Spent Less! Is it really true?

January 18, 2016

 

It is common at this time of year (just after the festive season) for people to think about their goals and aspirations for the year ahead.  Money and financial goals is a common topic and one that gets a lot of attention.

 

Something I hear often is that you should “spend less than you earn”.  Whilst this theory makes perfect financial sense, this line of thought is likely to be hindering your chance to reach financial freedom!  Let me explain.

 

Let’s say you earn $80k per annum.  After paying your taxes, you net $62k.  That’s already $18k to the government, ouch!  So you have $62k left over, which is just shy of $1,200 per week.  You buy food, fuel your car, pay for transport, pay household bills, pay for shelter (home loan or rent), then you spend what’s left over on dinner out, the movies, a night out, and so on.

 

Investing in assets (like property) is far from your mind as you simply don’t have surplus cash to commit.  After all, investing is just for those on higher wages or for the rich, right? Let me share a secret with you, those on bigger salaries are usually the worse savers and the most complacent when it comes to creating wealth. I speak from experience!

 

If you’re spending more than you earn based on lifestyle choices, then this is a sure way to send you broke or keep you forever chasing your tail.  Flying business class may be a luxury you want, however if your salary only affords you an economy class ticket, then these are choices you need to carefully consider and make.

 

Many people don’t have an issue with tapping into the credit card, but when it comes to finding cash to invest in their financial future, it’s all too hard or it’s out of reach.

 

If you have equity in your property, then leveraging your equity means you don’t have to find the cash to invest.  You simply release the equity from your home (or investment property) to buy your next investment property, or investment asset.

 

If you don’t own property yet and don’t have equity you can tap into to invest, then there are many ways you can create (or stash) cash to kick start your investment portfolio.

 

Set yourself a savings goal and seek advice to better understand just how much cash you need to kick start your investment portfolio.  Then take a good hard look at what you’re spending your money on and what you can eliminate (or reduce) to save up for the deposit you need.

 

Once you get your first investment off the ground, the rest will become easier.  As equity builds within your investments, you can tap into the equity to buy more investment assets and create more wealth.  As the saying goes, money makes money!

 

The moral of the story, life is full of blind spots.  The concept of “spend less than you earn” makes perfect financial sense, but it can also be a blind spot (hindrance) and stopping you from achieving the financial success you want and deserve!

 

Financial success is a mindset.  If you feel stuck and you feel that your wheels are just spinning, seek the right advice and take action.  Contact us if we can assist in any way.

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