wealth account by roy mc donald

4 The Wealth Account

I have developed the concept of a wealth account - linkedto the strategic spending system - which has workedsuccessfully for my clients for over 20 years now. The ideaof strategic spending is to divide your hard earned incomeup into small, easily controlled bundles. The first bundletaken out should be savings—a minimum ten per cent ofyour gross earnings. This amount is transferred monthlyinto your Wealth Account, which should be a CashManagement Trust or similar. If you leave savings till last,you will always find there is nothing left over.

The second bundle is your Cash Account. This coversyour daily living expenses for which you normally pay cash;a bit like your pocket money. These are all non-deductibleitems. This account is simply accessed by a 24-hour accesskeycard.

The third bundle is your Operations Account. This isfor those larger expenses which are usually paid monthly,quarterly or yearly by cheque. This account should not belinked to the Cash Account (i.e. you cannot access it withyour Cash Account keycard). We keep the bundles sepa-rate. It is wise to use this account in conjunction with acredit card for those occasions when your monthly expenses

are higher than the budgeted amount. The card acts as asmoother, as next month will be a surplus that can bepaid back into the credit card.

In addition to your savings, which go into your WealthAccount, you should also put in enough funds to cover allyour tax deductible expenses. This will save time and effortfor your accountant when preparing tax returns.

The system is linked by the use of the Transfer Account,into which your pay is deposited. From there, periodic

payments are set up totransfer funds to all theaccounts on the 15th of eachmonth. You should maintaina small float in the CashAccount and OperationsAccount.

The main aim is to accu-mulate as much as possiblein the Wealth Account anduse these funds wisely tocreate wealth.

You can use the exampleWealth Account in Figure 2to link up with your strategic

spending plan. Once you have committed to strategicspending and keeping track of your spending using this system, you are well on the way to achieving your goal.

‘Don’t go around

saying the world

owes you a living.

The world owes you nothing.

It was

here first.’

Mark Twain

To summarise:Set up your three separate accounts (your wealth system)Wealth AccountCash AccountOperations Account

Use your strategic spending sheets to track your monthly and yearly spending.

Excellence is a commitment to completion

There is no right or wrong; there is only outcome.

Some people would rather be right than happy

Figure 2

Your name: Date:

Name of Beneficiary of Trust:

Wealth Account Investment Portfolio P.I.E

Property

Equities

(Fixed)Interest

eg: Cash Management TrustMinimum 10% Saving to

Wealth Account

Income

Expenses

Transfer Account(Net Income per month)

Cash Accounts

Keycards withCredit Card option

PrimaryAccount

SpouseAccount

MonthlyLiving Expenses Client 1 Client 2

Food ................. ..................Beverages ................. ..................Dining Out ................. ..................Clothes ................. ..................Hair/Personal Care ................. ..................Pharmacy ................. ..................Gifts ................. ..................Fares ................. ..................Other ................. ..................

dek

n iL

to

N

Operations Account

Interest Bearing Cheque

With Credit Card (For Overdraft Facility)

Housing Transport Miscellaneous

Rent/Mortgage ............ Car Payments............ Installments ............

Maintenance ............ Insurance ............ Credit Cards ............

Rates ............ Petrol ............ Education ............

Insurance ............ Maintenance ............ Medical ............

Electricity ............ Registration ............ Dental ............

Telephone ............ Insurance ............ Contributions ..........

Gas ............ Life ............ Holidays ............

Health ............ Loans ............Other ............ Other ............

Living

All Unearned IncomeAll Tax Deductible Items

Accounting FeesOne LifeInternational FeesFinancial Management Works FeesFinancial Success FeesNegative GearingDisability Insurance

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