Tài liệu Coach Yourself to Wealth Live the Life You Want potx

wealth you have, how your assets are allocated, what yourcurrent income is, how much money is being spent and where,and what is happening to the surplus—if there is a surplus.2 Your desi

Coach Yourself

to Wealth

Live the Life You Want Martin Hawes and Joan Baker

First published in 2005

Copyright © Martin Hawes and Joan Baker 2005

All rights reserved No part of this book may be reproduced or

transmitted in any form or by any means, electronic or mechanical,

including photocopying, recording or by any information storage

and retrieval system, without prior permission in writing from the

publisher The Australian Copyright Act 1968 (the Act) allows a

maximum of one chapter or 10% of this book, whichever is the

greater, to be photocopied by any educational institution for its

educational purposes provided that the educational institution (or

body that administers it) has given a remuneration notice to

Copyright Agency Limited (CAL) under the Act.

Allen & Unwin

1 Finance, Personal 2 savings and investment I Baker,

Joan, 1956– II Title.

332.02401

Typeset in 12/14 pt Adobe Garamond by Midland Typesetters, Maryborough Printed by Griffin Press, South Australia

10 9 8 7 6 5 4 3 2 1

Preface: A better life v

4 WealthCoaches Model for wealth and freedom 15

8 Where are your assets? Getting the balance right 46

Contents

Part V Strategies for wealth: How will you create wealth? 101

21 You have to own Wealth-Creating Assets 118

22 Choose only one Wealth-Creating Asset 122

23 How to choose a Wealth-Creating Asset 124

34 Networking: Winners work with winners! 188

The principles we set out in this book work For several yearsnow we have been working as WealthCoaches helping people toarrange their money to live a better life We have applied theprinciples set out here to many people’s finances over that time,proving that they work in many different situations Using thisbook, you too can understand the principles of wealth creationand apply them to your own circumstances.

Everyone is different We all have unique circumstances—no

two people, or families, have the same financial situation Ourincomes are all different; our expenditures are all different; what

we own is unique, as is what we owe Even more importantly andinterestingly, we all have different dreams, visions and aspirationsfor our futures, different goals for what we want and what wewant to be

It is these differences that keep the two of us doing what wedo—coaching people to improve their finances to have a betterlife The differences are the challenge—there is no one templatethat can possibly fit all people with all their different situations.The differences provide us with the challenge of working withpeople in all sorts of circumstances as they arrange their moneyfor the life that they want

The differences mean that we as WealthCoaches can neverrelax and become detached as we work with clients The factthat everyone has a unique position and unique goals demandsthat in the planning phase we listen hard and think even harder

We have to understand where our clients want to be in thefuture and have a clear picture of where they are now We allhave strengths and weaknesses, strong parts of our personalitiesand finances that can be used for the good, and weak parts thathave to be accommodated It is our job as planners andWealthCoaches to work out what is strong, what is weak, and

Preface: A better life

to fit the pieces together to make the best whole.

How do we make the pieces fit so that our clients get the livesthat they want? The answer is that it is like starting a fresh jigsawpuzzle each time we take on a new client There is a puzzle thathas to be solved each and every time

Having said that there’s no template which can fit and matcheveryone, there is a process that we follow with our clients, a pro-cess that we have developed and refined over the years and which

we will never stop trying to improve It is presented so that youcan use it yourself to create the wealth and the life that you want.Our experience in dealing with people is that despite theirdifferences, everyone wants one thing: a better life Clients look

to us to help with the money side of that, whether they have alot of money or not much, whether they are getting to the end

of their working lives or just starting out Money is important—

it makes the difference as to whether you can have the life thatyou want or not Money gives choices—with good finances youhave options that other people simply do not have

Having a lot of money is not a panacea—it will not solve allthe problems in you life—but for most of us it is a prerequisite

to having the freedom to live our lives as we want Withoutmoney (or with our money arranged and invested badly), ourlives are more restricted, our choices more limited

We are committed to helping people achieve the financialposition they need to be in to allow them to live the lives theywant to be able to live That is the purpose of our work and thetheme of this book Practically anyone can become wealthy andfree We have dealt with all sorts of people, from those whoalready have plenty of wealth but need help to arrange it to befree, to those with very little, who are just starting out to developwealth, and much of what we have learned is here for you to read

Joan Baker, Martin Hawes;

info@wealthcoaches.net

Part I

Setting the stage

Chapter 3 What is ‘wealth and freedom’ 9Chapter 4 WealthCoaches Model for wealth

So, you have decided that you want to be wealthy and free.Congratulations! That is the hardest step by far Most peoplenever progress beyond the stage of wishing to be rich You arereading this book because you want your life to be different

We are going to take you through the steps you need to take

in order to become wealthy and free to live the life you want.The process we work through with clients has five mainbuilding blocks or steps We look at:

1 Your current position

2 Your desired position

3 Your freedom figure

And then we move on to:

4 Strategies for wealth

5 Action plans

As you read on you will find out exactly what you need to do ineach of these areas Here we outline the sorts of things you will

be working through under each heading

1 Your current position

The most important thing here is to get a very clear sense ofwhere you are starting from Many of you may have only a vagueidea of the current position of your finances—after all, most of

us are too busy to do much more with our finances than getthrough each month In this section we will be helping youwork through exactly where your finances are now—how much

book works

wealth you have, how your assets are allocated, what yourcurrent income is, how much money is being spent and where,and what is happening to the surplus—if there is a surplus.

2 Your desired position

In many ways this is the most exciting part of creating wealth.This is where you get to decide what your dream life will looklike In this section we help you work through your dreams sothat you can describe in some detail the life of wealth andfreedom that you want to achieve

3 Your freedom figure

Using your dream lifestyle as a guide, we then focus on helpingyou to work out how much wealth you will need to live the life

of your dreams We call this amount of wealth your FreedomFigure, the amount of money that will allow you to be wealthyand free to live the life that you want Freedom Figures differbecause everybody has a different dream of their ideal life Youwill need a certain amount of passive income to live the life ofyour dreams To get that amount of income you will need tohave a certain level of capital to provide it This section showsyou how to calculate what your Freedom Figure should be, sothat you can set that number as your main goal

4 Strategies for wealth

Your strategy for creating wealth needs to be a good fit with whoand what you are Many people try to become wealthy bycopying other people’s strategies without doing the work they

need to figure out where they are at and what they want Wethink that you should do a lot of preparatory work beforechoosing a strategy to build your wealth, a strategy that willwork best for you We outline the various strategies for wealthcreation and give you some guidelines to help you choose theone that best suits your circumstances and talents.

to do the right things and let you set milestones that allow you tocelebrate your success

H O W T H I S B O O K W O R K S

As we progress you will find that each step to wealth requiresyou to examine what you have been doing and make some

changes There may be new concepts to learn (K = knowledge), new approaches to wealth (A = attitudes), new actions to learn (S = skills) and new practices to acquire (H = habits) These

four letters form the memory aid KASH, representing the core

of your learning

• Knowledge might include a new vocabulary or concepts

such as ‘Wealth-Creating Assets’ and ‘Wealth Allocation’.Wealth is not nearly as complicated as many people fearbut, like all disciplines, finance has its own jargon Evenmore importantly, concepts such as ‘Net Worth’ and ‘InternalRate of Return’ are fundamental to your understanding

of the creation and maintenance of your wealth All theseideas are introduced progressively and you will have a goodgeneral knowledge of the field by the time you have finishedthis book

• Attitude covers many things, including our beliefs and

mindsets We all have a set of ideas and feeling about moneyand wealth We did not consciously choose these attitudes—most of them have been given to us through our upbringing

We inherit most of our attitudes from parents, teachers,friends, and later on in life, our colleagues and the people

we socialise with We are often unaware of the beliefs—andeven baggage—that we carry around concerning money Butwhether you are aware of your attitude or not, it is affectingyour behaviour and determining many of the choices youare making We will be challenging you to think about your

KASH your way to wealth

2

attitude—and at times to change it so that you have a morehelpful set of beliefs to support you in becoming wealthy.What you tell yourself about money and wealth will be veryimportant to your success because it will determine whatyou choose to do, for example, whether to spend or whether

to invest

• Skill is required to do anything well The basics of wealth arevery simple A lot of people feel they must need to be verygood at things like maths in order to be good with money.Nothing could be further from the truth! You learned all themaths you need in primary school, but you do need to learnhow to apply that learning to money We cover skills such ashow to calculate your Net Worth, how to determine yourFreedom Figure, how to do one-page plans, and many moreskills You should practise all these skills until you are com-fortable with them (Keeping a folder or large notebook forthis work, together with a calculator, will allow you to reviewyour skills regularly That will help you build your skillsquickly and give you a sense of comfort and competence.)

• Habits make or break us! After all, we are whatever we

repeatedly do We will be pointing out to you the habits youneed to develop and some of the ones you may need tochange By the end of the book you will be convinced thatyou need the habits of dreaming, setting goals, growing NetWorth, building networks and many more The wealthy aredifferent because they do things differently to the rest of us,that is, they focus on growing income rather than justspending it If you can change just a few core habits withmoney, it will make all the difference to your wealth for therest of your life

We point out these learning points, chapter by chapter, andprompt you to take action Each chapter concludes with theKASH items you need to be good at, or need to develop This

K A S H Y O U R WAY T O W E A LT H

is the stuff that you want to take away so that you can use itagain and again to ensure you reach your dreams of a life ofwealth and freedom.

KASH will make you wealthy!

Having wealth and freedom is about having both the time and the money that you need to live the life you want Neither wealth

nor time is enough on its own—it’s hard to enjoy either money

or leisure without having enough of the other Time withoutmoney is not a lot of fun, nor is it fun having money but notime You need both

It is all too easy to focus on money alone Many people we seehave plenty of wealth but no time or freedom, when we knowthat time and money are both important to having a life ofwealth and abundance

Low Income/Lot of Time

Low Income/Little Time

High Income/Lot of Time

High Income/Little Time

Financial freedom is not simply being rich Many peoplewho are rich are not financially free Certainly, you need to bewealthy to have financial freedom—wealth is a prerequisite Buthaving a lot of assets or wealth is not enough by itself Forfinancial freedom that wealth must be invested in areas that willgive you passive income You cannot be free if you still have towork for your money and/or your money is still at risk.

As shown by the diagram on the previous page, there is a off between time and wealth in everyone’s life Many peoplestruggle because they lack income; they may have all the time inthe world because they are retired or unemployed, but this is

trade-a mix thtrade-at letrade-aves them with few options Mtrade-any ftrade-amilies on lowincomes have employment but are time poor, often the case wherelow earnings mean that both adults need to work Their lives areoften difficult and the challenges unremitting—they never seem

to have enough money and are too often frantically busy trying

to care for children and coordinate parenting responsibilities

Financially Free = Having Time and Money

Low Income/Lot of Time

Low Income/Little Time

High Income/Lot of Time

High Income/Little Time

• Copy the blank diagram into your workbook or folder and mark the quadrant you are in Mark the one you would like

to be in, and draw an arrow showing you moving from where you are to where you want to be

• To make this move, what do you have to work hardest on: time or income?

• Describe the way time and money interrelate in your life, for example, is it taking all your time to earn the money you need; are you short of both money and time; or do you have plenty of time but little or no money?

• Consider how it would be if you had enough passive

income to spend your time as you pleased—what would you be doing?

From a wealth-coaching perspective one of the most interestinggroups represented by this diagram are those people who haverelatively good incomes but little freedom (time) They mayappear to have lots of goodies and choices but in reality they aretied to long hours and their lifestyle is consuming most of theirincome Think about it—does this meet many of the standards

of a life of wealth and freedom?

The desirable quadrant in this diagram is at top right, the onewhere people are financially free Financial freedom is havingenough to afford the lifestyle that you want without having towork or actively manage investments It is having investmentsthat produce enough passive income to give you the life that you

choose Being rich is having a lot of capital—being financially free

is having a lot of capital invested in things that will give youincome safely and continuously, without having to spend a lot oftime getting it The goal is not simply to be rich, but to haveriches that give you enough passive income, and give it to youreliably, to have the life you want

Those who are financially free are rich, and know theywill stay rich Without sufficient passive income from secure

W H AT I S ‘ W E A LT H A N D F R E E D O M ’ ?

investments you will never be free to live your dreams or pursueyour priorities Without your assets being securely invested, yourun the risk of losing some of your wealth (even losing the lot).Therefore, to have financial freedom, you must get yourself into

a position where you have enough capital in stable investments

to give you the passive income you need This is obviously quitedifferent from being rich, where your considerable wealth may

be tied up in a business, highly geared property or a farm.Passive income is income that you receive while you arehaving lunch, on the golf course, playing with your children,walking in the bush, at home and asleep It comes from assetsthat you need do little or nothing with to produce income.These assets are investments that will have no (or at least little)borrowings, so that you are secure in your position Financialfreedom is having enough in good solid investments (welldiversified) to be able to live the rest of your life how youwant One of our clients described it as having ‘non-treadmillincome’—money that you do not have to go out to work for.The diversified portfolio is then quite obviously still

important—it is not the way that you will become wealthy, but

it is the basis of being financially free This is the thing thatconfuses so many people—they fail to distinguish between whatwill make them rich (Wealth-Creating Assets) and what will givethem secure passive income (Security Assets) The two areusually quite different

People who are rich but who are not financially free include:

• People who own a business, even a quite big and verysuccessful business, but who are still tied to it and cannotleave it for any period of time

• People with jobs who earn well and enjoy good lifestyles butwhose income stops the moment they do

• People who own investment property with large amounts ofborrowing that still needs very active management

• Farmers, who often have a very high net worth, but whocannot leave the management of the farm for more than

a few days and are subject to all the risks inherent in ing (commodity prices and exchange rate changes, badweather, etc.)

farm-Certainly these people may be wealthy—if they do a Net Worthstatement they may be worth millions of dollars But theirwealth is not the sort that gives them financial freedom Unlessthey cash up (and put the proceeds from the sale into goodpassive investments) they are still at risk, by no means secure,and therefore are not free They have the means or the wealth forfinancial freedom, but have not chosen to become free

Other people who give the appearance of being wealthy infact are not, and are a long way from financial freedom Theseare the people with good careers that yield them high incomes.They have very nice cars (company provided, of course) and agood house in a good area (often with a big mortgage) This isnot financial freedom either—as soon as they stop work, theincome stops too They have no (or little) assets and investments

to give them passive income, unless they have diverted a goodpart of their salaries to investment (and few seem to do that toany great extent) This is not financial freedom because they arestill dependent on the job that they have, and usually on theircontinued career advancement

Being rich is a capital game It is having a lot of capital, not

just a lot of income For true financial freedom, the income youhave must be achieved passively, not by actively working for it.You only get significant passive income if you have a lot of

capital To be free, your income has to come from capital invested, not time invested.

Many people become wealthy—but they do not stay wealthy.Whatever it is that makes you rich is likely to be risky Achiev-ing financial freedom is about developing great wealth, and

W H AT I S ‘ W E A LT H A N D F R E E D O M ’ ?

progressively shifting it into assets that are much more secureand far less exposed to the risks that your wealth-creatingactivities face

Many people who develop their wealth through a business,farm, property investment or development, or share trading,carry on with that activity even after considerable wealth has

been generated Worse, they continue to plough all the profits

they have made back into the activity that is making them rich.That activity is likely to be risky—it is near impossible to make

a large amount of money without taking risks Thus they areploughing all their profits back into that thing which, by its verynature, is risky

In effect, these people are playing ‘double or quits’ Byputting all their wealth back into their business (or propertyinvestments or developments), they are incredibly exposed to adownturn in that area They are only as good as each deal thatthey make—one false step and they lose the lot

Financial freedom, then, is about having time and money:

your time is your own, and so is your money You do not have

to spend time generating an income, and your money is secure.You need wealth, you need a good income—but it has to be theright sort of wealth and the right sort of income

Living the life of your dreams means that you will need aplan to both create wealth and secure it so that you have enoughpassive income to spend your time as you choose

If you dream of abundance in your life you have to first createwealth—but you also have to keep it Being rich on paper for ashort period of time will not give you the life of your dreams.For a life of freedom and abundance you need to create sustain-able wealth We have developed a model for our WealthCoachingclients to help them both get rich and stay rich We first wrote

about this in Get Rich, Stay Rich.

The WealthCoaches Model allows us (and our clients) toconceptualise things It’s very useful to have a model to putlanguage around what we are trying to do and put labels on thevarious things that clients have and are doing It puts the variousthings that our clients have, or plan to have, in different compart-ments and makes sure that the right balance is maintained betweenthem It also shows what is happening to a client’s income—where

it is coming from and where it is going to Perhaps the best thingabout using this format or template is that it suits everyone—wehave not yet found anyone whose financial plan cannot be put intothis basic model Our clients tell us that this framework helps themunderstand what they are doing and helps them keep on trackboth with creating wealth and making their lives secure

To become rich, you ‘only’ need lots of assets However, toget wealthy and stay wealthy (and therefore have financialfreedom) you need three parts to your finances Even while youare getting rich, you should not have everything in high-performance Wealth-Creating Assets You need to hold someassets or money as a fallback, in case of adversity and to remindyou that the endgame is having a lot of wealth in secure assetsthat will provide passive income To get rich and stay rich youneed these three things:

for wealth and freedom

To begin with, you need some Wealth-Creating Assets.

Wealth-Creating Assets are the things that will make youwealthy, the things that you put your money into with theintention of getting at least a 15 per cent p.a return Theyare aggressive assets: high performance and high risk They arethe opposite of the diversified portfolio—they cannot be diver-sified if they are to achieve a 15 per cent return (or more) foryou (More about getting this sort of return later.)

Wealth-Creating Assets

There are really only three things that will make you this sort

choose However, these are the only three categories that are

capable of giving a high enough return to grow your wealth tofinancial freedom

We have already said that the ownership of these kinds ofthings is risky: your own business is inherently risky (many donot last more than five years); property is risky because it hashigh borrowings, and shares are volatile, going up and down—and sometimes only down

The risks associated with owning these things mean that youcannot own only these and expect to have financial freedom

—you do not have financial security while you own only these.You may have great wealth, but the risks inherent in allWealth-Creating Assets mean that you cannot relax and callyourself free Wealth-Creating Assets are by definition risky,

so that your wealth is always at risk while it is still in this kind

of asset

Therefore, while these are the way to become rich, they arenot the endgame in themselves—you need to have more secureinvestments as well, investments that are unassailable (More onthis soon.)

In the next step in building the model, your Wealth-CreatingAssets give you income:

W E A LT H C O A C H E S M O D E L F O R W E A LT H A N D F R E E D O M

of the system for consumption, as shown by the third step inbuilding the model:

The question now arises: what are you going to do with yoursurplus income after consumption? If you consume some of theincome and reinvest the remainder in risky Wealth-CreatingAssets you are unlikely to remain wealthy for long So we come

to the next step of the model; some of your income needs to beinvested in Security Assets:

Security Assets are also investments, but their primaryfunction is to store wealth in a safe place Security Assets willgive you lower returns than Wealth-Creating Assets but they aremuch safer This is where you may keep your house and adiversified portfolio of investments This part of the structureshould have no (or at least very little) borrowings

When you first start off towards financial freedom, youwill have very little in the Security Assets compartment Clearly,you have to get as much of your capital working as hard as poss-ible in your Wealth-Creating Assets, getting those high returns

If you put a lot into Security Assets, too much of your wealth will

be underperforming to make you rich in the time required Early

W E A LT H C O A C H E S M O D E L F O R W E A LT H A N D F R E E D O M

Security Assets Wealth-Creating Assets

Income

on, most of your capital should be in Wealth-Creating Assets,the idea being to transfer some of it progressively into SecurityAssets Right from the start, nevertheless, you should begin todevelop Security Assets, even though there may only be a littlethere at first You should start to develop this at the beginning fortwo reasons:

• You are learning to put some money safely away In doing

so it should continue to remind you what the final goal is: to

have everything, all of your wealth, in these sorts of assets

• You are creating some fallback funds should things go wrong Remember that ploughing everything back into your

Wealth-Creating Assets means that you are playing ‘double

or quits’, the stakes are getting higher and higher, and onebad mistake could see you out of the game Having someassets put aside allows you to prop up your Wealth-CreatingAssets during a lean period, or to start again if the worsthappens You will have the means to get back in the game

It is tempting to keep putting everything into your Creating Assets, especially when you are doing well there Keeptelling yourself that the biggest enemy of the entrepreneur isover-optimism Early success leads many people to think that the

Wealth-game is easy and everything that they touch turns to gold This is

an illusion You are not perfect, you are not a god—you will

make mistakes You may have been successful but that will notmake you invulnerable forever Get the Security Assets startedimmediately, even if you only put in a little at the beginning.Over time you can divert more into it, paying off your home loanfirst, and then developing that diversified portfolio

This will necessarily slow you down a little on your road toriches The things in the Security Assets compartment will notget the returns that your Wealth-Creating Assets will get (expect

to get 5 per cent here, not the 15 per cent minimum fromyour Wealth-Creating Assets) Nevertheless, although it will slow

W E A LT H C O A C H E S M O D E L F O R W E A LT H A N D F R E E D O M

down your journey, it is a very positive step towards financialfreedom Getting rich is only half of the story—staying rich isthe other half You need to find a balance from the beginning.For many people, assets in the Security Assets compartmentwill be owned by an entity that is quite separate from everythingelse—in some countries probably some kind of trust The idea isthat your Security Assets will be untouchable if things go wrong.They will be removed, quarantined off from your other activities,

so they are still yours if everything else collapses around you

Your income will come from one or more of three sources:

• From your Wealth-Creating Assets This may be a business

and in some cases may be your only source of income (at thebeginning anyway)

• From your Security Assets This is likely to be quite small at

the start Any income generated from this area should beentirely reinvested back into it, at least until you start to needthe passive income that it generates to enjoy your freedom;and from

• Your job or your partner’s job.

Security Assets

Some of you, especially those who are quite advanced in theirquest for financial freedom, may get income from all threesources (although as we said above, you ignore the income fromyour Security Assets as it is simply reinvested).

The big part of this plan is now to decide what you are going

to do with your income This needs to be split three ways, asshown in the final step of the model:

• Consumption You have to live: pay for the groceries, rent or

mortgage on the house, power, telephone, etc The more youspend in this area, the less you will have for the other twothings There is a lot more on consumption in Part VI

• Wealth-Creating Assets This area is likely to take the lion’s

share of the income left over after consumption (in the earlydays at least) You will want to put as much spare income aspossible back into this area: to buy more properties or shares

or to fund growth in the business

• Security Assets Some small portion of your spare income

at the beginning should be put here Initially, when yourincome is small and need for growth is high, the percentagewill be small—perhaps only 5 per cent Later on you shoulddivert more, until in perhaps 10 years’ time everything isbeing siphoned off to Security Assets, when you will be fullyfocused on freedom rather than wealth creation

Planning to allocate your money like this is critical to yourchances of finding financial freedom If you do not plan todivide your income, you will spend it mindlessly—you maybecome rich, but you probably will not stay rich Make adeliberate plan to split your income and to set up automaticpayments at the bank

W E A LT H C O A C H E S M O D E L F O R W E A LT H A N D F R E E D O M

Exercise 2

Study the completed model until you are clear that you understand the differences between Wealth-Creating Assets, Security Assets and Income.

Make a full-page sketch in your workbook or folder.

• Now, write in the name of any Wealth-Creating Assets you have (business, highly geared property, aggressive share portfolio) Note down your Security Assets (family home, diversified portfolio, property with low/no borrowings) This is only a rough cut and we’ll come back to it (in Chapter 8) The important thing is to get a feel for where your money is at present

• Put the total amount of equity that you have in your Wealth-Creating Assets and in your Security Assets and put in the figures for Income and Consumption.

• Note how much income you have and estimate roughly how much goes on consumption, and how much is

Security Assets

reinvested into either Wealth-Creating Assets or Security Assets You should be getting a sense of where your wealth

is and what the bigger picture of your finances looks like.

Now that you have some background knowledge of how this

process works, let’s get on with your journey to wealth and freedom.

Exercise 3: Keys to wealth quiz

Score yourself out of 10 points on each of the following

10 keys to wealth

1 Income You must create as much income as possible.

Income is the key to wealth You have to have income

to invest in Wealth-Creating Assets It is also the income from these assets that will in turn drive up the value of your assets—your business (from profits), your property (from rentals) and your shares (from dividends

or profits)

Think back over the last five years regarding how your income has changed Score yourself 0–3 if your income is low and unchanged (or has fallen), 4–7 if you are working hard and growing income, and 8–10 if your income is good and growing and you are doing everything possible to grow

it higher.

W E A LT H C O A C H E S M O D E L F O R W E A LT H A N D F R E E D O M

2 Surplus Irrespective of how little or how much income

you have, you must ensure a surplus It’s not how much income you have but how much you keep that matters On the one hand you need to focus on driving up income from every source; on the other hand you must be relentless in focusing on spending less so that the amount of surplus grows Score yourself 0–3 if there is nothing or very little left over at the end of the month, 4–7 if you are managing to save a little, and 8–10 if you are putting aside money regularly in a planned way Give yourself 10 if you are paying yourself a planned percentage of your income for investment each pay period

3 Investment in Wealth-Creating Assets Saving the surplus

in low-return deposits is far better than nothing but it will not create sufficient wealth for most people unless they have huge incomes and are very disciplined savers Our

definition of Wealth-Creating Assets is that they give high returns on your money (15 per cent or more) A business, property or shares are the only Wealth-Creating Assets to give this level of return You almost certainly will need

to own Wealth-Creating Assets in order to become wealthy Score yourself 0–3 if you do not have any Wealth- Creating Assets, 4–7 if you are on the way to purchasing Wealth-Creating Assets, and 8–10 if you already have some and are managing them well.

4 Leverage It is the lever of borrowing that gives you high

returns on your money It is very difficult to become wealthy without borrowing unless you have a very high income and lots of time on your side When you borrow you get to use other people’s money to grow your wealth You must borrow for the things that will make you rich (and avoid borrowing for things that will make you poor!)

Score yourself 0–3 if the only debt you have is for consumption (credit cards, etc.), 4–7 if your only

4. borrowing is for appreciating assets (family home,

education), and 8–10 if you have borrowed to invest in Wealth-Creating Assets like a business, investment property

or shares.

5 Time Unless you take extraordinarily high risks (or are

incredibly ‘lucky’), it will take time for your wealth to grow The earlier you start the easier it is, as the compounding effect is working for you While it is never too late to do something about your finances it is important to begin as soon as possible Time allows your wealth to grow—and it also gives you some room to make a mistake or two and still have time to recover Business, property and shares all experience cycles of growth and you want to be in the game for long enough to experience the benefit It takes patience and time to grow wealth.

Score yourself 0–3 if you are procrastinating and wasting time (whatever your age!), 4–7 if you have plans to grow your wealth and are ready to start, and 8–10 if you have already begun and are determined not to waste a moment, much less a year, from now on.

6 Plan As in any area of life a plan makes all the difference.

You need to know where you want to go (dream), be clear about end results (goals), think through what you need to

do differently (strategies) and know how you will track your progress so that you can manage (milestones) All of the evidence says that written commitments in these areas make

a very big difference between success and mere daydreaming! Score yourself 0–3 if you hate plans and never make them, 4–7 if you have worked out your dream and goals and have plans to start making them happen, and 8–10 if you have a written plan and are already taking action according to the plan.

7 Expertise There’s a lot of stuff in various fields of wealth

that you will need to learn, depending on whether you decide to become wealthy through business, property or

W E A LT H C O A C H E S M O D E L F O R W E A LT H A N D F R E E D O M

shares So, depending on your chosen Wealth–Creating Assets, you need to find out the basics and then commit to learning everything you can to make your enterprise as successful as possible You must be willing to learn.

Score yourself 0–3 if you know nothing about wealth creation and have no intention of making the effort to find out, 4–7 if you are interested and have a plan to learn about

an area of wealth creation (for example, property investment), and 8–10 if you have already embarked on a lifelong learning program of up-skilling in your chosen area Give yourself a

10 if you have a written plan for growing your expertise.

8 Expert help No matter how assiduously you apply

yourself to learning what you need to know to become wealthy, you will still need the help of experts in other fields such as accountants, lawyers, trust experts and various agents You must choose wisely and manage them well.

No one knows everything

Score yourself 0–3 if you disdain all experts and think you can do it yourself, 4–7 if you have already worked with

a professional (for example, an accountant) to help your wealth creation, and 8–10 if you have a team of

professionals and are managing them well.

9 Network Wealth creation is very difficult on your own The

better the network you build the more support you will have Your network will be useful as a sounding board, will bring other skills to you and is usually a good source

of referrals Don’t ever underestimate the power of a good network

Score yourself 0–3 if you hate networking and don’t want to build a network, 4–7 if you have a few like-minded friends and associates with whom you discuss your wealth creation plans and efforts, and 8–10 if you have a wide network of people from various walks of life who know and

do many different things.

10 People skills You usually have to be good with people to

succeed This will start with immediate family members,

who need to be committed and supportive of wealth creation No matter what you invest in you will need good people skills—with customers, suppliers, tenants and professionals in many disciplines.

Score yourself 0–3 if you haven’t discussed your dreams and goals with your partner, 4–7 if you have enlisted the support of close family and close friends, and 8–10 if you are one of those people who can manage good relationships with everyone you need in order to be successful.

Score analysis

80+ You are doing brilliantly! Your knowledge and skills are

very good and you are doing most of the things you need to do

to ensure that you become wealthy and stay that way Have a close look at any of the keys where you did not score the full amount—that will probably give you an indication of what you need to do to put the final touch on your wealth-creation habits Congratulations! You must have a great attitude.

60+ You are doing well You must be doing most things right,

at least some of the time Ask yourself why you are not more consistent—you obviously know a lot about what you need to

do to become wealthy Is your attitude stopping you? Are you giving up from time to time? Are there particular keys that you have neglected entirely and that you need to attend to?

If you do more of the right stuff consistently your performance should improve rapidly

40+ Well, you can’t plead ignorance! You either have some

knowledge of what you need to do but are not doing it often enough, or you have only just started and haven’t quite got there yet Examine the keys where you scored poorly and pick

a couple where you can take action immediately This should make such a difference to your performance that you will soon implement the other keys.

W E A LT H C O A C H E S M O D E L F O R W E A LT H A N D F R E E D O M

0–40 Your wealth may be in a bad state The only way from

here is up If you are serious about becoming wealthy you should take a day off and read the whole book You will never

be wealthy unless you understand and apply these keys for wealth Remember, anyone can do this—start today to take action on one of these keys Pick a chapter, do the exercises and make something happen today to take you on the path

to wealth.

Part II

Your current position: Where are you starting from?

Chapter 8 Where are your assets? Getting the

Chapter 10 What is going out: Expenditure flows 55

Let’s get down to business! The most important part of the path

to wealth is taking stock of where you are now In this sectionyou are going to build up a picture of your current financialposition Some of this will be about the ‘hard’ numbers, such ashow much wealth you have (Net Worth) and current levels andsources of income Some of it will be about the ‘soft’ stuff, such

as understanding why you are in the position you are in—thismay relate to your attitude to wealth or to poor habits withmoney No matter what the picture looks like, we believe thatyou need to have a very firm grasp of your current financialreality before you go any further

Everyone’s reality is a little different Most likely you havebeen working hard since the day you left school or finishedwhatever education or training you undertook We have all beentold that’s what we need to do to succeed in life However, you(and many others) have probably found that it isn’t true, thatthis recipe has not taken you very far Even when you have gotfurther, you may not be in the place you want to be You mayhave a high Net Worth but are still having to work hard Habitscan be hard to break!

If you are like most people, you probably find that it is takingall your efforts just to stay in the same place You may own ahome but still have a considerable amount left on the mortgage.You may be working hard—perhaps harder than ever before—but feel you are unlikely to make much more headway Andyou certainly won’t be able to stop work very soon—if at all.Depending on your age you may have more or less anxiety aboutthe position you find yourself in: younger people often look atthe work and lives of those ahead of them on the ladder and

reality

think that this is an unrewarding path that they do not wish tofollow More experienced people often feel that their oppor-tunities for further advancement have passed and there is littlethey can do to change their circumstances.

If you are the owner of a business you are likely to be workingvery long hours and perhaps not taking much out of the busi-ness Your earlier hopes of becoming wealthy and free seem moreand more distant You may even be feeling trapped becauseyou can see no way out Even thinking about the next businesscycle downturn fills you with fear because there may not bemuch ‘fat’ in your business and you may have high levels ofborrowings

Exercise 4

Write your story about your life so far No one will see this unless you choose to share it, so feel free to be as detailed and

as passionate as you wish.

• What has happened so far?

• How are you feeling about your life at present?

• What do you like about your life?

• What is irritating you that you want to change?

• What do you think will happen if you stay on this path?

Whatever you are doing or have been doing is a perfect recipe toachieve your current position Understanding the path you havetaken to here—and where exactly ‘here’ is—is critical to movingforward towards a life of wealth and freedom

This chapter will help you gather a very clear picture of yourcurrent position When you are finished this section you shouldfully understand where you are with your finances, and have anup-to-date written record of them We will have helped you fill