Many of these concepts are adopted from George Clason’s book, The Richest Man In Babylon, first published way back in 1926.

Pay yourself first

One of the greatest lessons the book has taught is this first lesson, pay yourself first. Save 10% of your net income earned. If you want to save money for your future, you need to start setting aside some of todays income. You cannot accumulate wealth if you do not save part of what you earn. One way I like to approach this concept is to imagine that the government imposed a new 10% tax. People wouldn’t be happy about it but would find a way to make it work.

Our compulsory superannuation system does somewhat force this concept on us, with mandatory superannuation contributions of 9.5% of your salary.

Control your expenditure

Otherwise known as budgeting. Put simply, spend less money than you earn and live within your means. In todays credit hungry society, many lack the discipline to do this. There are so many great tools and resources online to assist with the budgeting process. Take control of your spending!

Invest the difference

If you spend less than you earn, you will have a surplus amount left over that can be made available for investment. Investing carries risk and without an investment plan, you are doomed to fail. While this is a whole topic in itself, below are a couple of key principals that will keep you in good stead when thinking about investing:

• Diversification – Spread the risk
• Portfolio rebalancing
• Long term investment approach

Compound interest is your friend! It means earning interest on interest and it can really accelerate your wealth. One of my favourite quotes ever is by Albert Einstein: “Compound interest is the eighth wonder of the world. He who understands it earns it… he who doesn’t… pays it.”  With compound interest, time is your friend, the earlier you start the better.

Protect your wealth

You can have the best financial plan in the world, but without insurance, any plan can unravel. For example, for many younger people, their biggest asset is their ability to earn future income over their working lifetime. It’s therefore important to protect this earning stream to not jeopardise your future plans.

Increase your ability to earn

The best way to increase your ability to accelerate your income is to invest in yourself. It’s a great time in history to do this with so much information available at your fingertips.

I hope the above five key principals provide some insight to set you on the right track to achieve your financial goals. They may seem simple and you may think you know these principles as you read them, but the key is to take action.

A Hewison Private Wealth Adviser can help you take this action if you feel this is something you need, please get in touch.