Hey guys,

I had a client who earned in excess of £100,000 yet only had £30,000 in equity in a property. He had been earning this for over 5 years and his wife was a "lady of leisure".

Now normally I would apply the you spend your income and I will spend your capital rule but in this case my first suggestion was that they take a serious look at their expenditure because it was clear to see that despite having a fantastic income they had accumulated very little capital.

Once we took a serious look and set some ground rules we determined that they could afford about £1200 per month to help build their portfolio. This meant an extra £14,400 per year of cashflow that can be used to either fund a shortfall in the cashflow on the portfolio or that can be saved and used to purchase property. In this case we are using the simplest of strategies called "turning cashflow into capital".

The important thing to realise is that this is a short term situation. Once you have built up enough capital you can return to your previous expenditure.

The other fundamental is that if you decrease you expenditure you will soon get used to your new spending habits and have no need to go back to your old habits thereby further increasing your capital.

Live with passion,

Brett Wood