The intention of the wealth compass is to point you towards true financial success. It aligns you with financial freedom while eliminating financial leaks.
Do you know where exactly your money goes to?
Your money habits are either influenced by emotions or logic. Emotional spending is dictated by the west direction of the compass. Logical spending, on the other hand, is influenced by the east direction. To create wealth, money has to be spent logically by investing on the East side of the compass through appreciating assets.
Tip; West spending = Emotional spending
East Spending= Logical spending.
This represents your daily financial leaks that are driven by impulse. People who give in to emotional spending are likely to make it habitual. Knowing too well that ‘feel-good’ feelings are what drive most consumers into buying goods, consumer culture has been well studied by marketers.
The more you make unbudgeted purchases, the more financial leaks you welcome.
Random take-outs, online purchases, or impulse buying may seem harmless. In the long run, your emotions will drive you into making bigger and unnecessary purchases.
The general rule for money going North is minimum spending.
Wealthy people ensure their compass needle indicates towards True East. Money from the Eastside is spent on assets that appreciate in value as guided by logic.
The value of the assets purchased in this category is higher than their depreciable cost based on the market demands.
Examples are; Stock shares, land, bonds, and real estate.
¬The general rule for money going East is maximum spending.
West spending represents assets bought for instant gratification. They depreciate in value over the years. As an investment, this would only eat up into your savings instead of generating constant cash flow.
Examples of assets on the West side of the compass are furniture, vehicles, machinery, high-end accessories, couture clothing.
The general rule for money going West is conservative spending.
Money here is allocated to repetitive purchases on everyday essentials such as food, clothes, rent, water, and electricity.
A rise in income will lead to a rise in purchasing power of these items. When compounded out, spending eventually exhorts funds going East and may ultimately consume existing appreciating assets.
South spending can equally expand and exceed your income level if not cautiously looked upon.
The general rule of money going to the South is prudent spending.
The West, North, and South spending of the wealth compass represents depreciating liability and are collectively identified as West spending.
To create wealth, money should be directed to the East side of the compass.