Over almost 15 years as an Investment Adviser, I have met many people earning very good incomes who still feel uncertain about their financial progress.
A high income creates opportunity, but it does not automatically create wealth.
Without a deliberate strategy, additional income can be absorbed by lifestyle spending, debt repayments, tax obligations and irregular financial decisions.
The result is often a person who earns well but remains dependent on continuing to earn at the same level.
The client situation
In this case, the client was a successful professional earning a high PAYE income. Their career was progressing well, their household income was strong, and there was usually money left over after normal expenses. However, the surplus was not being directed consistently.
Some years involved additional mortgage repayments. Other years involved investments, large purchases or simply higher spending. The client wanted to enjoy their current lifestyle, but they also wanted to know that today’s income was creating future financial independence.
Identifying information, figures and some circumstances have been changed to protect confidentiality.
What mattered most
The client wanted to:
The objective was not extreme budgeting or sacrificing everything today for retirement. It was to create a balance between enjoying life now and building choices for later.
Our approach
We began by identifying where the client’s income was going and how much could reasonably be committed to long term wealth creation. A cash reserve was established first. This ensured that unexpected costs would not require the sale of investments or the use of expensive debt.
We then divided the available surplus between several priorities:
Investing outside KiwiSaver was important because the client wanted flexibility before traditional retirement age. A person can be wealthy on paper but still lack options if all their capital is locked away or tied up in illiquid assets.
The long-term portfolio was invested with a growth orientation, reflecting the client’s long timeframe, strong income and ability to tolerate short term market movements.
Contributions were automated so that investing became a regular commitment rather than something considered only when cash happened to accumulate.
Our investment philosophy in practice
Long term financial independence is usually built through consistent behaviour rather than one exceptional investment decision.
We believe investors should focus on the factors they can control:
We also established guidelines around minimum cash reserves, debt levels, regular investment contributions and the amount of risk within the portfolio. As income increased, the strategy could be reviewed before additional spending became permanent.
The outcome
The client gained a clear system for turning a strong income into lasting wealth. They no longer needed to decide each month whether to invest, repay debt or retain cash. The strategy had already established the appropriate balance.
The client continued enjoying their lifestyle while steadily building assets that would eventually reduce their reliance on employment income. The greatest benefit was not simply a higher investment balance. It was the knowledge that each year of work was moving them closer to genuine financial freedom.
What I have learned
A high income can create the illusion of financial security. True financial independence comes when a person has accumulated sufficient assets and flexibility to make decisions without relying entirely on their next salary.
In my experience, the most successful high-income earners are not necessarily those who take the greatest investment risks. They are the people who create a clear strategy, automate good decisions and maintain discipline as their income grows.
At Yovich & Co, we help clients convert income into long term choices.
Jarrod Goodall
FSP198885
Wealth
