UNIT 1: THE PERSPECTIVE OF ENTREPRENEURSHIP

TITLE OF THE LESSON: WEALTH CREATION

DURATION: 3 hours

INTRODUCTION

Building wealth and managing one's finances is one of the rarely taught topics,

so many individuals or business owners suffer when it comes to wealth creation or end

up hiring. Also, most of them end up hiring professionals to manage their wealth. This

lesson introduces the concept of wealth creation, how to manage income, how

to manage and increase income, and also on how to choose the right investment. The

lesson also presents wealth creation opportunities that are applicable to all individuals.

OBJECTIVES:

At the end of the lesson, the students are expected to:

1. define the wealth creation;

2. explain the importance of wealth creation;

3. discuss the wealth creation plan; and

4. explain the reason of investing.

PRE-TEST

As a student, how would you create wealth?

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LESSON PROPER/COURSE METHODOLOGY

What Is Wealth Creation?

What is wealth creation and how can you create a saving strategy that works?

This is a question that's probably crossed your mind at least once. During this

pandemic all nations struggle to obtain financial stability which has tremendous impact

to our economy.

Malindog Uy (2020) stated that the Philippines is one of the countries that is

deeply affected by the Covid-19 pandemic. Given the increasing number of Covid-19

positive cases, the country continues to lose money and the lower percentage of gross

domestic product (GDP) is not helping. It is most likely that in the succeeding quarters,

it will be hard for the Philippine economy to bounce back.

In addition, half of the Filipinos have temporarily or permanently lose their job

due to closing of businesses. The solution to this is the gradual opening of the

economy, however, many Filipinos will be unsafe with the virus spreading. Moreover,

as stated by the government, the health of the public is the number one priority in this

time of pandemic. There is also a huge loss in the income of the government, since

projects were postponed, and remittances and investments from other countries

temporarily stopped, as other countries also closed their borders. Fortunately,

the government find ways in increasing budget by getting loans and by accepting

donations from organizations and rich countries. The question now is how will

the government manage the funds and how will they use it to help Filipinos and create

more wealth.

The term wealth creation can mean a lot. To others it may mean increasing

the level of money, it can also mean getting rich, or it can also mean investing to

increase money. It differs depending on the characteristic and behavior of a

person. In Economics, Wealth Creation is the increase in the number of assets

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owned by an individual, a family, community, organizations, and country. Since

Economics is

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associated with scarcity, when there is an increase in the resources, especially scarce

resources, that can also be considered as wealth creation.

In Entrepreneurship, Wealth Creation is the combination of all financial

planning and investment advice for the betterment of the assets owned by an

individual, family, or company. It includes planning for the future like getting married,

having children, the costs of education, tax services, estate planning, and retirement

planning. From this meaning, one can see that wealth creation is important in our lives

and it entails different functions in our lifetime. Yet, one must remember that in order

to be successful in wealth creation, needs, wants, and goals must be understood,

organized, and prioritized first, to be able to meet the growth opportunities of wealth.

Furthermore, wealth creation entails the use of one's imagination and

hard work to be able to produce massive number of money. Hereby, weath creation is

all in the mind of a person; it is how a person thinks to do something unique that lead

to wealth creation and possibly a way out of poverty.

On the other hand, wealth creation is also defined as the process of producing

a supply of assets like stocks, gold, cash, bonds, and real estate; that are considered

to be sufficient in generating a stable source of income to help in livelihood. As once

said by Robert Kiyosaki, "Don’t work for money, let money work for you." Also, it is

important to start early, as assets appreciate more in the long-run.

Importance of Wealth Creation

1. Regular source of income. Good investments provide a source of income;

they help individuals pay bills in the future or even after retirement and provide

emergency cash or fund in times of needs or special events and occasions.

2. Healthy Retirement. Building wealth is a requirement for a healthy and happy

retirement. The wealth creation is specifically important to those who are near

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 in their retirement years for it can help them enjoy life without so much

financial worries.

3. Goal-based investing. As explained above, the first step in wealth creation is

determining your goal. In this way, you know what to do, what to achieve, and

how to push yourself harder to achieve that goal. A goal-based investing help in

achieving targeted wealth. Having a goal also works well with finances, for it

helps individual to budget income and save more.

Ideal Wealth Creation Plan

Since Wealth creation is a part of a financial plan, here are some steps to

consider in planning wealth creation.

1. Create a budget

2. Invest rather than just saving.

3. Understand the impact of inflation on saving.

4. Invest in appreciating assets

5. Become Debt-free.

6. Cut on unnecessary expenses

7. Don’t mix insurance with investments

What Is Budget?

Budget is defined as the estimation of income and expenses over a period of

time. It is commonly compiled and evaluated on a periodic basis to achieve a certain

amount. Creating a budget is for everyone that wants to track their money and how

they spend it.

Creating a Budget in Five Steps

1. Figure out your after-tax income. If you get a regular pay check, the amount

you receive after all the deductions like loans, insurance, etc. is your after-tax

income. If you have other types of income, perhaps you make money from

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 side gigs deduct the costs and taxes you incur in that gigs, and that will be

your after-tax income.

2. Select an appropriate budgeting plan. Budget should be able to cover all your

needs. Choosing the appropriate budgeting plan you achieve your financial

goals and fulfill your needs.

3. Track your progress. It is important to always track your progress. In this

way you will know how fast or slow you in achieving your goals.

4. Automate your savings. Always automate, so that the money you've saved

for a particular purpose go with a minimal effort on your part. You can choose

an accountability partner to support you in doing your budget and in your

financial goals.

5. Revisit your budget as needed. You'll never know when to change your

budget again. It can be due to increase in income, in expenses or priorities.

Therefore, do not forget to adjust your budget accordingly.

Investment

Investment is an asset or item gained with a goal of appreciating and producing

income. In economics, investment is the act of acquiring assets or goods that will not

be consumed today but will be used in the future. In finance, investment is a monetary

asset purchased to provide income in the future or to be sold at a higher price for a

profit.

Investment is basically an asset to allow money to grow over a period of time.

The wealth created from investment can be utilized as savings, income, payment of

loans, purchase of another asset, etc.

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 Categories of Investment

1. Ownership Investments- a type of investment that assets are owned and

purchased by the investor. Examples include stocks, real estate properties, bullion,

and others. Having a business and funding it is also an example.

2. Lending Investments - bonds are the main instrument when it comes to lending

investment. The money you invest is used to fund banks in order to give loans to other

people and the government to fund some projects.

3. Cash Equivalents - these are of liquid investments which can be converted into

cash, with low level of risk.

Reasons to Start Investing

1. To Keep Money Safe

Money conservation is one of the central reasons people invest. Most of the time,

people save and invest money so they can have something to spend when they need

to buy something or when there is unexpected expenses, to safeguard the future, and

to save up for retirement.

2. To Grow Money

Another objective of investing is to secure that it grows into a huge amount over time.

The appreciation of capital is normally a long-term goal that helps secure future

finances. To grow money into wealth, one must consider different investment options

that will have a significant return depending on the amount invested. Some of these

investments are associated with high level of risk, but at the same time, the return of

the money is also at a high level.

3. To Have a Stable Income

Investing can also help in earning a steady source of income. It can be your primary or

secondary source of income. Examples of investment that pay out regularly includes

fixed deposits with regular interest. Another is buying stocks from

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companies that pay investors dividends. This type of income generating investment

help in paying your everyday expenses and in saving extra money in the future.

4. To Achieve Financial Goals

Investing can help in achieving short-term and long-term financial goals without

experiencing trouble or too much stress. There are some investment options with high

liquidity level with short lock-in periods, sometimes, there are also investment options

with long long lock-in period and are not very liquid. An individual can choose the most

ideal type of investment to achieve financial goals. It can be the investment with short

lock-in periods, if one wishes to use the money instantly, or it can also be the

investment with long lock-in periods, if one wishes to use the money in the future.

Understanding the Impact of Inflation on Savings

Inflation is the increase in the prices of goods and services in a particular

economy. It can be the rise of the prices of food, clothing, transport, housing, etc. As

the price increases, people suffer their capability to consume different goods

and services decreases. An inflation that is too high is not good for individuals

and economy. Furthermore, inflation reduces the value of money. Therefore, the value

of the money you saved today will not have the same value in the future due to inflation.

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