Last time I introduced you to the three laws to successful wealth creation that will enable you to build a solid foundation to ensure you provide a very sustainable income in retirement. As I pointed out, many people forego the planning required to prepare for retirement until it is too late. However, this needn’t be the case. Even if you are about to retire or you have already retired you can still apply these principles to get your investments working for you.
In this article I want to address the first of these laws in more detail to show you how you can stop losing and start making money from your investments. If you remember, the first of the three laws to wealth creation was to ‘spend less than you earn’.
Throughout my career many people have asked me to show them how they can create wealth. In most cases they expect that I will give them the ‘holy grail’ of investing, the one thing that will make them millions. Instead, I ask them a simple question – ‘Do you have a budget?’ You know, that great wealth creation vehicle that many suggest you should have to help you become financially independent. If you are like most people, you probably think a budget will restrict your spending, hamper your lifestyle and generally make you miserable. However, none of this is true – a budget is simply a financial plan to succeed.
A budget lists your income and expenses, and lays the foundation as to how you either invest or spend your money. It allows you to have more freedom, more security and more wealth. Quite simply, it provides you with the flexibility to plan for the future, but more importantly take control of your life today and put you on the right path for your future.
It is usually this first rule that creates considerable angst amongst people. This is because most people do not have a budget. However, without a budget, how do you know how much you are actually spending, or more importantly how much you can save?
Usually it is not until people receive their group certificate at the end of the financial year that you hear the outcry ‘I got paid that much, what did I do with it all?’ Only when spending habits are quantified do we know how much we can save. I have never met anyone that could not save at least 10% of their income after completing a budget. Most people could in fact save 20% to 30% of their income and still maintain a good lifestyle.
If you begin to budget you will realise how much money is wasted through uncontrolled spending.
Budgeting is like your roadmap to financial independence – it provides you with a plan of attack that allows you to create your preferred reality. The bottom line is a budget will allow you to allocate your income appropriately so that you stop losing and start making money.
My advice to you is set some time aside to create a budget to quantify your spending so that you can begin to invest your income wisely.
Next time we will look at how to invest your surplus income wisely so as to create both capital growth and income.
Source by Dale Gillham