Cash Flow & Budgeting
We place a lot of emphasis on encouraging people to operate on a planned level of spending within their means in order to create a regular savings capacity that can be contributed towards a deliberate long term wealth creation process to achieve identified goals.
Most clients that initially come to see us have little clarity how much they are actually spending each year. Yet regular savings and annual surplus cash flow are one of the most important components of wealth creation as investment returns alone cannot do the hard work. From the basic principles of compound interest it is clear and widely known that the first $1M is the hardest to save. The larger your investment balance becomes, the more you benefit from the compounding effect as your money will start to work for you. But markets cannot do the heavy lifting for you, if you start from zero then saving is something you cannot get around.
Adjusting your lifestyle to incorporate very good budgeting habits and spending discipline in order to create a regular savings capacity is hence a key part of long term wealth creation.
We often observe that high incomes also lead to much costlier lifestyles, with the remaining savings capacity being lower than for people with very good budgeting habits and spending discipline irrespective of their incomes.
However, as simple as this sounds, implementing and sticking to a clear budget is anything but easy. We encourage the following philosophy:
“Don’t save what is left over after spending, but spend what is left over after saving.”