You call that a wealth creation strategy?

I had someone say that to me once. We had spent an hour going through their Statement of Advice, and when we turned to the pages that outlined the recommended investments and their performance, they looked at the 'one year' returns, and said

"You call that a wealth creation strategy?"

Well I did as a matter of fact.

Now this was some years back, in around 2001. Those with a long-ish memory may recall that markets had NOT acted that favourably in preceeding years. However, there are two point that bear noting here. They are:

• short term returns are generally not that relevant in a long term wealth creation strategy, and
• returns are wholly irrelevant, if you haven't got anything to get a return on.

There is a bigger picture at stake that goes beyond what is happening over the short term, and even what is happening with markets in general. That is, step 1 of creating wealth, is to spend less than you earn. Step 2 is to do something smart with the difference.

There is no step 2, without step 1.

You may have a lump sum in super, or access to some equity, but it is the ability to direct free cash flow to the things in your life that are important to you, that will determine the outcomes of your financial strategies. It is that, that will predominately drive your position to the rewards that lie ahead.

 In the end, the strategy that I had recommended for the coupe included cash management, income and asset protection, debt ideas, an estate planning overview, asset allocation decisions and more. And yes, the recommended investment has gone up significntly in the ensuing years. But that is NOT the 'prize', it is merely the icing on the cake.