Cash Flow is like ‘Oxygen’

Decision at a wall - Spend or Save

“Part 1” explored why it’s more important than ever to take charge of your financial future and make it a must to build wealth outside of (as well as inside) superannuation. In “Part 2” let’s explore another crucial component to enable Generation Xer’s to work towards creating Financial Freedom.

In working with a few thousand clients in every financial position over the past 15 years, I would like to share what I believe are the absolute keys to building wealth for the future. These are;

1) find a way to create a surplus cash flow and then

2) use that cash flow to achieve your future financial & lifestyle goals.

Pretty simple right?…but not when 90% of people are spending everything (if not more) than they earn.

The main reason I feel that approximately 90% of people are not saving anything is that they don’t force it upon themselves. Superannuation is forced upon employees through the 9.5% compulsory employer super contributions. However, because personal savings is not forced upon us, most people spend every part of their pay on a weekly or monthly basis. The reason that this happens is because most people pay themselves last.

Even people who budget don’t necessarily save anything…they just know where their money goes. Traditional budgeting is not fun & doesn’t work.

I’m a firm believer that the absolute number 1 best way to budget is to not necessarily track everything that you spend, but instead flip the whole budgeting process on its head and pay yourself first. At The Practice we call this “bottom-up budgeting”.

Make achieving your savings goals as crucial as paying your mortgage or your rent. Decide at the start of the month or the start of the year “this is what we want to save, this is what we want to pay down off debt or the mortgage, this is how much we want to put into a long term wealth creation plan” and then on a monthly basis, as soon as you get paid, take that money off yourself, pay yourself (save) first, and then learn to live off what is left over. For the first three or four months this might be difficult, because you are forcing yourself to live off less. But it’s amazing how we can adapt.

Most clients who do this, after a few months, are able to find they are living the same lifestyle previously, but saving money and building momentum. And once you start building that momentum, that’s when the magic starts to happen and you will be well on the path towards creating future financial freedom.

Matthew Morrison is the Director of Wealth Advisory at The Practice, a Personal Wealth & Business Advisory firm based in Parkville, Melbourne. Matt along with The Practice team are committed to and passionate about developing and implementing financial strategies to enable clients to Fuel their Family’s Future.

Matt and The Practice team can be contacted via or (03) 8888 4000.

6 thoughts on “Cash Flow is like ‘Oxygen’

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