Noel Whittaker - Golden Rules of Wealth

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RETIREMENT LIVING HANDBOOK

25 YEARS OF WHITT & WISDOM

GOLDEN RULES OF WEALTH

First published in Australia in 1996 by Simon and Schuster

This ebook edition published in 2017 by Noel Whittaker Holdings Pty Ltd

Visit our website at www.noelwhittaker.com.au

Reprinted February 1997

2nd Edition August 1998

3rd Edition October 2001

4th Edition November 2004

5th Edition April 2009

6th Edition February 2011

7th Edition June 2017

Noel Whittaker Holdings Pty Ltd 2017

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publisher.

National Library of Australia

Cataloguing-in-Publication data:

Whittaker, Noel, 1940 .
Golden Rules of Wealth

ISBN 978-0-9954199-8-8 (epub - ebook)

1. Finance/personal Australia. 2. Investments Australia. I. Title

Cover design by Sharon Felschow

Cartoons by Paul Lennon

Typeset in Australia by dta studio, Brendale, Queensland, 4500

10 9 8 7 6 5 4 3 2 1

W riting a book is always a major task, and as ever, I have been inspired by the unstinting support I have received from so many people.

Special thanks are due to:

My wife and best friend, Geraldine, who reads every sentence I write before its published.

To my children Mark, James and Elizabeth who have learned to tolerate Dads moods when he is in the writing mode.

To Brenda Partridge and the staff of Whittaker Macnaught, for their help in more ways than I can mention.

To Owen Doyle for his invaluable assistance with design and content.

To Sharon Felschow for cover design and the typesetting a true professional and a delight to work with.

To Paul Lennon for the cartoons.

To McPhersons Printing Group for production.

To Jeremy Charlston of Clayton Utz for legal advice.

T he twenty-first century is here, and terms such as electronic money and cyber cash are now commonplace. Cheques and bank branches are now obsolete as we go on-line with our transactions, and pay our bills by electronic funds transfer. Now we are more likely to get any cash we need at the supermarket when we are paying for our groceries there is no need to worry about banking hours any more. We can send E-mails from our mobile phones, and get the news, as it happens, from Wall Street through the Internet.

Its an exciting and fast-moving age but, despite all this technology, it has become clear to me from the queries I get by mail, on radio and in seminars, that most people still dont have a clue about the basic principles of building wealth. Do these change? No, they dont. Certainly the tax and retirement laws are continually being amended, and they vary from country to country. However, there are timeless wealth-creation principles that will work for everybody no matter where they live or when they start to use them. They will hold good for the next thousand years, just as they have done for the last thousand years.

Those who understand these principles, and practise them, will be wealthy. Those who dont practise the principles have a high chance of joining the fastest growing group in the world the poor.

The good news is that it doesnt require any special skill, and you can start off with no money. All you have to do is use the principles consistently.

The aim of this book is to help you understand the basic principles of creating wealth for yourself. Once you have built this foundation, you can advance to a higher level by reading some of my other books. They cover the topics of making money, saving tax and building wealth in more detail, as well as giving you specific help in areas such as tax, shares, property and superannuation.

This book contains 40 chapters, each one of which teaches you one principle. I suggest you keep it next to your bed and try to read one chapter every night. Then, in just 40 days (or maybe less), youll be ready to start your journey on the road to wealth.

You will notice that each chapter starts with a quote. Notice them carefully, as they are designed to motivate you, and to teach you. Many great truths have been expressed in a few words.

Noel Whittaker

CHAPTER 11

Work to a budget

There are two ways of being happy. We may either diminish our wants, or augment our means either will do the result is the same. It is for each man to decide for himself, and then do that which happens to be easiest.

BENJAMIN FRANKLIN

N ow that you know where you are, and possibly where you want to go, you have to think about a plan for managing the fuel that is going to drive you on the road to wealth. The fuel is the money you will earn; the plan is called a budget.

Think about it. Have you ever heard of a large business without a budget? Of course not, and even though you are a person, not a business, it is possible that you will earn well over a million dollars in your lifetime. Surely it makes sense that you take the time to prepare a money plan to help you spend it to best advantage. Dont get worried about doing this. A budget is not something to be frightened of, and it doesnt take a degree in maths to do. It is simply a chart that lists your expected income and expenditure.

Its a good idea to focus on your spending first, because you will probably have more control over your spending than your income at this stage . However, if you follow my advice, there will almost certainly come a time when you will have a lot more control over your income too. Thats when the fun really starts!

Understand there are four main ways to spend your money. In the order of importance they are:

1. saving and investment (which is self-explanatory)
2. fixed essential expenses (such as rent, loan repayments, and school fees)
3. variable essential expenses (such as food, clothes and telephone)
4. enjoyment (such as drinks, nights out and sport).

Thats the way it should happen, but have you noticed what most people do when they get paid? Notice the order of spending:

1. enjoyment (have a drink after work, then pick up a video and order a take-away meal)
2. variable essential expenses (fill the car up with petrol, do the grocery shopping, and maybe buy some clothes)
3. fixed essential expenses (pay the loan repayments, and try to scrape together enough to pay the school fees and the light bill).

What about savings and investment? Just for this week there is nothing left over for that category. Never mind, well start next week, for sure. You know the rest; when next week comes another unexpected bill will turn up, and savings and investment gets put on hold again. Years pass, and the investment plan never gets going. Compound interest doesnt have a chance to start, much less create a large pool of money.

What should happen is that you set aside the investment and savings money first, and have a splurge with whats left over, if there is anything left over.