It’s not what you make – it’s what you keep

All your (income) eggs in one basket? How much financial success (net worth) will you need to be able to do what you want to, not what you have to?

So it’s not what you make that matters – its what you keep. And it’s what you do with what you keep that determines whether you do what you “have to” do or what you “want to” do in life.

The right advice from the right associations

In my life journey I have been lucky enough to be associated with some “very wealthy people” that were incredibly willing to share their financial success wisdom and experience with me. This also helped me understand a number of basic financial truths. It taught me to understand that it’s not money that is the root of all evil, but the excessive love of money that is the root of all evil. I also had to unlearn that people who had developed wealth didn’t “do so at the expense of others” or that they had to do something unsavoury or illegal to attain their wealth. Talk about conditioning…

Money and Month

Whilst this is in no way to be construed or seen as being financial advice, what I am about to share with you should however highlight some fundamental financial truths and disciplines that can make a huge difference to people’s financial thinking. One of those  truths in today’s society is that whilst we might “make good money”, we often simply spend it on lifestyle and consumption and sometimes run out of money before we run out of month. Short term gratification. Due to the easy access to credit, many people live beyond their means and this starts a negative spiral, which often necessitate a complete review and a major “refinancing exercise” to start again with a clean sheet.

Unfortunately many people never get out of this spiral and end up in a very large proportion of Australians that retire with insufficient funds to sustain any form of lifestyle in their “golden years”.

In order to then progress positively and sustainably, one of the first things we needed to learn was to have discipline. (Isn’t it amazing how often that word emerges when we are talking about personal development or success?)

Financial Success: Paying yourself first

Reading the simple but powerful book “The Richest Man in Babylon” by George S Clason taught me amongst many other things the value of “paying oneself first” by saving at least 10% of every dollar earned, before any other forms of payment were made for anything else. I learned that it was not so much the size of the percentage number kept, but the habit of doing so that created wealth.

Making, Keeping and Applying

What I learned from the people mentioned above was that it wasn’t “what we made that counted. It was what we kept that counted”. And then even more important was “what we did with what we kept”.

Once we analyzed our financial situation with a professional, we committed a sufficiently affordable amount of what we made into investment, even starting very small and particularly investments that enabled “compound growth”, over time this created capital growth that enabled further investment. One of my mentors keeps reminding us to “stay in rhythm” when it comes to investment. To keep making sure that our capital growth doesn’t lie dormant, but is further leveraged to create “exponential compound growth”.

After a while we no longer have to “keep” as much of what we make as we perhaps had to for a time, giving us new choices.  Or, if we then have a particularly good “yield” from an investment, then that is more sensible money to use or apply to some lifestyle options. Now once that stage is achieved, it frees up more time and opportunities for us to do things we want to, rather than things we needed or have to do.

Educating Yourself on Financial Success

If you aren’t already on this journey, I urge you to talk to people you know within your network that can help you understand the terminology and opportunities that exist out there. Preferably people that have personal “runs on the board” because I learned there are many people employed to sell such solutions that don’t or can’t practice what they are preaching (selling) themselves. If you talk to enough fair dinkum “practitioners” you will learn of a diverse range of options and how they work, so you can narrow down “what you feel comfortable with”. Only then does it make sense to start talking to some “professional advisers” in the investment field. And then I would urge you to apply what I wrote about in The Trust Triangle.

Getting The Right Financial Success Advice

My recommendation is to differentiate those advisers that charge for their services from those that don’t. Those that don’t charge usually are paid a commission from the products and services they recommend, so they “have a barrow to push” and are not as independent in their recommendations.

I have learned that good independent advice is worth paying for. My accountant got me started on this journey by asking me how long I was still planning to “waste” so much of “what I made” on tax each year. He strongly suggested I needed to gear that tax more effectively by borrowing to invest in the right kind of assets. I was intimidated by the stock market, so he loaded me up on books on residential property investment and we spent 3 solid months reading and educating ourselves in the market. Wow, am I grateful to Sam Polimeni. If only I had heard that 10 years earlier…..

Good Advice

So how do you know whether it’s “good advice?” By using your networking skills and getting yourself connected through people you know and trust and then doing your homework until you find advisers you feel comfortable with. If you meet and talk with 3 or 4 you will have learned a lot of the terminology & jargon and also what questions to ask so you can then pick an adviser with more confidence.

It’s Your Money

One more thing. It’s great to get good advice, but please don’t do what lots of people do then. They “abdicate” and leave everything to the expert to take care of for them. Remember it is your money and no matter how much advice you are given or choose to take, you alone should make the investment decisions. Nobody can or should take that away from you .

Forgive me for having to add a disclaimer here but this blog and its contents should not be considered financial advice nor investment advice as it is a general discussion on the philosophy of finance and investment and does not take into account your specific objectives, financial situation or needs. I recommend that you seek independent professional advice with any investments that you consider.

Power and need

However, I would like to emphasize very strongly how important this concept is to be taken when it comes to personal success. In my negotiation grooming, I position the two opposites POWER and NEED. When we have the POWER, we rarely have a strong need. Conversely, when our NEED is overly strong, we have usually lost most of our power, right?

In my career management coaching I lean heavily on this concept because when you are pursuing the next role on your mapped out career path (yes, we can achieve that), you will have a substantially more powerful position if you have a solid, passive investment supported financial position that accompanies you into that pursuit. If you didn’t have that to support you, and were dependent on this role for you financial survival, let alone success, you would have a much greater need and much less power, wouldn’t you?

Nobody likes to hire anyone that is “desperate”. Conversely, it is so much easier to be “cool” and in control when your confidence is buoyed by the power your passive income creates for you. That way you can focus on doing what you “want to do” rather than what you “have to do”.

So What Next?

Please don’t underestimate how much power, confidence and also choices this passive wealth can give you. Whatever you age or stage, if you haven’t started a wealth creation journey outside of your primary source of income yet, may I suggest that the time is right now to start that process, particularly in our current times of global economic volatility? After all, it is your bus, and you want to drive it, don’t you?