Wealth Creation

Where Do You Start!

Before you get into the wealth creation strategies and the development of your mindset. You need to first take a good deep look at your financial position. This is done to get a clear picture of all your monthly transactions, as this is the basis to all wealth creation. You need to know what your total income is minus all of your expenditures so you can work out the best steps and strategies to take in wealth creation. You must start taking responsibility of your finances as no one else will.

Here is a list of the three most basic steps we need to take in order to start your wealth creation journey:

1. Create a budget
2. Debt Reduction
3. Savings Plan

Create a Budget

So the first step is to create a budget by adding all of your incomes together and then subtracting all of your expenses. The more honest you can be with this the better, as it will give you a true picture of your financial position. If this isn’t done right here, it will only distort the final result and you’ll find that the outcome will be different in the real world.

When my wife and I did this about 2 years ago we were so shocked that we were living outside of our means. With a wedding just around the corner and a baby on the cards, doing the budget changed the way in which we spent, saved and reduced our debt. It was like switching on a light in the darkness of our finances.

Creating a Budget can be a boring and time consuming process, but it’s so important to get this right as your financial future depends on it. So take as much time as need to get this right. We found that we needed to tweak the budget over the months as hidden expenses would pop up from time to time.

So how do I start a budget?

There are plenty of budgeting spreadsheets and programs on the internet. Some are free and others you will need to pay for. If you are well versed in MS Excel then you could easily build your own customised spreadsheet. I have done a bit of  research and come up with three budget spreadsheets/programs.

1. Money Tree: This is a great program that has all the bells and whistles that you could ever need and it’s easy to use. The feature that I really like is that it has an icon on your task bar that alerts you of payments that are due that day and how much they are. It takes some time to log all of your transaction details into the program but it is well worth the effort. You also get plenty of bonuses when you buy the package. You can go to Money Tree and see their website plus view their demo video.  It’s a great program for under $25.00 US.
2. Money Advise: This is an Excel based budget spreadsheet that has five free online tools and the template is easy to use. It has all that you need for a basic budget and for $10.00 US it’s well worth the money. Go to Money Advise and have a look.
3. Free Excel Budget Spreadsheets: This website has heaps of different Excel budgeting spreadsheets that can accommodate any type of budget from family to a wedding budget. Just “Click Here” to go to their website and look through the different ones until you find the one for you.

I hope that these spreadsheets help with your budget. Don’t forget, take plenty of time and get this right as it will save you heaps of money in the long run.

If you want to create a budget by going  it alone, you can make up your own spreadsheet. Here are the most common items that need to be accounted for:

Income: You must add up all the forms of income you receive.

1. Salary/Wage for you and your spouse.
2. Pension, benefits, baby bonus and family allowance.
3. Rental income and board money received.
4. Tax rebate.
5. Investment dividends and option premiums.

Expenses: Now you must add up all of your expenses.

1. Housing: boarding, rent and mortgage payments.
2. Utilities: electricity, water, gas, phone and pay TV.
3. Insurances: car, health, home and contents, income protection and life.
4. Transport: petrol, registration, repairs, tyres, tolls, public transport and license.
5. Food.
6. Medical.
7. Personal: clothing, grooming, gym fees, entertainment and holidays.
8. Other: Savings, special projects and individual spending.
9. Loan expenses: personal, car, boat and credit cards.

Now that you have created a budget you have to subtract the expenses from your income to get a total picture of how you’re fairing. If you are in the black then you can use the extra money for paying off debt or saving it for investments.

If you’re in the red then you’ll have to go through and work out where you can cut back on some of your expenses. We will look at Debt Reduction strategies in the next blog post.

All the best in your wealth creation journey,

Jon Symonds

This entry was posted on March 28, 2010 at 3:36 pm and is filed under Wealth Creation. Tagged: budget, Create a budget, Debt Reduction, Expense, Income, Money Advise, Money Tree, Wealth Creation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.