Money Expert: Apply this Simple Formula to Become wealthy


Many people who graduated from university at the same time I did have gone on to accumulate sizeable assets over the past decade or so. Individuals who studied business and finance subjects got a head-start in their careers as did people who opted for industries requiring rare skills, like the IT sector.

But a sprinkling who studied arts and humanities also managed to become relatively wealthypartly by working hard on developing their personal brands and therefore placing themselves in the position to command huge salaries.

Then there are those big income-earners who had all the opportunities to grow their wealth, but somehow have ended up living from hand to mouth: architects, vets, scientists among them.

Why did some obvious candidates for the rich league fail while others became wealthy against the odds? Money expert Dawn Ridler explains the simple formula behind wealth-building.

Yes, you do need to earn enough money to save and invest in the first place, but mostly the way to ensure a comfortable financial position is to have your head in the right space – and the discipline to stick to your plan of spending less and investing more. – Jackie Cameron

By Dawn Ridler

Is it possible to distil a complicated and emotional topic like wealth into a simple equation? If you can simplify a concept, it is much easier to understand and implement, so let’s give it a bash. The equation goes like this: Income minus consumption equals wealth.

If you really want to impact your wealth then you can do one of three things – increase your income, decrease your consumption and grow your wealth. Obviously the biggest impact will come from tweaking all three and not just focusing on one.


This is the most difficult and takes the longest to change. If you want to increase income, you can either increase the flow from the current source or find a whole new one. To increase your current income you’re going to need to work harder and smarter, and probably most importantly invest the time (and money) to keep your skills on the cutting edge of your profession.

If your career is one of the many under threat from being made extinct in the next 10-20 years thanks to technology, you might need to re-skill completely. Many income sources, especially passive income require capital (aka wealth) expenditure so let’s put that on the back burner for now.


This is the easiest one of the three to tackle immediately and get results instantly. It is often is the most difficult to do, especially if times are tight. We work hard for our living, there have to be some rewards for that, right? How carefully do you watch your expenditure? Daily? Monthly weekly? Never?

Luckily for us there are now apps that pull all your savings and expenditure into one place, categorise them for you and, with one flick of your finger, you can see how the month is going. The one I like best is called “22seven” and is available for free in the various app stores.

In the broadest of terms, there are net savers and net consumers – which are you? – and perhaps more importantly which one is your life partner? Two net consumers are going to have a hard time growing their wealth because they enable each other.

My recommendation to everyone wanting to save more and consume less? Make savings a game. Use technology to catch the money dripping into your wealth and quietly tie them up before you even miss them.


Looking after your wealth is probably the easiest part of the equation, not because it is easy to understand or navigate, but because there are skilled people out there who will help you. The key to the long term health of your wealth is to ensure that each ‘bucket’ of your wealth has a clearly defined objective and timeline.

This will dictate what mix of asset classes should be used in caring for it. Sure, fees can erode this, but before you throw the baby out with the bathwater and try and go it alone, understand that there is a whole range of fee options that will give you value for money.

What is value for money? An advisor who works with you all year to help you manage and understand this difficult topic. A fund that is either a dirt cheap tracker/ETF: These are proudly average and beat active managers 80% of the time. If you want actively managed fund, pick one that can justify their 2-3% per annum fees by consistently beating the market (not their contrived benchmark).

Actions: If you tackle all three aspects of the Wealth Equation at the same time then you can really leapfrog this game.

  • Dawn Ridler is a Certified Financial Planner. She is founder of Kerenga in Johannesburg. Dawn completed her MBA at age 22. After a stint as CEO of Crafters Market and Build-A-Bear Workshop (SA), she decided to leave the retail arena and moved into financial services. She achieved her Certified Financial Planner® designation in January 2010. Dawn is a registered representative on the FSB license of Hexon Financial Services number 42793. She is currently a member of the Financial Planning Institute’s risk competency committee.

Written by How South Africa

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