The Rules of Wealth

by Richard Templar

  Getting wealthy is a bit like that. You toil away for years and suddenly you are lucky. You scrimp and save and sacrifice and gosh, how wonderful to be touched by fate’s fickle finger!

  YOU TOIL AWAY FOR YEARS

  AND SUDDENLY YOU

  ARE LUCKY

  Well, the truth is that you have to speculate to accumulate. You have to be in it to win it. If you don’t bet, you don’t get. No, no, no. I am not suggesting gambling in any sense. If you invest on the Stock Exchange, after wisely taking advice and studying the companies and their performance, this is the safest form of gambling. If you stake it all on red, this is high-risk gambling. If you work your socks off for 20 years and finally it pays off, this is not gambling.

  Speculate has in fact four meanings – to discuss, to think deeply, to invest and to believe in something not entirely certain. I think that about sums up our pathway to prosperity.

  Discuss. Talk to all and sundry about wealth and see what others think and do. Study them closely.

  Think deeply. Understand your subject.

  Invest. Speculate with your time and effort and life.

  Believe in something not entirely certain. There are no guarantees, but you should be able to shorten the odds considerably if you follow the rules others have forged for you.

  I know you might have thought I mean you to speculate with your hard-earned cash. I don’t. I mean you to speculate with your time and effort, forethought and planning, energy and dedication. The more you put in, the more you’ll get out.

  On the other hand you could go and blow it all on red. Only joking.

  RULE 26

  Decide your attitude to risk

  Am I going to suggest that money can only be hard won by perilous investments and chancy ventures? No, I’m not. In that case, am I suggesting caution and that you should carefully hang on to every penny? No, I’m not advocating that either.

  What I am suggesting is that it’s entirely up to you what level of risk you feel happy with – it’s no good me telling you what that level should be. You have to decide your own attitude to and appetite for risk. Personally I love the idea of sailing close to the wind financially. However, my attitude is definitely verging on the cautious side so I don’t take the risk. I find the risky schemes where you could blow the lot or make a fortune hold some appeal but I don’t indulge my whims. I have young children and they come first.

  Once you have decided your attitude to risk it makes your planning easier. It allows you to tailor how you intend becoming prosperous. Hare or tortoise I guess.

  IT’S ENTIRELY UP TO YOU

  WHAT LEVEL OF RISK YOU

  FEEL HAPPY WITH

  Obviously your attitude will vary depending on the project. Things to take into consideration are:

  Your age. We cope better with risk the younger we are.

  Family commitments. If, like me, you have young children it does make you more cautious. If they’ve all left home, you might be prepared to push it a bit further.

  Income and/or assets. You need to work out the percentage of your wealth you are prepared to risk. The more you’ve got, the smaller the risk might be – unless you are prepared to risk the lot of course.

  If you are going to take risks, then do try to offset them. Take out insurance if you like. Also:

  Don’t put all your eggs in one basket (more about this later).

  Consider how much stress and excitement you can handle.

  Look at the timing – long term against quick returns.

  Think about how much you can afford to risk. Worst-case scenario stuff.

  Judge how much information you have. Too little increases risk.

  The other thing to ponder is how you respond to the risks of life. Life in itself is risky and nothing is certain. How do you cope when things go wrong? Are you positive, dynamic, enthusiastic and up? Or do you get all gloomy and depressed and feel the glass is half empty? Know yourself and know how you cope and how you respond to changes. And remember that risk doesn’t mean bad. It means you don’t know how it will all turn out.

  RULE 27

  Think through the alternatives to taking a risk

  We all know that the greater the risk, the higher the potential reward. And of course the lower the risk, the less return you’re likely to get on your investment.

  But you also need to consider what your alternative is. What if you don’t take this risk? Is there an alternative that gives you almost as high a return, or will the money bring you in almost nothing if you don’t take the risk?

  Let me give you an example. Suppose you’re considering investing in a volatile market for a chance of high returns. If you don’t make the investment, you could put the money in the building society where it ought to be safe (I did say ought to...). So what kind of interest is the building society paying you?

  It could be 3 per cent. Then again, it could be 0.5 per cent. If it’s fairly high, your high risk investment may not be worth taking, whereas when interest rates are very low it might be your best chance of a decent return.

  This concept – the overall reward you get for taking a risk, when measured against the alternatives, is called risk premium (just forget that bit if you don’t like jargon, I only put it there in case you want to know). It’s a calculation particularly worth making when it comes to short-term investments, as over the long term it can be harder to predict how the alternatives to the risk will perform.

  Look back to late 2007. Then, savers could get interest rates of over 6 per cent. At the same time, the equity markets (share prices) were falling. So there was no reward, or premium, for taking the risk of investing in equities. However, once interest rates dropped the balance shifted and equities looked like a far better option than they had – and that has nothing to do with the investments themselves, but simply how they measured up against the alternatives.

  YOU NEED TO CONSIDER

  WHAT YOUR ALTERNATIVE IS.

  WHAT IF YOU DON’T TAKE

  THIS RISK?

  RULE 28

  If you don’t trust someone, don’t do business with them

  It’s such a simple rule: we don’t do business with people we don’t trust. What more is there to say? Apart from that this also includes companies, corporations, governments, you name it. And why don’t we trust them? Because there is something adrift, something that rings that little warning bell inside us. There may be clear visible signs but as often as not there won’t be. Mostly this rule is about using your intuition, listening to your inner voice.

  If you feel something, anything, is wrong, then walk away. Listen to what is being said to you. There are unconscious clues your subconscious is picking up. If you ignore them you’ll invariably regret it. I’ve done it. We’ve all done it. I nearly did it again the other day. I nearly bought a car from a dodgy dealer. I knew he was dodgy but I wanted the car. I knew the car would be dodgy. What is it that makes us overwrite all the warning signs? I did the only sensible thing – I phoned a friend. And he talked me out of it. Good man.

  You can extend this rule to cover loads of situations such as: ‘If you don’t trust your boss, don’t work for them.’ ‘If you don’t trust your childminder, don’t leave your kids with them.’ ‘If you don’t feel comfortable with your financial adviser, get another.’

  Look, you can choose what you do and how you do it but if you want to be a Rules Player then you need to be assertive, stand up for what you know is right, don’t accept second best – ever. Listen to your intuition, be the biggest, boldest and bravest. If the situation feels wrong, it probably is. If you don’t get the right feelings about a person you are dealing with, find a way out.

  If it waddles like a duck and quacks like a duck, chances are it’s a duck. Avoid. Walk away. Hold on to your wallet and run.

  LISTEN TO YOUR INTUITION,

  BE THE BIGGEST, BOLDEST

  AND BRAVEST

  RULE 29

  It’s never too late to start getting wealthy<
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  It’s very easy sometimes to believe that the hand we got dealt in life is all we have to play with. Or to say, ‘Ah well, I should have started a pension in my early twenties – it’s too late now’. But we can change anything we want – it’s never too late to start being wealthy.

  Look at Rule 1 again – anyone can make money. And it’s not limited by your age or any other time factor. All it requires is that you shift your focus to becoming wealthy and already things will happen without you having to do anything more. Obviously if you want more than the basic that the universe is going to give you, you will have to do more. But by shifting your focus you will set wheels in motion and prosperity will come to you. And no, this isn’t mumbo jumbo. It’s a universal fact. The fact you do something – shift your focus – is enough.

  No matter how long you have been going along a particular path – poverty, lack of success, whatever – it doesn’t need much of a shift to alter course. And altering course can happen no matter how long you’ve left it. There is no such thing as too late. It’s a bit like being an ocean-going liner. You may need a lot of space to stop but it doesn’t take much to get you to change direction. A couple of degrees on the wheel and you’ll be on a completely different course within a few miles.

  In gaining prosperity, as in most things, there is a tipping point. Once you’ve added on those couple of degrees to port or starboard the resulting change in trajectory gets bigger and bigger in a sort of compound way.

  It is also never too late to start investing – in stocks, in shares, in a pension, in style, in quality, in yourself, in life. By staying alert and alive we resist that decline into inactivity and apathy which is such an ageing attitude. My father-in-law (always such an inspiration) started another business when he was 75, and not just any old business either – it was in a new technology which most 50-year-olds were having trouble getting their head round.

  IT IS NEVER TOO LATE TO

  START INVESTING – IN

  SHARES, IN A PENSION,

  IN STYLE, IN QUALITY, IN

  YOURSELF, IN LIFE

  However, if you think it is too late, it probably is. The secret is never to think that. If you think that you can give up easily then you probably will. Don’t think it. Look, we came into this book together to make money – some for you and some for me. I’m going to do my bit, my damnedest, to help you increase your prosperity. If you think there are any barriers – age, sex, race, ability – then you are already batting on a losing wicket. Dump the preconceptions and trust me. It is never too late to begin. Start now.

  RULE 30

  Start saving young (or teach your kids this one if it’s too late for you)

  OK, it might be too late for you to start saving young. We can’t go back. But you can certainly teach your kids the importance of learning this trick. And I’m not suggesting we scrimp and save to be able to save. Saving should be something we naturally do. I guess it’s a trick you learn quickly if you are self-employed – or not, if you go bust. Every time you earn money you put some aside for VAT and tax. Failure to do so means scrabbling around when the return is due and you have to find it. If you put aside more than you need, the leftovers become the savings. Obviously you only fail to do this once or twice before it becomes a really easy thing to remember to do.

  IF YOU PUT ASIDE

  MORE THAN YOU NEED,

  THE LEFTOVERS BECOME

  THE SAVINGS

  I find that it is easier to have a ‘figure’ so you don’t have to think too much. My own figure is 50 per cent. Anything I earn, I put half straight into a savings account. I don’t have to think about this. I know that some is for tax and some is for VAT and the rest is for savings. Every now and again I transfer the balance of what’s left to a second savings account – a sort of super savings account. From the super savings account I can transfer money to a pension fund, ISA (Individual Savings Account) or whatever.

  This, for me, is an easy way to save. I don’t have to think too much about it. It is a method I pass on to my children – spend half your pocket money and save half. I hope they’ll find this an easy method to pick up, a sort of savings muscle memory, so that they will have a quid or two when they need it at university or whatever.

  I really wish I had (a) started saving young and (b) been taught to do so. Lots of really prosperous people have said that they had wealth management drummed into them from a very early age. It seems to be an essential part of prosperity gaining.

  I am fascinated to watch my own children learning about money. There does seem to be a genetic predisposition for spending or saving. We treat all of them identically when it comes to money but one child finds it easy to save; another is a fanatic spender and couldn’t save anything to save himself; and one is oblivious to money either way.

  I’m a great believer in making changes to correct basic flaws in one’s upbringing. It’s no good sitting around blaming others, you have to change it. I have to take responsibility and train myself. Obviously this doesn’t apply to being tidy.

  RULE 31

  Understand that your financial needs change at different stages of your life

  Some cultures allow for a different focus, a different strategy, during different stages of your life. For instance, up to 20 might be for being young and foolish and getting an education. Age 20 to 35 could be for getting married and raising a family. Age 35 to 55 might be for running your business and making your fortune. Life after that is for spiritual contemplation and retirement from the commercial world.

  ALLOW FOR A DIFFERENT

  FOCUS, A DIFFERENT

  STRATEGY, DURING

  DIFFERENT STAGES

  OF YOUR LIFE

  Essentially, your financial needs change over time, reflecting what is going on in your life at any stage, and the choices you make in your lifestyle at that time. You might need more money when raising a family, but maybe this is a time when you can usually cope better with a little adversity.

  By the time your kids are at university you definitely need loads more cash or the poor darlings won’t have enough to squander in the student union bar in the evenings, every evening. And once you hit retirement you can downsize again – unless you intend spending it all on expensive world cruises.

  This rule is about checking where you are and what you need. And about knowing that the conditions which influence your needs do and will change. You have to make allowances for differing circumstances.

  A bit of forward planning with this in mind will stand you in good stead. For example, if you’re about to invest all your spare cash in a long-term investment scheme, remember that if you suddenly need a bit more money as you’ve taken maternity leave or you want to go on a world trip in a career break, your money will be tied up. Think it through and anticipate possible future needs and changes.

  So, quick exercise. Where are you in your life? How much do you need? What is the next stage for you? How much are you going to need?

  RULE 32

  You have to work hard to get rich enough not to have to work hard

  I cannot emphasize how strongly I feel about this one. I watch and learn from the seriously wealthy and have reached the conclusion that in nearly every single case they slogged their guts out to get where they are. They often started early. They worked late into the night. They sacrificed a lot. They didn’t take long lunch breaks, they didn’t waste time. They didn’t watch television in the evenings. They worked their socks off. They know money doesn’t grow on trees.

  If you too are serious about getting rich, then you too must do as they do. You are going to have to put in the hard work to get rich enough so that you don’t have to work hard. But you must do the work first.

  So how dedicated are you? How serious are you? This is the point where we sort the wheat from the chaff, the men from the boys, the girls from the women, the runners-up from the winners.

  Still here? Good. You are obviously committed. If you are prepared to put in the lo
ng hours and you put them in on the right things, you should succeed. Maybe not immediately. Maybe not with your first idea. But by slogging away you will get there. How do I know this? Because I have done it. I’m not preaching from the wilderness (I hope I’m not preaching at all). I started out poor, and worked long and hard and chose where to put my efforts carefully. And now I’m rich. It really is that simple. On the surface it looks like luck. But that’s because I make it look so. In The Rules of Work I wrote about looking cool, looking laid back, looking effortless. I practise that a lot. I often go back to work very late at night after everyone else has gone to bed – or get up very early in the morning. Don’t tell anyone because I like the indolent image where everyone assumes I am a work-shy, lotus-eating, decadent loafer. But the reality is I graft. You have to.

  THEY DIDN’T WATCH

  TELEVISION IN THE

  EVENINGS. THEY WORKED

  THEIR SOCKS OFF

  I’ll let you into the secret of the wealthy club – you need to work like you’ve never worked before. Work like there is no one watching. Work like you don’t have a boss. Work like your life depended on it. The second secret is that you have to enjoy it. If it’s a chore then you won’t do it.

  Let me make one very important point here. This Rule does not mean that if you work hard at anything you will become wealthy. An office cleaner on the minimum wage will not become rich by working all hours as an office cleaner or by cleaning really hard and thoroughly. They might, however, become rich by starting their own cleaning company and working very hard at getting it off the ground, and finding new clients and making sure their staff were great, happy and motivated.