Good cash flow management is by far the most important practice that you must master to be successful at building wealth. I realise that it’s not a particularly popular topic, but bear with me, because it’s an easy thing to master if you know how. It won’t take you much time, and you will feel more empowered and in control as a result. 

You can’t expect to build wealth if you spend all your income 

Investment returns alone won’t help you build wealth, unless you already have a large investment base. You must contribute some of your own money/savings. 

For example, most people that buy an investment property fund its holding costs (i.e., the shortfall between net rental income and loan interest) from their salary/wage income. A property’s holding costs might equate to $20k-30k p.a. on an after-tax basis. Essentially, that is their capital contribution towards this investment (assuming they borrowed the full cost of the property). However, if the investor decided to fund these holding costs through drawing additional borrowings, the interest cost would compound, and greatly diminish investment returns. 

In short, you can’t build wealth without doing the hard work of making regular cash contributions into your investment portfolio. If you are not already doing that, you need to find a way to begin. Make 2023 the year you do that.  

Unconscious expenditure is the problem. You must minimise it.

Holidays are expensive. And since Covid, holidays have become even more expensive (although that might change over the next 12 to 18 months as higher interest rates temper demand). However, holidays are probably the best example of conscious expenditure. That is, we tend to think very deeply about where we want to holiday, how we get there, accommodation and so on. We carefully weigh up the cost-benefit of the expenditure. As such, holidays tend to provide a high utility per dollars spent i.e., they are good value for money. 

However, unfortunately, we do not apply the same diligent approach to all expenses, especially low dollar value expenses. In fact, for some expenses, we don’t spend any time thinking about them. Consequently, we spend money on things that have no impact on our standard of living. These expenses are a waste, as they don’t provide any benefit or enjoyment. Whilst these items tend to be lots of small dollar value items, they certainly add up over the course

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