By Jason Laming, AFP®, Financial Advisor, Blueprint Wealth
When most people think of wealth they imagine someone with a large income. But let me ask you a question: if John earns $50,000 per year and Robert earns $100,000 per year, who is wealthier? The obvious answer is Robert, but in fact he only has more wealth building potential. Now consider what they do with their income. If John saves $10,000 per year and Robert saves $5,000 per year, who is wealthier now?
A key first step to building wealth is this: spend less than you earn. It sounds simple, but for many it proves to be difficult.
People often tell me they will save more when their income increases and yet income is not the part of the equation that matters most. I have met people earning half a million dollars a year who have very little to show for that income because they spend all of what they earn.
If your income increases and your spending follows you will be no better off. You may have a slightly better lifestyle (nicer car, go on better holidays) but you are not building wealth. And no, saving for a holiday does not count! Real, genuine saving and wealth building happens after you have paid your weekly bills, dinners out, holidays and toys.
Building wealth is about making a choice and many choices thereafter. It is also about setting goals and finding that balance between your lifestyle now and the lifestyle you desire in the future. If you build enough wealth over time, you may not need to work. If you build enough wealth, you can choose when to retire. If you build enough wealth, you can do more for your family. When you build enough wealth it affords you choices – and it starts with spending less than you earn.
So, how much is enough? That depends on what your short and long-term goals are and how much you are willing to sacrifice. Saving is a sacrifice, a cost, something foregone. You can go on an expensive holiday each year or you can go on a modest holiday and save. You can buy a $5 coffee each day or you can make your own and save. Once your goals have been identified, you can then set and track measurable targets to achieve them. The starting point is to spend less than you earn – it is a key first step towards building wealth.
At Blueprint Wealth, we offer financial advice that is right for you, no matter what stage of life you are at. Contact us today to set up a plan that is right for you.
Jason Laming has been a member of the Blueprint Wealth team since 2010. He holds an Advanced Diploma of Financial Services and a Bachelor of Commerce majoring in Finance and Marketing. Jason brings previous experience in Financial Services as a Mortgage Consultant, adding valuable expertise to Blueprint Wealth’s Mortgage offering. Jason believes in taking the time to understand his clients’ individual needs and constantly strives to deliver a rewarding client experience.
Jason Laming is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited and a member of the Financial Planning Association.
Blueprint Planning Pty Ltd ABN 78 097 264 554 trading as Blueprint Wealth is an Authorised Representative and Credit Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706.
Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.