The Sydney Morning Herald
To start off the financial year financially sound you must look at whether you have a financial plan or strategy in place to become financially independent.
- 1. Cash flow: Good cash flow management is the foundation of wealth creation. It involves looking at your income and expenses and having a system in place to capture your profit or savings capacity. It’s this saving capacity that you can use to build your wealth.
- 2. Capital: It’s true what they say, money makes money. Having a lump sum or access to equity is where you need to begin when creating wealth. Once invested wisely your money should keep growing. If you don’t have any starting capital, go back to your cash flow and put in place a plan to build up a lump sum.
- 3. Time: Time is the magic ingredient in wealth creation – because investments in growth assets, like shares and property compound over time (that is, they grow exponentially). If you invest $20,000 into the share market at age 45 with a 10 per cent average return you will have about $52,000 by age 55. If you invest the same amount at age 35 you'll have $134,000. But if you invest at age 25 you will have almost $350,000 by the time you are 55 years of age. If you need a hand putting together a plan seek advice from a good coach and mentor. A mentor is someone with knowledge and wisdom who can guide you to make the right decisions, while a coach is someone to keep you motivated and on track.