Wealth Creation

Ever since I can remember I wanted to build wealth and make my millions. We can discuss the ethics and motivations of this goal another time. This article will outline my views on a strategy to build wealth. I will outline a general strategy and leave you to search Adam and my respective blogs to find out more.


I'm a 24 year old trainee accountant for a big global financial services firm with a goal to run my own Investment Company. I spend a lot of time reading and experimenting with personal finance and enjoy investing in shares. I started my blog back in second year of University to track my progress on my goal to become a multimillionaire. I write about all areas of personal finance, but normally things that have inspired me in my daily life. The highlight is my quarterly multimillionaireroad plan review update where I detail all my net wealth. See my most recent March 2014 update. I'm far from making my first million but if you look at my progress over the last year and a half, I believe that I am on track.

Weath Creation Stategy

In my opinion the strategy for wealth creation is pretty straightforward on paper but difficult to implement in practice; particularly in find the motivation! 

Here is the "paper" bit:

Job: The first thing to do is to get a job. You need a primary source of income to ignite your plan. People say that applying for jobs is a full time job in itself. You need to be scouring all avenues in the search for a job - put your CV online, utilise recruiters, call up Companies to see if they have a position and utilise your network.

Avoid Debt: whatever you do, however much debt you have, don't take on any more debt! Debt is the antithesis of wealth creation. By taking in debt you may have more money in your pocket today but in the future you will be poorer as a result than had you never take. On that debt.

Automate your Savings: the second your paycheck hits your bank statement you need to be saving a portion of it. I would suggest setting up a standing order to a savings account from your primary current account. The money should come out the day after you receive your paycheck. I'd recommend saving 10% of your paycheck and then see if you can increase it over the following years. The reason to automate is to take saving out of your hands. Most people do not have the discipline to save regularly and will wait to see what's left at the end of the month. NEWSFLASH: there won't be anything left. Automate!

Make your money work for you: the ideal situation is that you have so much saved up that you could live off the interest alone. In the meantime you don't want (all) your money just sitting on a savings account earning a meager amount of interest. Make sure you have some emergency savings, a couple of thousand in place in case you lose your job. With the remainder of your savings and all future savings place a portion (I'd suggest 50%) into higher risk investments, especially if you aren't saving for anything in particular. 

Give yourself time: Rome wasn't build in a day. Neither will your wealth. Building wealth takes time and patience. You will get frustrated and face setbacks but persevere and you will be rewarded.

If you're interested in a more detailed explanation of building your wealth check my How to become Rich series. 

Now, putting the plan into practice is up to you.

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Tesco Value

At the time of writing this Tesco Plc share price sits at 287p. This is well below its 52 week high if 388p and extremely close to its lowest price of 280p. There have been ongoing recent reports that the likes of discount supermarkets Aldi and Lidl are snatching market share from the "Big Four" supermarkets (Tesco, Sainsburys, Asda and Morrisons). Tesco market share has slipped in the last couple of years from its stable 30% to around 27%. In addition, this week has seen the exit of Tesco Finance Director Laurier McIlwee, which many have suggested as symptomatic of severe disharmony amongst the Directors. In combination, the issues that Tesco faces has resulted in the share price falling a long way off from its former 10 year high of nearly 600p.

Tesco Value!

For investment ideas I try to look for great businesses that have fallen on hard times. In the case of Tesco, I believe that the Company is now vastly undervalued. The Company still generates bags of cash, with plenty if cash in its coffers to invest or defend itself in a price war. I get the feeling that many analysts are forgetting that this Company has consistently made between 1 and 2 billion pounds per year for the last few years, and that it generated £64billion in revenue in 2013. 

We mustn't forget that Tesco is in a period of consolidation, particularly as it pulls out of America. Tesco will need to start to re-compete for the UK market just as it did in 1995 when it overtook Sainsburys as the UK's largest supermarket.

Running the Numbers

So what is Tescos worth? This is a very subjective question. No two analysts will be able to produce exactly the same numbers as there may be thousands of assumptions that need to be made on those numbers. 

However, a Company's value should scream out to you. In the case of Tesco we can take it's free cash flow per share and project it forward as if it declines at 1% per annum then even at a discount rate of 10%, the fair value of the Company would be 360p. Given that today's market price is 280p, this current price appears to scream that the Company is currently cheap.

Tesco results are being announced Thurday 17 April 2014. I think until this happens markets will continue to be jittery about the price. My assumption is that the results will show (as expected) a decline in the Company's performance. Following this announcement I intend to buy a small stake in the Company.

Of course, all this assumes that Tesco will not decline in performance significantly in the future. Let me know your thoughts?

Do you like what you've read? Tell your friends by sharing it with one of the buttons below. Please post this to Facebook or Tweet it to help your friends and family. Feel free to send me an email (mrmoneybanks<at>multimillionaireroad<dot>com), find me on twitter @millionairer0ad or comment. Whether good or bad, I want to hear from you all.

Pension shakeup

A few of my previous articles have been about the changes to economic policy following George Osborne's budget speech on 19 March 2013. One of the biggest outcomes following that speech was the changes made to Pensions.

Pensions Previously

I previously explained that Government policy meant that when you came to retirement you were forced to take you pension pot and buy an annuity that would pay you an income for life. There was some flexibility in the scheme. You were able to up to 25% of your pension pot tax free as cash before purchasing your annuity. You were also allowed to choose your annuity provider. There were also different types of annuities.

Pension shakeup

The big change to the pension system is that you no longer have to buy an annuity. You now have the freedom to choose where to put your money when you retire. When you come to retirement you still have the option to take out 25% of your pension pot as cash tax free. However, whilst you may still wish to buy an annuity, you can now take your money out of your pension pot and invest it into the stockmarket or buy an investment property with the cash. You could even buy a Lamborghini with the money , assuming you can afford it! Unfortunately, the drawback to doing this is that whatever you take out of your pension pot will be taxed at your marginal rate of income tax i.e. If you are a higher rate tax payer then you will pay 45% tax on any money that you take out of your pension.

I will discuss in a following article what you should do with your pension.

What will happen to the annuity market?

Many have predicted that the annuity market will crumble. Some have suggested that the market for annuities will shrink by as much as 90%. Insurers such as Aviva reacted by shrinking by as much as 5% (as quoted on the stockmarket), suggesting that investors agreed with this sentiment. I'm not so pessimistic. There will always be a place for annuities. 

I believe that the shakeup to the annuities market such that there is no legislated demand will definitely cause a fall in the demand for annuities. It is hard to predict by how much. However, I am fairly certain that the changes will cause an increase in the attractiveness (or price) of annuities as insurers compete to attract investors who are otherwise strongly tempted to take their pension as cash. This is simple supply an demand. As demand falls for an item, assuming that nothing else changes, the price should go up. I actually believe that these changes will make annuities more attractive.

What if I already have an annuity?

Unfortunately if you already have an annuity then you're too late to change it. The only exception to this is if you purchased your annuity within the last 30 days. If this is the case then you can still change your decision.

Do you like what you've read? Tell your friends by sharing it with one of the buttons below. Please post this to Facebook or Tweet it to help your friends and family. Feel free to send me an email (mrmoneybanks<at>multimillionaireroad<dot>com), find me on twitter @millionairer0ad or comment. Whether good or bad, I want to hear from you all.


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