Budget is Not a Dirty Word for the Wealthy.
As the saying goes – “People Don’t Plan to Fail they simply Fail to Plan”
Ask any successful person and they will know their numbers inside out.
You cannot drive a car without looking at the dash board.
Well, some people do, but it’s not advisable.
Most Poor people tell me they don’t earn enough to begin saving
Or they tell me as soon as they pay off their debt they will start saving.
Or they say as soon as they reduce their expenses they will start to save.
However they never get around to it and before you know it they get older and it’s now too late to save as they are too old.
They turn 65 years of age and they are still trying to pay off that debt or loan or expenses they spoke about 40 years earlier.
Life just gets in the way.
Or the person who said they should have invested in that property 10 years ago and in 10 years time they will say the same thing.
“I should have done that 10 years ago…”
It’s difficult to change habits or change your pattern or blueprint but those who start off with the right behaviors are the ones who are financially independent.
Take budgeting for example.
Budgeting does not have to be a Dirty word if you are not good at looking at your numbers.
A very simple system is to do the following and over a life time it will make you financially independent.
Simply, put aside 10% (20% is even better) into a savings account first or pay off the mortgage first or pay the shortfall on an investment property first, Before spending anything on yourself.
Than spend the rest.
It’s the Budget you have when not having a Budget.
You will find you won’t miss it.
I remember a client who was paying $2,000 a month off her home mortgage and after 15 years she had fully repaid the loan.
For the next two years she had an extra $24,000 a year available but could not tell me where she had spent $48,000 in the last 2 years despite the fact that when she was paying $2,000 a month on her home mortgage she did not even miss it.
(People’s expenditure tends to increase in direct proportion to their incomes increasing. So the more one earns the more one wastes with nothing to show for it over a lifetime).
So she immediately bought an investment property costing her $2,000 a month in mortgage repayments and in her words she did not miss $2,000 a month in her spending if she took that out of her budget first before spending the rest.
Most poor people spend everything first and make excuses for not saving.
Whether they earn $30,000 a year or $300,000 a year, they will have no assets accumulated over a lifetime.
Over my professional life as a Practicing Accountant I have seen this happen over and again.
It’s not the income one earns alone that determine ones wealth but what one does with it.
More accurately the rich or poor habits they have over a lifetime.
Put another way the disciplines one puts in place over a life time.
I have seen people earn $65,000 a year and still manage to accumulate several properties, pay off their home and are self funded retirees, not relying on the government pension.
I have also seen people earn $600,000 a year and by the time they reach retirement age they have only paid off their home loan and need to rely on a government old age pension in their retirement.
So develop good habits from young and let time take care of the rest.
Founder & Non Executive Chairman – Chan & Naylor Accountants
Disclaimer: This article contains general information; before you make any financial or investment decision you should seek professional advice to take into account your individual objectives, financial situation and individual needs. Click for more detail regarding this disclaimer.