Tag Archives: retained earnings

What really creates wealth

What would you say is the x-factor that creates wealth? Choose the most correct answer:

  1. great investment strategy
  2. having a significant income
  3. saving money
  4. lucky dice

Most of these answers are important factors in your financial future. Someone recently shared with me an article by Australian money wiz, Peter Thornhill. He’d argue that answers 1 and 2 are too complicated and unnecessary. Answer 4 wouldn’t even get a glance from him. Here’s his take on what really creates wealth:

“Cash flow [is] the life blood of any good business… [Retained earnings] is what creates wealth for us as individuals as well as corporations, the sensible investment of a part of each year’s earnings.”

There you have it: retained earnings. This is a fancy word for “saving money”, and this is what creates wealth more than the lotto, big paychecks or snazzy investments. People with all three of those can still struggle and fail; I’d put my money on the saver.

What do you think?

Drop by next week to find out the simplest way to put this into action for yourself…