This one powerful idea will build your long term wealth

I want to talk this week about the difference between short term riches and long term wealth.

So what do I mean by that?

Well, it’s understanding the difference between the profit you make and keep, ie your retained profit, and what you DO with that profit to build your long term wealth. Because it’s your long term wealth that’s going to give you financial security in the future.

Obviously making profit is our starting point; we’re never going to build wealth and security without that, so our business has to make “enough” profit every month to cover the costs AND retain profit to invest in growth. Remember a growing business needs more working capital to keep the cash flowing easily.

But what do you do with the profit after that?

You’ve got 3 goals before we even think about investing for the long term, and I’m sure you know what they are!

• Get ALL your taxes put away in a separate bank account – so that’s your VAT, corporation tax for last year and this year and any personal taxes if you pay them from your business

• Then build your buffer cash, again in a separate bank account. Your first target is 3 months overheads, then build that out until you’ve got 6 months cover

• And finally build your investment cash so you’ve always got funds available to invest in your business

Then what?

Well maybe you pull out that extra profit for a nice juicy dividend!

And why not? I’m not saying you shouldn’t be rewarded for your genius and hard work in making that profit.

But that decision is the fork in the road.

Short term riches (that you’ll just spend) OR invest in something that can compound over the years ahead to create long term wealth.

Now getting that balance right is clearly a personal choice, and potentially quite a conflicting decision to make. We want the lifestyle now, AND we want the freedom not to have to work later!

The question is, which one do you want the most?

How much do you want Financial Security, and what are you prepared to sacrifice in the short term to get it?

Now you don’t want to be making these decisions in isolation, based on how you’re feeling on a particular day. That’s far too random, and dangerous! And you’re far more likely to spend it than keep it!

Which is why you need a plan for Financial Security. A plan where you’ve already worked out your route to long term wealth, and you already know what you need to do, and just how much profit you’re going to use for long term investment.

Doing the thinking and planning so that you’ve worked out precisely what you’re aiming for. Because when you’ve got a plan, and you can see your long term wealth mapped out ahead of you, the decisions become SO much easier.

Businesses who don’t have a plan tend to spend their short term riches.

And they have to keep running faster to make the money again. And again. And again. Because they keep spending it!

But the ones who HAVE a plan have that clarity and certainty of what to do. And they get the buzz of seeing every month how their long term wealth is growing on their net wealth tracker.

So I’d love you to start thinking about your profits in a different way.