBA, MPhil and MTech programmes at the Akenten Appiah-Menka University of Skills Training and Entrepreneurial Development (AAMUSTED). He is also the CEO/Chief Consultant of Xtart Biz Consult. He consults and plays major roles in many business start-ups, mergeracquisition, fundraising, partnership and collaboration, feasibility studies for international companies intending to establish subsidiaries in Ghana or West Africa. He engages in many volunteering works. He runs The Duah Mentoring (TDM) Club 100 Programme, where yearly, he mentors about 100 young people who are between the ages of 18 and 40 years in business, personal finance and leadership. He has also served as a keynote speaker and panellist at different business events organised by YouthConnekt Africa, British Council, National Youth Authority - Ghana, Ministry of Youth and Sports – Ghana, SNV, Ashoka Africa, AAMUSTED, KNUST, IMANI Africa, AMADEUS, ASLEM among others in Ghana, Morocco, Nigeria, and China.

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Bibliography Abraham, M. H. (2015). The Entrepreneur's Solution: The Modern Millionaire's Path to More Profit, Fans & Freedom. New York, USA: Morgan James Publishing. Clason, G. S. (2005). The Richest Man in Babylon. Recorded Books. A Classic from The Diamond’s Mine Library. Collins, J. L. (2016). The Simple Path to Wealth: Your road map to financial independence and a rich, free life. Scotts Valley, CA: CreateSpace Independent Publishing Platform. DeMarco, M. J. (2011). The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime. Viperion Publishing Corp. Drucker, P. (2014). Innovation and entrepreneurship. Routledge. Federal Reserve Bank of Dallas (2021). Building Wealth: A Beginner's Guide to Securing Your Financial Freedom. USA. Fildes, E. (2019). Guide to Wealth Preservation: Place Your Future in Experienced Hands. UK: Goldmine Media Limited. Hagstrom, R. G. (2013). The Warren Buffett Way. John Wiley & Sons. 337

Hill, N. (2011). Think and grow rich. Hachette UK. James, R. (n.d.). Asset Protection: Safeguarding Your Wealth. New York, USA: Sound Wealth Management Group. Kahneman, D., & Deaton, A. (2010). High income improves evaluation of life but not emotional wellbeing. Proceedings of the national academy of sciences, 107(38), 16489-16493. Kiyosaki, R. T., & Lechter, S. L. (2008). Guide to Investing: What the Rich Invest in that the Poor and Middle Class Do Not!. Hachette Book. Kiyosaki, R. T., & Lechter, S. L. (2001). Rich Dad's Cashflow Quadrant: Rich Dad's Guide to Financial Freedom. Business Plus. Koch, R. (2011). The 80/20 Principle: The Secret of Achieving More with Less: Updated 20th anniversary edition of the productivity and business classic. Hachette UK. Lester, D. (2008). Starting Your Own Business: The Good, the Bad, and the Unexpected. Crimson. Lyndhurst Financial Management (2020). Guide to Wealth Preservation and Wealth Transfer: The Importance of Planning for the Future and Having Your Affairs in Order. UK: Goldmine Media Limited.

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Meadows, D. (1999). Leverage points: Places to Intervene in a System. Hartland: Sustainability Institute. MLC (2007). Wealth Protection: Strategies to Protect What's Important to You. Miller Street: MLC Limited. Moore, R (2019). I’m Worth More: Realize Your Value. Unleash Your Potential. Hachette UK. Moore, R. (2017). Money: Know More, Make More, Give More: Learn how to make more money and transform your life. Hachette UK. Olumide, E. (2018). The School of Money: How to make, manage and multiply your money. Nigeria: Common Sense Publishing. Raabe, B., Binder, D., Burt, J. & Sun, J. (n.d.). Wealth Preservation: Helping You Make Informed Decisions About Your Most Important Financial Concerns. California, USA: Relevant Wealth Advisors. RBC Echelon - Distinctive Wealth Solutions (May, 2021). Transferring Wealth: Creating a Legacy through Estate Planning. RBC. Wealth Management. Member NYSE/FINRA/SIPC. Ries, E. (2011). The lean start-up: How today's entrepreneurs use continuous innovation to create radically successful businesses. Currency.

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Rothschild & Co Wealth Management (2017). Why Wealth Preservation. UK. Sarlo, C. A. (2019). The causes of poverty. Fraser Institute. Stanley, T. J. (1996). The millionaire next door: The surprising secrets of America's wealthy. Taylor Trade Publishing. Smith, A. (1776). An inquiry into the nature and causes of the wealth of nations: Volume One. London: printed for W. Strahan; and T. Cadell, 1776. Templar, R. (2012). The Rules of Money: How to Make It and How to Hold on to It. UK: Pearson. Templar, R. (2015). The Rules of Wealth: A personal code for prosperity and plenty. UK: Pearson. Welch, J., Welch, S., Primus, B., Winkelmann, H., Grawe, S., & Szymczyk, M. (2005). Winning (Vol. 84). New York: HarperCollins. World Bank (1991). Assistance Strategies to Reduce Poverty. Washington DC, World Bank. A World Bank Policy Paper. World Bank (2000). World Development Report 2000/2001: Attacking Poverty. Washington DC, World Bank.

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Index

Active Income, 147, 148, 164, 166

Expenses, 150-153 Fair Exchange, 103-105 Financial Application Ability, 197

Appropriate Trust, 317-320 Asset Placement, 273, 274 Asset Protection, 256, 271273

Financial Communication Aptitude, 197

Bankroll, 174 Beneficiary Designations, 304, 306, 307

Financial Decision-making Confidence, 198 Financial Discipline, 231-235 Financial Independence, 4849

Borrowing, 199, 202, 203 Budget, 219-224 Buffer Fund, 155-158, 168 Corporate Climbers, 120, 122, 143

Financial Knowledge, 197 Financial Leverage, 90-92 Financial Literacy, 193-199, 204

Contingency Fund, 155-158, 168

Financial Planning, 207-208, 211

Corporation, 276 Currency, 17-20 Debt, 92 Disposable Income,144-145 Domestic Self-Settled Trusts, 281

Financial Power of Attorney, 309 Fixed Expenses, 151 Health and Disability, 254 Healthcare Power of Attorney, 309-310

Dreamers, 120-122 Earned Income, 147 Earning, 200 Emergency Fund, 156-157 Estate Planning, 300, 303304

Income, 144-149 Individual Final Wish, 304 Insurance, 261-264

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Interest Rate, 66, 108, 170, Investment, 172-178 Investment Diversification, 177

Portfolio Income, 148-149 Poverty, 5-11 Property Risk, 252 Protective Trusts, 278-279 Revocable Trust, 307-308 Saver-Investor, 124-125 Savings Fund, 154-155 Saving and investing, 200201

Irrevocable Trusts, 279 Lasting Power of Attorney, 268 Law of 72, 170 Leverage, 85-102 Liabilities, 43-44, 61-62 Life Insurance, 262-263 Limited Liability Company/ Partnership, 277-278

Self-accomplishment, 55-56 Social Leverage, 93-95 Spending, 201-202 Social Status, 55. 58 Statutory Protection, 274 System Leverage, 98-100, 102 Tax Authorities, 255 Testament, 304-305 Term Life, 263 The Heptagon Wealth Creation Model, 128

Liquidity risk, 250-252 Location Independence, 50 Loss Exposures, 248,250 Marketing Leverage, 96-97 Millionaire Build-up, 180 MIPPS Wealth Definition, 40-58

Time, 72-77 Time Horizon, 173-174 Time Independence, 49-50 Umbrella Liability Insurance, 264

Money, 15-23 Money Script, 30 Money Story, 30 Net Income, 66 Net Worth, 41, 43-45 Non-Life Insurance, 263 Offshore (Foreign) Trusts, 280

Value, 77-84 Value Added, 84 Value Created, 83-84 Value Creation, 82-83 Variable Expenses, 152 Virtuoso, 123 WCAA Wealth Equation Quadrant, 59-66

Passive Income, 147-148 Periodic Expenses, 151 Personal Economics, 136-137 Physician Orders for LifeSustaining Treatment, 310

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Wealth Acceleration, 159, 164

Wealth Equation by Worth, 61

Wealth Accumulation,130, 133-134

Wealth in General, 12 Wealth Management, 189191

Wealth Conservation, 265270

Wealth Plan, 290-292 Wealth Planning, 141, 149 Wealth Preservation, 257258

Wealth Creation, 67-70 Wealth Creation Equation, 111-114

Wealth Protection, 159-160, 254-285

Wealth Creation Model, 126 Wealth Distribution, 286-289 Wealth Equation, 61-65 Wealth Equation by Acceleration, 65-66

Wealth Transfer, 311-314 Wealth Velocity, 106, 108112, 117

Wealth Equation by Accumulation, 64-65

Whammy Expenses,152-153 Whole-of-life, 263 Will, 305-310, 316

Wealth Equation by Creation, 63

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Contact The Author

D R .

E V A N S

D U A H

Intentional Wealth 2.0

Building with The Pentagon Wealth Model

Website: www.evansduah.com Email: [email protected] LinkedIn: Dr. Evans DUAH, ACMA, CGMA, CGIA Facebook: The DUAH Instagram: The DUAH Twitter: Evans Duah

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