How to get rich (part 1)

Many people dream of attaining unlimited wealth but never quite get there. In part one of ‘How to get rich’ Angelique Ruzicka interviews Gerald Mwandiambira, acting CEO of the South African Savings Institute for his take on what it means to be wealthy and looks at a few South Africans who’ve made it.

If you type in the words ‘How to get rich’ into Google you get over 171 million results. The topic never gets old and there is a mountain of information out there on how to attain it. But very few people become super wealthy.
Getting rich in Africa is not impossible. One only needs to look at Forbes’ 50 Richest People in Africa 2015 list to get a sense of the stupendous wealth that some people on this very continent have attained.

South Africans are included in that list too. To mention a few, there’s Jannie Mouton with net worth $520 million (R6, 426.43 million) a self-made millionaire who is the founder and CEO of PSG group a listed investment holding company. Gus Attridge (worth $660m) also a self-made millionaire who is the deputy CEO of Aspen Pharmacare, the largest pharmaceutical manufacturer in Africa. Lauritz Dippenaar, co-founder of Rank Consolidated, (you guessed it – also a self-made millionaire and worth $730m) accumulated wealth through building a financial services empire.

Let’s not forget to mention Allan Gray (worth $1.6 billion), founder of Allan Gray limited a Cape Town based investment management firm and Patrice Motsepe ($2.1 billion), who Forbes describes as South Africa’s first and only black billionaire. Motsepe is self-made and founder of African Rainbow Minerals. He also has a stake in financial services company. And if you think there’s no money to be made in the media – spare a thought for Koos Bekker chairperson of Naspers, said to be worth $2.3 billion.

What is being financially rich?
But what does ‘being financially rich’ actually mean? Gerald Mwandiambira, acting CEO of the South African Savings Institute says you’ve made it if you have sufficient financial resources to cover immediate expenses or other unforeseen expenses that would come up at any one time.

Wealth then is measured in time and not in money. He says wealth is measured in time because you can determine it by the length of time you’d survive without your salary from your job. Ask yourself: “If you were to stop earning income how long would the resources that you have help you maintain your standard of living?”

Mwandiambira points out that with this definition it’s possible for a domestic worker to be wealthier than a CEO. This is simply because she may have saved more money for her standard of living and can live off that longer than say a CEO who may have far more wealth than her but who would lose it all in a flash were he to lose his job.

“Some may look like they’re wealthy but wouldn’t be able to live without their salary and would in three months have their cars and homes repossessed. Their wealth will last a month or two so to me you need to have enough resources to cover your future and immediate financial needs and you need to be able to sustain that. With true wealth you would be able to sustain it for a lifetime,” says Mwandiambira.

Rich mentality
Mwandiambira maintains that wealthy people are people who have a plan. “They plan and track and adjust their positioning depending on their current situation. Anybody who is serious about accumulating wealth needs to be a consummate planner, they need to have a vision and they need to have contingency plans so that if things don’t go their way they need to have alternative ways to cope.”

This is the difference between those who become wealthy and those who never achieve it. Essentially, those who dream about being wealthy don’t really attain wealth because that’s all they do: they dream. Millionaires and even billionaire’s get there through sheer determination, passion and are goal orientated.

Sure there are those who make their wealth through sheer luck. According to Bloomberg there’s a woman in Las Vegas who won the lotto four times since 1993, and a man in the United Kingdom who stumbled upon buried gold worth millions. However, people who win money easily can and tend to lose it just as easily too, particularly if they don’t know how to handle that wealth.

“The people who fail to accumulate wealth never have a plan B. If they lose their job they don’t know how else they will earn an income. They can only rely on getting another job,” adds Mwandiambira.

Multiple income streams
Rich people get richer in many ways. Mwandiambira says it’s particularly in three ways: they have a job where they earn an income, they save and they rely on investments so that their money grows through compound interest. “You tend to find that they are multidimensional in terms of their income streams and they don’t depend on one plan to maintain their lifestyle.

“I spoke to a very wealthy gentleman and asked him how he gets it right. And he said you need to have an income for today (so that can be a job) you need to have something saved up (for anything that happens) and you need an income that is growing. So you definitely need savings, an investment and you need current income, which can come from a job or business,” he explains.

The key is that should you lose out on one of these income streams that you have enough wealth in the other streams so that they can effectively step in and replace the income you lost. “Wealthy people do not survive on one line. That is not true wealth. Most of us are stuck in one job and if we are lucky we have some small savings or investments. But these income streams for wealthy people are significant and can cover each other at any one point.

So if your business is failing [and you are wealthy] the savings can literally step in and do exactly what the business did for however long it needs to. If the savings and business fail then the investments need to be able to step in and cover all the lifestyle needs. So they are almost covered three times over,” says Mwandiambira.

I point out that unless you inherit money or have another type of financial kick-start that it’s very hard to accumulate that kind of wealth especially enough to invest in three income streams that can step in to maintain a lifestyle at any given moment.

But Mwandiambira says this should not be an excuse and that young people have the opportunity to acquire wealth right from the onset. “Even during the first you can plant the seed toward true wealth by having an investment, savings and income in place at the very outset. What tends to happen is that your investment starts with compound returns and your savings are there to cover you and you have income.”

Most people don’t try to start off with all three, which is where they get it wrong. “Most people start out with an income. Then when they have children they start thinking about savings and then when they are getting older they realise they will retire one day and then think about investments. But if you plant those seeds from the very outset and have that clear goal you can set up the basis of creating real wealth,” says Mwandiambira.

Business and jobs for the wealthy
For business ideas always look at the obvious. “A lot of people try to be intricate and exotic but a lot of successful businesses are just based on man’s needs. When you think of business think of one product that will do well. All the big billionaires started with one simple product line and that’s all they did. They have a low margin high volume business and you make money like that. Sometimes you just have to anticipate a change in technology [to make money], for example people are changing to Smart phones.

“So you then have to anticipate what the next move will be from Smart phones and what people will be using. It doesn’t have to be something completely new. The iPad, for example, was just an adaptation of a computer screen. Those are genius inventions but sometimes you need to keep it very basic,” says Mwandiambira.

Failing and getting back up
Investing your money is a good strategy toward accumulating wealth but things can go horribly wrong. When asked about the risks that comes with investing Mwandiambira says: “Wealthy people will also tell you that they have lost.

“You will never come across a billionaire who hasn’t lost [something]. So be prepared to lose what you invest. You need to believe in yourself but at the same time you need to be able to pick yourself up if things don’t go as planned.”

And you don’t always have to lose money. Mouton, also known as the ‘Richard Branson of Stellenbosch’ got fired at the age of 48. But he picked himself up, built his own business from scratch and is now one of the richest men in South Africa and Africa. He ‘looked back’ enough to write a book about his experience entitled ‘And then they fired me’.

“Work with a professional so that you learn the ropes. While you learn the basics it’s really up to you and your own gut feeling and you make the final decision. If you lose your money don’t mope around and blame your financial advisor, you have to be able to pick yourself up again. Anybody who invests must be prepared to lose it all or they will never attain true wealth,” says Mwandiambira.

Find your passion
Mwandiambira advises people to think about their own talents and skills which they could derive a secondary income from. “You can freelance in your spare time and there’s a lot work that you can do. Some, for example, consult in the evenings.”

He also urges people with aspirations of being wealthy to go all out in the first couple of years, even if they don’t really get much sleep in the process. “The day has 24 hours and you can make use of it. You hear stories of how some billionaires never slept in the first couple of years. If it means that for a few years you don’t sleep but you then don’t work for the rest of your life [that’s surely better than] sleeping peacefully and working for just one salary for eight hours every day. Push yourself and work for 20 hours for a few years and then never work again at all.”

If you happen to be uncertain about how to obtain wealth be prepared to take advice and be willing to pay for it. “I find very few people are willing to pay for it. Good advice goes with your level of aspiration. Get second and third opinions from other people and professionals. You also indemnify yourself from the scams. If a registered financial advisor gives you the wrong advice then you can often get recourse,” points out Mwandiambira.

Read our sequel on the six ways to build lasting wealth (as advised by Dr John Demartini) by clicking here.