It’s not as hard as you think.  

Ok, I get it. There are several people reading this who want to punch me in the face to rearrange my nose because they believe that as I have no idea what their personal circumstances are, I have no right to make the comment above.  

And they may be right. But generally, they are wrong.   

Here’s why.  

If you are struggling to create wealth, then it is because of 4 reasons:  

• You have insufficient income 
• Your expenses are too high 
• You have no wealth strategy  
• You have the wrong mindset

And I have found that not having a strategy and the wrong mindset is more of a problem than insufficient income or excessive expenses.  

And now some people will not be satisfied in just rearranging my face. They want to decapitate my knees too.   

They are red with rage, screaming at their screen’s saying that they want to create wealth (so have mindset) but do not have any money so cannot come up with a plan (strategy). Therefore, according to them, the real problem is income. There is not enough of it.   

I will let the screamers, scream for a while.   

Now everyone is back, let’s look at income. The average Australian wage is $60,000 with average household income of $108,000 according to the Australian Bureau of Statistics.   

That is not exactly peanuts. In fact, I have clients who have more wealth than other clients who earn twice as much income.   

And I have recently had conversations with someone who at one stage was earning only enough to feed themselves and keep a roof over their heads.  Over the last 10 years they income has gone up multiple times, yet they still have no savings or wealth. The issue is not income.  

Here’s why. The more income we earn, the more exotic ways we find to spend it. Earning high income does not equate to wealth. Johnny Depp has career earnings over $500 Million. And he is almost bankrupt.    

In the 1950’s there was UPS driver in USA called Theodore R. Johnson. He never earnt more than $14,000 in a year. When Johnson retired, he had accumulated $70 million in wealth and gave away $36 million in his lifetime.  

So, trust me when I tell you income is not the issue.  

Expenses then? Yes, but only because there is no focus, plan or strategy to create wealth. If you build a plan your expenses will automatically correct itself.  

I know this sounds simple and a bit insane, but it is true.  

Over the last 10 years or so we have had clients who have ‘spending issues’ but once a plan (strategy) is put in place and then that plan is executed (mindset) income and expenses to a certain extent become irrelevant.   

Let me give you another example.   

Approximately 10 years ago, a client came to us advising they were renting, but had an investment property yet had no money and was struggling to make ends meet.  

So, we reviewed everything from the investment property to their personal expenses. And we came up with a plan that did not sit well with our client.  

We told them to sell the investment property (it was chewing cash because it was negatively geared and had little equity) and to try to cut down on food purchases (they loved entertaining and having their kids school friends over).  

I then told them to put 15% of income as soon as it arrived in a savings account and whatever was left, they could spend however they wanted. They did not believe they could save 15% as they were barely making ends meet.  

They were reluctant. But desperation makes you make choices. The investment property was sold, savings started and by default expenses lowered.  

A few years later they purchased a home which has now more than doubled in value. And a couple of years ago their purchased an apartment as an investment property which is positively geared.   

In summary  

• Income did not increase significantly 
• Expenses reduced because of a strategy 
• The strategy was to save 15% of income 
• The mindset was to stick to the plan.

Today, those clients have decent equity in their investments and savings because the 15% has not stopped.   

This was the same philosophy followed by Johnson except he started with 20% aged 17 and invested in the stock market.  

If you are searching for wealth and financial freedom don’t make excuses. Just ask what your plan is. If it is to spend and then see what’s left over for savings, then that is not plan. That is hope.  

And hope is never a strategy. And hope rarely works.