How to Build Wealth: My learnings from “the streets”

“A person can be highly educated, professionally successful and financially illiterate”. — Robert T. Kiyosaki

I have always been interested in learning about how money works. Especially during my early teens, I often wondered why and how some of our neighbours became richer while others became poorer, although they had relatively similar jobs.

But growing up in a typical African household, discussions around financial skills wasn’t the norm. I can hardly recall my parents talking to us about managing money, saving, investing in assets, or developing a sound financial habit. And speaking to many of my peers also made me realize that my experience wasn’t unique. So in as much as I wanted to believe this was a challenge that only existed in my home, it turned out that most of us received little or no training from our parents about money management.

Just like learning about sex education in a typical African home, financial education was out of our reach to most of us.

When it came to the subject of education, my parents had their expectations; we were to learn everything from school. But while the school can do a good job developing professional skills, the same cannot be said for financial skills. In reality, the financial education I have received has mostly come from my observation of the habit of those in the societies I have lived in, or as pop culture refers to it, “the streets”.

Financial education: My learnings from the streets

I spent most of my formative years in Nigeria and my first financial lessons came from observing the dominant economic culture and lifestyle in Nigerian society. The average young Nigerian tend to spend a lot of their “earned or borrowed” income on cars, bags, clothes, and jewellery — to be admired and respected. Morgan Housel´s words best describe the scenario,

“We tend to judge wealth by what we see because that is the information we have in front of us. We can’t see people bank account or brokerage statements. So, we rely on outward appearances to gauge financial success. Cars. Homes. Instagram photos”.

And with the proliferation of “social media” over the last decades, I think many more Nigerians became more accustomed to “high consumption lifestyles” — little or no investments, assets, or profit-making businesses, but an insatiable need to constantly convince others of their success.

But after moving to Germany several years ago, I became confronted with an alternative reality that was quite different from what I had been accustomed to while in Africa. For the first time, I became immersed in a society filled with people who should ideally be regarded as “wealthy” but looked and lived modestly.

Coming from a culture that defined wealth by the way people look and the amount of material procession they could display, this was a different experience. For the most part, Germany exposed me to a society where most people allocated their time, energy and money in ways and opportunities that helped them build more wealth and believe that financial independence is more important than displaying high social status.

Today, as I reflect on my experience, I see that the opportunity I have had to have lived in both societies have greatly influenced me, and I believe I have gained valuable insights from my experiences that could be useful to someone. This is why I decided to share this piece with some of my learnings in this article.

Disclaimer: The following is not financial advice but for educational purposes.

A large inheritance and a good income are not enough!

“Ordinary folks with no financial education can be wealthy if they have a handful of behavioural skills that have nothing to do with a formal measure of intelligence”. — Morgan Housel

At the foundation of building wealth lies a necessity: Capital. For most people, this usually comes from their earned income or some form of inheritance. However, having an income or inheritance is usually not enough to build or sustain wealth, especially if you cannot live below your means.

“Wealth is not the same as income. If you make a good income each year and spend it all, you are not getting wealthier, you are just living high. Wealth is what you accumulate, not what you spend.” — Thomas Stanley and William Danko

Our ability to build wealth can greatly depend on our financial habits. As Thomas Stanley and William Danko found out, most wealthy people typically have a habit conducive to accumulating wealth. In some cases, a handful of them have little or no formal education or advanced degrees but have developed skilful ways or habits of handling money. What seems to make the difference is usually not the size of their income, inheritance, or level of formal education, but having a sound financial habit.

The roadmap to building a sound financial habit

“By far, the best investment you can make is in yourself”. — Warren Buffet

I agree with the famous quote attributed to Warren Buffet — an American investor and philanthropist who is considered to be one of the most successful investors in the world — that one of the most significant investments we can ever make towards building wealth is to invest in our education.

Ideally, before starting with any investments, it is crucial to invest in learning about investments. But as sensible as this might seem, this step is often overlooked. I personally prefer reading books, watching videos, and listening to podcasts. And depending on your preference, you might choose another medium. But the goal remains the same:

Invest in developing your greatest asset — your mind.

At the end of the day, some of us will always be born into families that might not be able to afford us any form of financial education. Some others will grow up in societies encouraging wealth building, others not. But regardless of the differences in our backgrounds and circumstances, we can still build and accumulate wealth by actively seeking financial knowledge and developing sound financial habits to manage our income or inheritance. In the voice of Barrack Obama, “Yes, we can!!