The Laws Of Wealth Creation

Financial independence is a goal many strive to achieve, yet only a few accomplish. Why is this the case when we live in such a prosperous country? The most common reason is lack of knowledge in how to create financial independence, while others lack the desire or confidence in their ability to obtain the knowledge.

Interestingly, many people are willing to spend years studying to gain a formal education with the expectation that they will obtain a job that will pay enough to enable them to sustain a desired lifestyle. Yet when it comes to educating themselves about how to create wealth, they never quite find the time. Instead the majority of Australians seem willing to live from pay cheque to pay cheque. For many this means working harder and for longer hours to create the extra income that will satisfy their needs.

The desire to have whatever we want now and pay for it later means that many forego the planning required to prepare for retirement until it is too late. But this needn’t be the case. Even if you are about to retire or you have already retired, it is never to too late to get your investments in order. By simply implementing what I like to refer to as the ‘three laws to wealth creation’ you can build a solid foundation that will ensure you provide a very sustainable income in retirement.

That said, in my experience many people only give these principles a fleeting glance believing they already understand them and therefore do not give them the attention they deserve. But let me ask you – are you on your way to financial independence?

The three laws to successful wealth creation are:

1. Spend less than you earn,

2. Invest your surplus wisely (at least 10% of your income), and

3. Leave it alone so it can grow.

Unfortunately, the majority of people do not get past the first rule of spending less than they earn and are therefore unable to move one. For those who do follow this rule and go onto invest their surplus cash, many fail to do their homework and consequently, through lack of knowledge, do not invest wisely. In fact, in my experience all too often people do what is simple or easy rather than what is wise when it comes to investing. A wise investment, however, must have two components – it must give you capital growth (your assets appreciate in value) and it must give you income. Investments that do not have both components are considered average investments in which you must accept average returns.

Finally, some people, even when they do invest wisely, are unable to leave their investments alone long enough to compound. Instead they prefer to spend their money on assets that depreciate in value to satisfy their short term needs rather than continue to invest in ‘financial assets’ that create growth and income.

Regrettably, this cycle is common and is often ruled by the emotions of fear and greed. And it is the lack of knowledge about wealth creation that intensifies these emotions, and prevents many from becoming financially independent.

Dale Gillham is the director and founder of Wealth Within, an Australian-based company specialising in share market education and independent investment advice. Dale is the author of the book ‘How to Beat the Managed Funds by 20% and Australia’s first and only accredited Diploma of Share Trading and Investment. For information visit

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