Looking back can help you plan the road ahead...

Many people I assist on a day to day basis share a common trait. The noise around them gets in the way of their financial success. The purpose of my blog today is to take you down memory lane which may help you plan the road ahead.

Whilst the past is the past, and looking forward is of utmost importance, when it comes to creating your personal wealth looking back at your financial position can be a trigger and a motivator to take action.

Here’s a quick exercise for you. Ask yourself the following questions and jot down the answers…

  • What was my net worth 10 years ago? (net worth is your Assets minus your Liabilities)

  • What is my net worth today?

  • How much income have I earned over the last 10 years?

  • What was my home worth 10 years ago worth?

  • What is my home worth today?

I’ve run this simple exercise for several of my clients over the years and the results were an eye opener for them which helped them take action.

"Planning is important, but without action nothing can be accomplished!"

A common theme I see is that people are too impatient with their investments (e.g. flipping their investment properties for a quick profit). I also see a trend where people continue to gear up their home and releasing equity for personal use (e.g. lifestyle purchases such as cars, toys, and holidays).

The issue with both these actions is that you will never achieve true financial freedom.

Time (and being patient) is the number one ingredient to creating true wealth from your property assets. It can be very tempting to cash in on the capital growth of a property, or to complete a renovation and flip it for a quick profit, however the secret to magnifying your wealth is to let the magic of compounding do its work.

Another common theme I see is refinancing a home loan to release equity against the rising value of the home. Debt recycling is an excellent strategy for creating wealth, however if the equity released is only being spent on toys, cars, holidays, and lifestyle purchases, then financially you are going backwards!

Many people I come across bring a lot of energy and effort to their day to day working lives, which is terrific. However the number one priority for you (personally) should be to focus more time, energy and effort into improving your personal balance sheet. After all, your job helps you put food on the table and provide you shelter, however your investment assets (your nest egg) is the ticket to financial freedom.

Run the above exercise for you personally and judge for yourself how you’ve travelled over the last 10 years (financially). If you’re on track to achieving your bigger picture, then well done! If you feel your wheels are just spinning and not getting anywhere financially, then take action and seek professional help to ensure the next 10 years are your best ever financially.

"You can build a mountain in 10 years, but taking action is the number one ingredient!"

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