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Monday, May 7, 2012

Wealth Creation

We live in one of the best countries in the world. We have one of the lowest unemployment rates and on average people in Australia earn high wages for their labour.  Yet most people would not consider themselves wealthy.  So if high income levels do not make us rich, then what does?

It’s simple mathematics really.
…and a lot to do with habit. AND… you can do this even if you are on welfare. Here’s the formula:  If you spend less than you earn, you can get rich.  I know it sounds too easy but you have to make the conscious decision to do this, otherwise money just seems to go doesn’t it? Here are two more formulas for you.  If you spend exactly what you earn, you will not be poor or rich.  If you spend more than you earn, you will always be in debt.

How to spend less than you earn.
There are many different tricks that you can use to cut down on expenses or to make a successful budget but if you are looking for simplicity try this.  Open up two separate bank accounts.  In the first one, put away some money each pay that is not to be spent.  This is yours to keep.  In the other one, put away money for unexpected emergencies.  This is because life happens and we don’t want any excuses to dip into the money we have decided is ours to keep.

What do we do with our kept money?
That’s a very good question for your Financial Adviser (not me).  Or else, seek out some books on investing from the library.

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