How to make $1 million and have nothing left

06 May 2015

By Shadforth Financial Group

How would it feel to earn $1 million a year? Sounds like a nice position to be in.

Maybe you know someone who earns lots of money. They may have the flash cars, a huge house, children at the best schools and take fancy overseas holidays.

But like a duck on water, while all may appear calm on the surface, they may be paddling furiously just out of sight.

Think of the case of the former corporate high-flyer who enjoyed many years of living on more than a million dollars, but ended up on a part-pension with little to show for his years of hard work.

He had not spent a cent on drugs or gambling. Instead, he borrowed heavily for his dream home. He replaced his luxury cars every two years or so. When he was stressed, he spent money to feel better. To keep his family together, he took frequent overseas holidays.

He was at a point in his career when his earnings had maxed out – the days of promotions or hefty bonuses were over – but his debt continued to grow.

He was neck-deep in the world of debt-propelled wealth, where all that glitters is not gold. When the divorce came, it certainly had an impact, in more ways than one.

It's an easy trap to fall into regardless of your income. Some people spend knowing they will get a bonus the following year. Some spend because they have many years of good income ahead of them. But there comes a point when remedial action is needed.

Here are some tips that could have saved the million dollar man from his financial pit. And they're valuable for all of us, regardless of income level.

Time travel to make your decisions

What would the you-in-10-years do if making your financial decisions today? They would probably be happy to make some trade-offs because the quest to live for now is less important than planning for down-the-track. Play the long game, not the short game and put the older you in charge!

Be clear on what you want

Most people spend more time planning their annual holiday than their financial future. Think about what lifestyle you want to lead in 10 years and work towards it. A lack of clarity will lead you into the "live-for-now" trap.

Get a mentor

You need someone to bounce your financial decisions off. It can be someone you know and trust or a professional. That person will calm you when you're doing it tough or tell you to think again when you want to spend plenty or make a hasty decision.

Financial security is all about one simple premise: it's not how much you make, it is how much you keep. It's also about the lifestyle you want to lead long before it's about the investments you make along the way.

In the end, you don't want to be the person who earned plenty but had little to show for it. You want to be the person who kept enough to be comfortable and independent in retirement.

Remember, the gap between poor and comfortable is much greater than the gap between comfortable and wealthy. To earn plenty only to spend your last 15 years battling to make ends meet is a tough way to finish. The well-planned long game always beats the flashy short game.

If you are seeking financial advice please contact us on 1300 308 440 or enquire online.

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