Budgeting

Our business started purely as a budgeting company, we would track every dollar our clients would spend and send them reports on how their tracking. Over time we have evolved and grown into offering more services, however the core of all our advice starts with a budget.

What is cash flow management?

Effectively managing cash flow is crucial to your ability to attain long-term growth to your net worth position (i.e assets less liabilities). Cash flow management involves monitoring your incoming cash flow and outgoing expenditure and ensuring any surplus is used effectively.

Cash flow is often said to be the ‘lifeblood’ of a business, and a company needs to have good cash flow management in order to pay its bills and invest for future growth. The same concept applies to individual investors. Good cash flow is essential for wealth creation. Therefore, cash flow management should be an important part of any financial plan.

What is a budget?

A personal budget is simply a written breakdown of an individual’s monthly income and expenses. It also sets out a plan for how future expenses will be paid for, and how much cash flow will be allocated to the strategies appropriate for the individual. The budget components include:

  • income
  • fixed expenses
  • variable expenses
  • discretionary expenses.

Our cashflow service.

A key part of our service is helping our clients understand their cashflow. We need to understand this in order to give you solid advice and build a long-term wealth creation strategy. A crucial part of this is the understanding of your current situation.

It’s common sense that if you have more money going out than you do coming in, that you are going to struggle to stay on top of your finances.

Our online cashflow and budgeting tool, helps you and us understand exactly where your money is going.

It gives you:

  • One complete and single view of your financial information, in one place
  • It enables us to answer questions such as what surplus you have?
  • What can you afford to invest and where that surplus has been going?
  • Better still, we can link your agreed financial goals, so you can see how you are tracking to plan ongoing.

Short of Money? Don’t blame your pay cheque

“A few years ago two economics professors, Steven Venti of Dartmouth and David Wise of Harvard University, studied the issue of income versus wealth for the national bureau of economic research, using social-security lifetime earnings and net-income assessments for 3,992 households whose heads were near retirement age. What they found was that:

  • There is a huge variation in wealth at every income level. Many low-income families have almost nothing. But the same is true of many high-income families.
  • Income alone does not explain wealth discrepancies. Some of the lowest-earning households had managed to accumulate significant wealth. In fact, income differences explained as little as 5% of wealth dispersion.
  • What the researchers called ‘chance events’ ie. Inheritances, unexpected expenses, marital status, number of children – all accounted for only 4% of wealth dispersion.
  • Investment choices explained about 7% of the variations. In other words, the vast majority of the differences in wealth had nothing to do with income, chance events or investment choices.

According to Venti and Wise the major determinant of wealth creation was simply based on how much individuals chose to save.

Those who made it a priority to save built wealth, regardless of their income level, individual circumstances, or choice of investment. And while life can be unfair and sometimes deals devastating blows, it would seem that the people who survive and thrive tend to be the ones who have a plan and stick to it.”

Business Day, December 1, 2006

Research reference: Choice, Chance and Wealth Dispersion at Retirement, U.S. National Bureau of Economic Research, 2001.

We would recommend you join the program. If you are serious about paying your house off early & creating wealth, these guys are the ones to be with.

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The Dodds Family

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