Reasons You're Not Rich

Many people assume they aren't rich because they don't earn enough money. If I only earned a little more, I could save and invest better, they say.

The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it's how you treat money in your daily life.

The list of reasons you may not be rich doesn't end at 10. Caring what your neighbors think, not being patient, having bad habits, not having goals, not being prepared, trying to make a quick buck, relying on others to handle your money, investing in things you don't understand, being financially afraid and ignoring your finances.

Here are 10 more possible reasons you aren't rich:

You care what your car looks like: A car is a means of transportation to get from one place to another, but many people don't view it that way. Instead, they consider it a reflection of themselves and spend money every two years or so to impress others instead of driving the car for its entire useful life and investing the money saved.

You feel entitlement: If you believe you deserve to live a certain lifestyle, have certain things and spend a certain amount before you have earned to live that way, you will have to borrow money. That large chunk of debt will keep you from building wealth.

You lack diversification: There is a reason one of the oldest pieces of financial advice is to not keep all your eggs in a single basket. Having a diversified investment portfolio makes it much less likely that wealth will suddenly disappear.

You started too late: The magic of compound interest works best over long periods of time. If you find you're always saying there will be time to save and invest in a couple more years, you'll wake up one day to find retirement is just around the corner and there is still nothing in your retirement account.

You don't do what you enjoy: While your job doesn't necessarily need to be your dream job, you need to enjoy it. If you choose a job you don't like just for the money, you'll likely spend all that extra cash trying to relieve the stress of doing work you hate.

You don't like to learn: You may have assumed that once you graduated from college, there was no need to study or learn. That attitude might be enough to get you your first job or keep you employed, but it will never make you rich. A willingness to learn to improve your career and finances are essential if you want to eventually become wealthy.

You buy things you don't use: Take a look around your house, in the closets, basement, attic and garage and see if there are a lot of things you haven't used in the past year. If there are, chances are that all those things you purchased were wasted money that could have been used to increase your net worth.

You don't understand value: You buy things for any number of reasons besides the value that the purchase brings to you. This is not limited to those who feel the need to buy the most expensive items, but can also apply to those who always purchase the cheapest goods. Rarely are either the best value, and it's only when you learn to purchase good value that you have money left over to invest for your future.

Your house is too big: When you buy a house that is bigger than you can afford or need, you end up spending extra money on longer debt payments, increased taxes, higher upkeep and more things to fill it. Some people will try to argue that the increased value of the house makes it a good investment, but the truth is that unless you are willing to downgrade your living standards, which most people are not, it will never be a liquid asset or money that you can ever use and enjoy.

You fail to take advantage of opportunities: There has probably been more than one occasion where you heard about someone who has made it big and thought to yourself, "I could have thought of that." There are plenty of opportunities if you have the will and determination to keep your eyes open.

Real Estate Investment Trusts: Are They For You?

If you once invested in the Nairobi Stock Exchange, chances are that you have made excellent returns over a short period of time. Sadly though, you stand the risk of exposure to an array of factors characterized with investing in non diversified portfolio. If you have considered diversifying your investment portfolio but didn’t know which one to go for, then Real Estate Investment Trusts may be an option to consider. But again, you may ask; are they really right for me.

Majority investors today consider investing in real estate as the ultimate investing goal. To the wealthy individual, it is merely an investment like any other; buy today, cash in tomorrow. That just goes as far as direct real estate investing is concerned. But now, there are the Real Estate Investment Trusts, commonly known as REITS.

Simply put a REIT is a pool of funds that is invested in real estate. Funds are drawn from investors and put under the management of a fund manager who then decides on the kind of real estate investment to go for based on the amount raised by subscribers for the trust. REITs will typically invest in real estate or real estate related assets. These can vary from shopping centers to office buildings, hotels and mortgages secured by real estate.

There are three types of REITs but the most common one is an equity REIT. The REIT basically entails having investors’ pool funds by way of buying shares of the REIT and getting an income out of it. This income is mostly paid on an annual basis.

The other type, a mortgage REIT basically entails lending money to owners and developers or investing the money in financial instruments secured by mortgage or real estate.

A hybrid REIT combines both the features of a mortgage REIT and the equity REIT. An investor in this category has his portfolio well diversified against the downturns in each category.

The United States has the most developed REIT market in the world. Other rapidly expanding REIT markets include Australia, France, Japan, Canada, the Netherlands, Singapore and Hong Kong. In Australia, the REIT concept was launched in 1971 with the General Property Trust being the first REIT to be listed in the Australian Stock Exchange (ASX). There are over 60 REITs listed today and Australia has the largest property trust in the world after the United States. Germany planned to introduce REITs in 2007 but the legislation is seemingly yet to be passed. There are already 7 REITs in Hong Kong. In the United Kingdom, 7 companies converted into REITs in 2007 after the Finance Act enacted a legislation allowing them to do so.

In Africa REITs are also gaining popularity in some key African nations where financial markets are well developed. Key in Africa is South Africa which, according to Ernst and Young was the top performer in the world in terms of total return over three year period giving a return of 34%. The number of public REITs in South Africa was 7 by end of 2006. However, the market had the lowest leverage among the key markets in the world.

Kenya’s market is slowly coming of age. Bora Real Estate Investment Limited (BREIL) was launched late last year at a point when Kenyans felt that the property market had completely sidelined the starters in the investment maze. One of the reasons behind setting up BREIL, according to Joe Macharia, the CEO of Bora Capital (the company behind BREIL) was to provide an investment option that works for small savers who cannot afford to put up a payment to acquire property or build a house.

The BREIL structure is a hybrid REIT but private (not listed in any market). Investors invest in the fund by subscribing to shares of BREIL and getting a regular income on an annual basis.

One of the advantages of investing in REITs is the tax advantage enjoyed by the investors. This is so because REIT investing allows for tax rebates on gains.

There is the old saying that you can never go wrong on land. Same applies to property as it can only appreciate in value. An investor therefore looking for gains over the long term would benefit from investing in REIT as it offers stability over ones investment.

One challenge with investing in REIT is that the target groups, mainly those within the age bracket of 25 to 45 are excited about short term gains. This is not a common feature with REITs which are illiquid and have an investment time span of more than one year.

REITs may just be what your investment portfolio needs. However, do observe caution in taking on REITs, contact your Investment Advisor for more information on the risks and benefits to your investment portfolio.