The Creation of Wealth

Wealth is created through several means.

• Natural resources can be harvested and sold to those who want them.
• Material can be changed into something more valuable through proper application of knowledge, skill, labor and equipment.
• Better production methods also create additional wealth by allowing faster creation of wealth.
  

For example, consider our early ancestors. Building a house from trees created something of greater value for the builder. Hunting and firewood created food and fed a growing family. Agriculture converted labor into more food and resources. Continuing use of resources and effort has allowed many descendants to own much more than that first house.

This is still true today. It is more obvious to those working with physical material than to a service worker or knowledge worker. A cubicle worker may not be aware in how many ways their work is creating something which is of more value to their employer than the amount that employer paid to produce it. This profit creates wealth for the owners of the organization. The process also provides income for employees, and suppliers, and it makes the continued existence of the organization possible.

The Limits to Wealth Creation

There is a debate in economic literature, usually referred to as the limits to growth debate in which the ecological impact of growth and wealth creation is considered. Many of the wealth creating activities mentioned above (cutting down trees, hunting, farming) have an impact on the environment around us. Sometimes the impact is positive (for example, hunting when herd populations are high) and sometimes the impact is negative (for example, hunting when herd populations are low).

Most researchers feel that sustained environmental impacts can have an effect on the whole ecosystem. They claim that the accumulated impacts on the ecosystem put a theoretical limit on the amount of wealth that can be created. They draw on archeology to cite examples of cultures that they claim have disappeared because they grew beyond the ability of their ecosystems to support them.

Others are more optimistic. They claim that although localized environmental impacts may occur, large scale ecological effects are either minor (in terms of magnitude) or non-existent. They sometimes claim that if these global scale ecological effects exist, human ingenuity will always find ways of adapting to them. To them, there is no limit to the amount of growth or wealth that this planet will sustain.

The limited surface of Earth also restricts potential growth and the effects upon this planet.

The difference between income and wealth

Wealth is a stock, meaning that it is a total accumulation over time. Income is a flow, meaning it is a rate of change. Income represents the increase in wealth, expenses the decrease in wealth. Mathematically, net income (income minus expenses) can be thought of as the first derivative of wealth, representing the change in wealth over a period of time.

Wealth Creation

Each one of us wish to become Wealthy. However, very few are able to achieve it. The basic reason for failure to become Wealthy are mostly common. Some of the most common reasons are given below:

1. A sound physical health is essential. Most of us do not give importance to Physical Health by ignoring the two basic things of sound physical health.
   1. Food habits
   2. Exercise
   It is recommended that first & foremost thing to improve is physical fitness for which one should change his food habits & everyone should start exercise which suits to his/her needs to maintain a disease free body.
   
   
2. A sound mental health is essential to take right decisions to the maximum possible extend. A right decision can be taken only if it is taken without fear, greed, anger or influence. Some time should be spared every day to improve mental health by adopting any one of the following:
   1. Pranayam
   2. Dhyan
   3. Jap
   4. Kirtan
   It is expected that a normal person can achieve upto 90% correct decisions if atleast one action is taken for betterment of mental health.
   
   
3. The decision to create wealth should be taken with long term objectives of wealth creation . However , most person take this decision on friends/neighbors advice without working out their needs/goals . You should also take advise from experts of this field in this regard .
   
   
4. Some persons consider investments as a tool of tax savings rather than growth & value creation .

Goals Of Wealth Creation

The goal of wealth creation can differ from one person to another. Some examples of targets are given below for example

1. A service class person wants to save for retirement & needs to meet expenses for higher education /marriage etc. of his /her children.
2. A business class person wants to save for growth in business /emergencies.
3. An optimistic person in service may like to save for switch over from service to business.
4. Many people save for buying properties viz., shops/residence/land etc.

How to Create Wealth

In general there are following investment avenues which give higher growth rates to your investments:

1. Shares
2. Mutual funds
3. Tax saving schemes-with tax advantage & high growth rates
4. Real Estate