CHOOSING THE RIGHT PATH

Private Property South Africa
Justin Clarke

"Most of us know these lines from one of Robert Frost's famous poems: 'Two roads diverged in a wood, and I, I took the one less traveled by, and that has made all the difference.'

Creating wealth is undoubtedly the road less travelled by. Only a few have taken this path, not because they had a certain level of education, or a certain amount of money, or even connections in the right places. They simply came to the place where the road diverged and chose the one less travelled by, the road to wealth.

The majority unfortunately choose the other road. These travellers also include 100% of the people who are not making any form of provision for their retirement – the vast majority of people in South Africa. These travellers further include 100% of those who pin their dreams of wealth and financial freedom on luck, whether hoping for an inheritance, gambling or playing the lottery.

Alexander Forbes recently released some sobering statistics regarding staking your future on luck, particularly with regard to the lottery. They note that your chances of winning the lottery are 0.0000072%, but perhaps even more disturbingly, that playing the lottery regularly can cost R804 000 over a lifetime.

The calculations made by Alexander Forbes are based on the assumption that ticket prices stay stable at R3.50 per draw each Wednesday and Saturday, interest rates are at 10% and historical payouts are a good indication of future payouts. Their calculations look like this:

• Five tickets per draw twice a week between the ages of 25 and 60 will result in a loss of R286 785.96.

• If this money was saved, R517 535.85 could have been accumulated over the same period, leaving you R804 321.81 better off.

Indeed, most people are not careful about spending R3.50 or other small amounts on lottery tickets, coffees, take-aways and lunches. Saving on these expenses could add millions of rands to your pocket, but this, indeed, is a road less travelled by.

Another road rarely travelled is the property investment path to financial freedom. And yet, there is no lack of evidence that this road does in fact lead to wealth and financial freedom.

Consider, for example, the recent findings of the Global Wealth Report, a survey among Citi Private Bank's international high-net-worth clients - those with assets worth more than $10 million (around R70 million). The survey showed that 33% of these wealthy individuals are invested in property.

Furthermore, residential property – excluding investors' own homes - was the clear favourite for those invested in property, accounting for 50% of the typical portfolio. Commercial property made up 30% of the typical portfolio, with property funds and Real Estate Investment Trusts (REITs) at only a combined allocation of less than 5%.

Many people know about the power of property investment to create wealth, and yet when they arrive where the two roads diverge, they continue to choose the highway to nowhere, in financial terms. Indeed, it takes courage to choose the road less travelled by, and that, perhaps, is precisely the reason why wealth and financial freedom are enjoyed by less than 5% of the population.

The good news is that arriving at the point where the two roads diverge is not a once-in-a-lifetime event. In fact, every morning when we get up, we find ourselves at this point. Every day, it is entirely up to you which road you will choose."

Article courtesy of www.lightminded.com

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