Coach Yourself To Wealth

Coach Yourself to Wealth 22/4/05 1:24 PM Page i
Coach Yourself
to Wealth
Live the Life You Want
Martin Hawes and Joan Baker
Coach Yourself to Wealth 22/4/05 1:24 PM Page ii
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

83 Alexander Street
Crows Nest NSW 2065
Australia
Phone: (61 2) 8425 0100
Fax: (61 2) 9906 2218
Email: info@allenandunwin.com
Web: www.allenandunwin.com
National Library of Australia

Cataloguing-in-Publication entry:
Hawes, Martin, 1952.

Coach yourself to wealth.
ISBN 1 74114 365 9.
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
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Contents
Preface: A better life v

Part I Setting the stage 1
1 How this book works 3
2 KASH your way to wealth 6
3 What is wealth and freedom? 9
4 WealthCoaches Model for wealth and freedom 15
Part II Current position: Where are you starting from? 31

5 Facing reality 33
6 What is stopping you? 36
7 Net worth 39
8 Where are your assets? Getting the balance right 46
9 What is coming in: Income 51
10 What is going out: Expenditure flows 55
Part III Your desired position: What do you want? 65
11 Whats the dream? 67
12 Who will share the dream? 72
13 What do you really value? 75
Part IV Your Freedom Figure: How much will you need? 79
14 Whats enough? 81
15 SMART goals 91
16 Now, what do you really want? 97
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C O A C H Y O U R S E L F T O W E A LT H
Part V Strategies for wealth: How will you create wealth? 101
17 How wealth is created 103
18 How income makes you wealthy 106
19 How wealth is destroyed 110
20 How to protect wealth 114
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
24 Getting asset allocation right 126
25 What if you have a job? 137
26 You must create a surplus 141
27 You should maximise income 149
28 You have to learn to borrow 156
29 How to maximise your returns 161
Part VI Action plans: What will you do? 165
30 Bridging the gap 167
31 Do a one-page plan 171
32 Turning strategies into actions 176
Part VII Where can you find help? 183

33 Whos on your side? 185
34 Networking: Winners work with winners! 188
35 Assembling a dream team 192
36 Are you getting the best? 196
37 Making your team work for you 199
38 Tips for choosing professionals 204
39 Learning from the masters 207
40 The last menu item: Frogs! 215
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Preface: A better life

The principles we set out in this book work. For several years
now we have been working as WealthCoaches helping people to
arrange their money to live a better life. We have applied the
principles set out here to many peoples finances over that time,
proving that they work in many different situations. Using this
book, you too can understand the principles of wealth creation
and apply them to your own circumstances.
Everyone is different. We all have unique circumstancesno
two people, or families, have the same financial situation. Our
incomes are all different; our expenditures are all different; what
we own is unique, as is what we owe. Even more importantly and
interestingly, we all have different dreams, visions and aspirations
for our futures, different goals for what we want and what we
want to be.
It is these differences that keep the two of us doing what we
docoaching people to improve their finances to have a better
life. The differences are the challengethere is no one template
that can possibly fit all people with all their different situations.
The differences provide us with the challenge of working with
people in all sorts of circumstances as they arrange their money
for the life that they want.
The differences mean that we as WealthCoaches can never
relax and become detached as we work with clients. The fact
that everyone has a unique position and unique goals demands
that in the planning phase we listen hard and think even harder.
We have to understand where our clients want to be in the
future and have a clear picture of where they are now. We all
have strengths and weaknesses, strong parts of our personalities
and finances that can be used for the good, and weak parts that
have to be accommodated. It is our job as planners and
WealthCoaches to work out what is strong, what is weak, and
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to fit the pieces together to make the best whole.

How do we make the pieces fit so that our clients get the lives
that they want? The answer is that it is like starting a fresh jigsaw
puzzle each time we take on a new client. There is a puzzle that
has to be solved each and every time.
Having said that theres no template which can fit and match
everyone, 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 you
can use it yourself to create the wealth and the life that you want.
Our experience in dealing with people is that despite their
differences, everyone wants one thing: a better life. Clients look
to us to help with the money side of that, whether they have a
lot 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 that
you want or not. Money gives choiceswith good finances you
have options that other people simply do not have.
Having a lot of money is not a panaceait will not solve all
the problems in you lifebut for most of us it is a prerequisite
to having the freedom to live our lives as we want. Without
money (or with our money arranged and invested badly), our
lives are more restricted, our choices more limited.
We are committed to helping people achieve the financial
position they need to be in to allow them to live the lives they
want to be able to live. That is the purpose of our work and the
theme of this book. Practically anyone can become wealthy and
free. We have dealt with all sorts of people, from those who
already have plenty of wealth but need help to arrange it to be
free, to those with very little, who are just starting out to develop
wealth, and much of what we have learned is here for you to read.
Joan Baker, Martin Hawes;

info@wealthcoaches.net
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Part I
Setting the stage
Chapter 1 How this book works 3
Chapter 2 KASH your way to wealth 6
Chapter 3 What is wealth and freedom 9
Chapter 4 WealthCoaches Model for wealth
and freedom 15
1 How this
Chapter
book works
So, you have decided that you want to be wealthy and free.
Congratulations! That is the hardest step by far. Most people
never progress beyond the stage of wishing to be rich. You are
reading 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 main
building 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 in
each 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 of

where you are starting from. Many of you may have only a vague
idea of the current position of your financesafter all, most of
us are too busy to do much more with our finances than get
through each month. In this section we will be helping you
work through exactly where your finances are nowhow much
3
wealth you have, how your assets are allocated, what your
current income is, how much money is being spent and where,
and what is happening to the surplusif 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 look
like. In this section we help you work through your dreams so
that you can describe in some detail the life of wealth and
freedom that you want to achieve.
3 Your freedom figure
Using your dream lifestyle as a guide, we then focus on helping

you to work out how much wealth you will need to live the life
of your dreams. We call this amount of wealth your Freedom
Figure, the amount of money that will allow you to be wealthy
and free to live the life that you want. Freedom Figures differ
because everybody has a different dream of their ideal life. You
will need a certain amount of passive income to live the life of
your dreams. To get that amount of income you will need to
have a certain level of capital to provide it. This section shows
you how to calculate what your Freedom Figure should be, so
that 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 who
and what you are. Many people try to become wealthy by
copying other peoples strategies without doing the work they
4
HOW THIS BOOK WORKS
need to figure out where they are at and what they want. We
think that you should do a lot of preparatory work before
choosing a strategy to build your wealth, a strategy that will
work best for you. We outline the various strategies for wealth
creation and give you some guidelines to help you choose the
one that best suits your circumstances and talents.
5 Action plans
Nothing much ever gets done without a clear plan. The path to
the level of wealth that will let you live the life of your dreams
is usually a long one and could take a few years. Without a good
plan you are likely to lose your way or become disheartened
because you cannot see that you are making progress. In this sec-
tion we help you build a simple plan of action that will assist you
to do the right things and let you set milestones that allow you to
celebrate your success.
5
2 KASH your
Chapter
way to wealth
As we progress you will find that each step to wealth requires
you 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 fear
but, like all disciplines, finance has its own jargon. Even
more importantly, concepts such as Net Worth and Internal
Rate of Return are fundamental to your understanding
of the creation and maintenance of your wealth. All these
ideas are introduced progressively and you will have a good
general knowledge of the field by the time you have finished
this book.
Attitude covers many things, including our beliefs and
mindsets. We all have a set of ideas and feeling about money
and 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 beliefsand
even baggagethat we carry around concerning money. But
whether you are aware of your attitude or not, it is affecting
your behaviour and determining many of the choices you
are making. We will be challenging you to think about your
6
K A S H Y O U R WAY T O W E A LT H
attitudeand at times to change it so that you have a more

helpful set of beliefs to support you in becoming wealthy.
What you tell yourself about money and wealth will be very
important to your success because it will determine what
you choose to do, for example, whether to spend or whether
to invest.
Skill is required to do anything well. The basics of wealth are
very simple. A lot of people feel they must need to be very
good at things like maths in order to be good with money.
Nothing could be further from the truth! You learned all the
maths you need in primary school, but you do need to learn
how to apply that learning to money. We cover skills such as
how to calculate your Net Worth, how to determine your
Freedom Figure, how to do one-page plans, and many more
skills. You should practise all these skills until you are com-
fortable with them. (Keeping a folder or large notebook for
this work, together with a calculator, will allow you to review
your skills regularly. That will help you build your skills
quickly 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 you
need to develop and some of the ones you may need to
change. By the end of the book you will be convinced that
you need the habits of dreaming, setting goals, growing Net
Worth, building networks and many more. The wealthy are
different because they do things differently to the rest of us,
that is, they focus on growing income rather than just
spending it. If you can change just a few core habits with
money, it will make all the difference to your wealth for the
rest of your life.
We point out these learning points, chapter by chapter, and

prompt you to take action. Each chapter concludes with the
KASH items you need to be good at, or need to develop. This
7
is the stuff that you want to take away so that you can use it
again and again to ensure you reach your dreams of a life of
wealth and freedom.
KASH will make you wealthy!
8
3 What is wealth
Chapter
and freedom?
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 ownits hard to enjoy either money
or leisure without having enough of the other. Time without
money is not a lot of fun, nor is it fun having money but no
time. You need both.
It is all too easy to focus on money alone. Many people we see
have plenty of wealth but no time or freedom, when we know
that time and money are both important to having a life of
wealth and abundance.
Financially Free = Having Time and Money
Lot Low Income/Lot of Time High Income/Lot of Time
May be
Semi-retired Financially Free!
Part-time
Unemployed
TIME
Low Income/Little Time High Income/Little Time

May be May be
Single parents Professionals
Have multiple jobs Business owners
Small children Double income with kids
Career building
Little
Low INCOME High
9
Financial freedom is not simply being rich. Many people

who are rich are not financially free. Certainly, you need to be
wealthy to have financial freedomwealth is a prerequisite. But
having a lot of assets or wealth is not enough by itself. For
financial freedom that wealth must be invested in areas that will
give you passive income. You cannot be free if you still have to
work for your money and/or your money is still at risk.
As shown by the diagram on the previous page, there is a trade-
off between time and wealth in everyones life. Many people
struggle because they lack income; they may have all the time in
the world because they are retired or unemployed, but this is
a mix that leaves them with few options. Many families on low
incomes have employment but are time poor, often the case where
low earnings mean that both adults need to work. Their lives are
often difficult and the challenges unremittingthey never seem
to have enough money and are too often frantically busy trying
to care for children and coordinate parenting responsibilities.
Exercise 1
Financially Free = Having Time and Money
Lot Low Income/Lot of Time High Income/Lot of Time

TIME
Low Income/Little Time High Income/Little Time
Little
Low INCOME High
10
W H AT I S W E A LT H A N D F R E E D O M ?
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 pleasedwhat would
you be doing?
From a wealth-coaching perspective one of the most interesting

groups represented by this diagram are those people who have
relatively good incomes but little freedom (time). They may
appear to have lots of goodies and choices but in reality they are
tied to long hours and their lifestyle is consuming most of their
income. Think about itdoes this meet many of the standards
of a life of wealth and freedom?
The desirable quadrant in this diagram is at top right, the one
where people are financially free. Financial freedom is having
enough to afford the lifestyle that you want without having to
work or actively manage investments. It is having investments
that produce enough passive income to give you the life that you
choose. Being rich is having a lot of capitalbeing financially free
is having a lot of capital invested in things that will give you
income safely and continuously, without having to spend a lot of
time getting it. The goal is not simply to be rich, but to have
riches that give you enough passive income, and give it to you
reliably, to have the life you want.
Those who are financially free are rich, and know they
will stay rich. Without sufficient passive income from secure
11
investments you will never be free to live your dreams or pursue

your priorities. Without your assets being securely invested, you
run 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 quite
different 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 are
having lunch, on the golf course, playing with your children,
walking in the bush, at home and asleep. It comes from assets
that 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. Financial
freedom is having enough in good solid investments (well
diversified) to be able to live the rest of your life how you
want. One of our clients described it as having non-treadmill
incomemoney that you do not have to go out to work for.
The diversified portfolio is then quite obviously still
importantit is not the way that you will become wealthy, but
it is the basis of being financially free. This is the thing that
confuses so many peoplethey fail to distinguish between what
will make them rich (Wealth-Creating Assets) and what will give
them secure passive income (Security Assets). The two are
usually quite different.
People who are rich but who are not financially free include:
People who own a business, even a quite big and very

successful business, but who are still tied to it and cannot
leave it for any period of time.
People with jobs who earn well and enjoy good lifestyles but
whose income stops the moment they do.
People who own investment property with large amounts of
borrowing that still needs very active management.
12
W H AT I S W E A LT H A N D F R E E D O M ?
Farmers, who often have a very high net worth, but who
cannot leave the management of the farm for more than
a few days and are subject to all the risks inherent in farm-
ing (commodity prices and exchange rate changes, bad
weather, etc.)
Certainly these people may be wealthyif they do a Net Worth

statement they may be worth millions of dollars. But their
wealth is not the sort that gives them financial freedom. Unless
they cash up (and put the proceeds from the sale into good
passive investments) they are still at risk, by no means secure,
and therefore are not free. They have the means or the wealth for
financial freedom, but have not chosen to become free.
Other people who give the appearance of being wealthy in
fact are not, and are a long way from financial freedom. These
are the people with good careers that yield them high incomes.
They have very nice cars (company provided, of course) and a
good house in a good area (often with a big mortgage). This is
not financial freedom eitheras soon as they stop work, the
income stops too. They have no (or little) assets and investments
to give them passive income, unless they have diverted a good
part of their salaries to investment (and few seem to do that to
any great extent). This is not financial freedom because they are
still dependent on the job that they have, and usually on their
continued 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 you
have 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 wealthybut 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
13
progressively shifting it into assets that are much more secure

and far less exposed to the risks that your wealth-creating
activities 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 riskyit is near impossible to make
a large amount of money without taking risks. Thus they are
ploughing all their profits back into that thing which, by its very
nature, is risky.
In effect, these people are playing double or quits. By
putting all their wealth back into their business (or property
investments or developments), they are incredibly exposed to a
downturn in that area. They are only as good as each deal that
they makeone 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 incomebut it has to be the
right sort of wealth and the right sort of income.
Living the life of your dreams means that you will need a
plan to both create wealth and secure it so that you have enough
passive income to spend your time as you choose.
14
4 WealthCoaches Model
Chapter
for wealth and freedom

If you dream of abundance in your life you have to first create
wealthbut you also have to keep it. Being rich on paper for a
short 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 WealthCoaching
clients 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) to
conceptualise things. Its very useful to have a model to put
language around what we are trying to do and put labels on the
various things that clients have and are doing. It puts the various
things that our clients have, or plan to have, in different compart-
ments and makes sure that the right balance is maintained between
them. It also shows what is happening to a clients incomewhere
it is coming from and where it is going to. Perhaps the best thing
about using this format or template is that it suits everyonewe
have not yet found anyone whose financial plan cannot be put into
this basic model. Our clients tell us that this framework helps them
understand what they are doing and helps them keep on track
both with creating wealth and making their lives secure.
To become rich, you only need lots of assets. However, to
get wealthy and stay wealthy (and therefore have financial
freedom) you need three parts to your finances. Even while you
are getting rich, you should not have everything in high-
performance Wealth-Creating Assets. You need to hold some
assets or money as a fallback, in case of adversity and to remind
you that the endgame is having a lot of wealth in secure assets
that will provide passive income. To get rich and stay rich you
need these three things:
15
Wealth-Creating Assets;
Income; and
Security Assets.
In our model we keep each of these separate. To understand the

process, you should think of them as separate things. Never-
theless, although they are separate, they are also interrelated.
Now we start to build the model.
To begin with, you need some Wealth-Creating Assets.
Wealth-Creating Assets
Wealth-Creating Assets are the things that will make you

wealthy, the things that you put your money into with the
intention of getting at least a 15 per cent p.a. return. They
are aggressive assets: high performance and high risk. They are
the opposite of the diversified portfoliothey cannot be diver-
sified if they are to achieve a 15 per cent return (or more) for
you. (More about getting this sort of return later.)
16
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
There are really only three things that will make you this sort
of return:
A business;
Property investment or property development; and
Shares.
You do not get high returns from just anything in these

categoriesnot all businesses or property investments or
shares will give you the growth that you need to get rich. So
you need to know how to go into whichever of them you
choose. However, these are the only three categories that are
capable of giving a high enough return to grow your wealth to
financial freedom.
We have already said that the ownership of these kinds of
things is risky: your own business is inherently risky (many do
not last more than five years); property is risky because it has
high borrowings, and shares are volatile, going up and down
and sometimes only down.
The risks associated with owning these things mean that you
cannot 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 all
Wealth-Creating Assets mean that you cannot relax and call
yourself 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 are
not the endgame in themselvesyou need to have more secure
investments as well, investments that are unassailable. (More on
this soon.)
In the next step in building the model, your Wealth-Creating
Assets give you income:
17
Income
Some of this will be spent in order to live (consumption).

Although we are both well known for being very keen on people
living on a budget, even we have to concede that you need
money to eat and live! Some of your income will have to go out
of the system for consumption, as shown by the third step in
building the model:
CONSUMPTION
$
Income
18
The question now arises: what are you going to do with your
surplus income after consumption? If you consume some of the
income and reinvest the remainder in risky Wealth-Creating
Assets you are unlikely to remain wealthy for long. So we come
to the next step of the model; some of your income needs to be
invested in Security Assets:
Security
Income Assets
Security Assets are also investments, but their primary

function is to store wealth in a safe place. Security Assets will
give you lower returns than Wealth-Creating Assets but they are
much safer. This is where you may keep your house and a
diversified portfolio of investments. This part of the structure
should have no (or at least very little) borrowings.
When you first start off towards financial freedom, you
will 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
19
on, most of your capital should be in Wealth-Creating Assets,

the idea being to transfer some of it progressively into Security
Assets. Right from the start, nevertheless, you should begin to
develop Security Assets, even though there may only be a little
there at first. You should start to develop this at the beginning for
two 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 one
bad mistake could see you out of the game. Having some
assets put aside allows you to prop up your Wealth-Creating
Assets during a lean period, or to start again if the worst
happens. You will have the means to get back in the game.
It is tempting to keep putting everything into your Wealth-
Creating Assets, especially when you are doing well there. Keep
telling yourself that the biggest enemy of the entrepreneur is
over-optimism. Early success leads many people to think that the
game is easy and everything that they touch turns to gold. This is
an illusion. You are not perfect, you are not a godyou will
make mistakes. You may have been successful but that will not
make you invulnerable forever. Get the Security Assets started
immediately, even if you only put in a little at the beginning.
Over time you can divert more into it, paying off your home loan
first, and then developing that diversified portfolio.
This will necessarily slow you down a little on your road to
riches. The things in the Security Assets compartment will not
get the returns that your Wealth-Creating Assets will get (expect
to get 5 per cent here, not the 15 per cent minimum from
your Wealth-Creating Assets). Nevertheless, although it will slow
20
down your journey, it is a very positive step towards financial

freedom. Getting rich is only half of the storystaying rich is
the other half. You need to find a balance from the beginning.
For many people, assets in the Security Assets compartment
will be owned by an entity that is quite separate from everything
elsein some countries probably some kind of trust. The idea is
that 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 the
beginning anyway).
From your Security Assets This is likely to be quite small at
the start. Any income generated from this area should be
entirely reinvested back into it, at least until you start to need
the passive income that it generates to enjoy your freedom;
and from
Your job or your partners job.
CONSUMPTION
$
INCOME
$
Security
Income Assets
21
Some of you, especially those who are quite advanced in their

quest for financial freedom, may get income from all three
sources (although as we said above, you ignore the income from
your 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, as
shown 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 you
spend in this area, the less you will have for the other two
things. There is a lot more on consumption in Part VI.
Wealth-Creating Assets This area is likely to take the lions
share of the income left over after consumption (in the early
days at least). You will want to put as much spare income as
possible 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 your
income is small and need for growth is high, the percentage
will be smallperhaps only 5 per cent. Later on you should
divert more, until in perhaps 10 years time everything is
being siphoned off to Security Assets, when you will be fully
focused on freedom rather than wealth creation.
Planning to allocate your money like this is critical to your
chances of finding financial freedom. If you do not plan to
divide your income, you will spend it mindlesslyyou may
become rich, but you probably will not stay rich. Make a
deliberate plan to split your income and to set up automatic
payments at the bank.
22
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.
CONSUMPTION
$
INCOME
$
Security
Income Assets
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 well 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
23
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.
Ask yourself:
Have I created any wealth or is everything going on
consumption?
Do I mean to invest but never have any money left?
Am I living from pay-day to pay-day?
KASH point
Now that you have some background knowledge of how this
process works, lets 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 assetsyour 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 03 if your income is
low and unchanged (or has fallen), 47 if you are working
hard and growing income, and 810 if your income is good
and growing and you are doing everything possible to grow
it higher.
24
2. Surplus Irrespective of how little or how much income

you have, you must ensure a surplus. Its 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 03 if there is nothing or very little left
over at the end of the month, 47 if you are managing to
save a little, and 810 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 03 if you do not have any Wealth-
Creating Assets, 47 if you are on the way to purchasing
Wealth-Creating Assets, and 810 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 peoples 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 03 if the only debt you have is for
consumption (credit cards, etc.), 47 if your only
25
4. borrowing is for appreciating assets (family home,

education), and 810 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 growand 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 03 if you are procrastinating and wasting
time (whatever your age!), 47 if you have plans to grow
your wealth and are ready to start, and 810 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 03 if you hate plans and never make
them, 47 if you have worked out your dream and goals
and have plans to start making them happen, and 810 if
you have a written plan and are already taking action
according to the plan.
7. Expertise Theres 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
26
shares. So, depending on your chosen WealthCreating

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 03 if you know nothing about wealth
creation and have no intention of making the effort to find
out, 47 if you are interested and have a plan to learn about
an area of wealth creation (for example, property investment),
and 810 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 03 if you disdain all experts and think
you can do it yourself, 47 if you have already worked with
a professional (for example, an accountant) to help your
wealth creation, and 810 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. Dont ever underestimate the power of a good
network.
Score yourself 03 if you hate networking and dont
want to build a network, 47 if you have a few like-minded
friends and associates with whom you discuss your wealth
creation plans and efforts, and 810 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,
27
who need to be committed and supportive of wealth

creation. No matter what you invest in you will need good
people skillswith customers, suppliers, tenants and
professionals in many disciplines.
Score yourself 03 if you havent discussed your dreams
and goals with your partner, 47 if you have enlisted the
support of close family and close friends, and 810 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
amountthat 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
consistentyou 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 cant 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 havent 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.
28
040 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 thisstart 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.
29
Part II
Your current position:
Where are you starting
from?
Chapter 5Facing reality 33
Chapter 6What is stopping you? 36
Chapter 7Net worth 39
Chapter 8Where are your assets? Getting the
balance right 46
Chapter 9 What is coming in: Income 51
Chapter 10 What is going out: Expenditure flows 55
5 Facing
Chapter
reality
Lets get down to business! The most important part of the path
to wealth is taking stock of where you are now. In this section
you are going to build up a picture of your current financial
position. Some of this will be about the hard numbers, such as
how much wealth you have (Net Worth) and current levels and
sources of income. Some of it will be about the soft stuff, such
as understanding why you are in the position you are inthis
may relate to your attitude to wealth or to poor habits with
money. No matter what the picture looks like, we believe that
you need to have a very firm grasp of your current financial
reality before you go any further.
Everyones reality is a little different. Most likely you have
been working hard since the day you left school or finished
whatever education or training you undertook. We have all been
told thats what we need to do to succeed in life. However, you
(and many others) have probably found that it isnt true, that
this recipe has not taken you very far. Even when you have got
further, you may not be in the place you want to be. You may
have a high Net Worth but are still having to work hard. Habits
can be hard to break!
If you are like most people, you probably find that it is taking
all your efforts just to stay in the same place. You may own a
home but still have a considerable amount left on the mortgage.
You may be working hardperhaps harder than ever before
but feel you are unlikely to make much more headway. And
you certainly wont be able to stop work very soonif at all.
Depending on your age you may have more or less anxiety about
the position you find yourself in: younger people often look at
the work and lives of those ahead of them on the ladder and
33
think that this is an unrewarding path that they do not wish to

follow. More experienced people often feel that their oppor-
tunities for further advancement have passed and there is little
they can do to change their circumstances.
If you are the owner of a business you are likely to be working
very long hours and perhaps not taking much out of the busi-
ness. Your earlier hopes of becoming wealthy and free seem more
and more distant. You may even be feeling trapped because
you can see no way out. Even thinking about the next business
cycle downturn fills you with fear because there may not be
much fat in your business and you may have high levels of
borrowings.
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 to

achieve your current position. Understanding the path you have
taken to hereand where exactly here isis critical to moving
forward towards a life of wealth and freedom.
This chapter will help you gather a very clear picture of your
current position. When you are finished this section you should
fully understand where you are with your finances, and have an
up-to-date written record of them. We will have helped you fill
34
FA C I N G R E A L I T Y
in all of your financial details on the WealthCoaches Model, so

that you will be able to see exactly what you own, where you
have it allocated, what money is coming in and how much is
being consumed or invested.
KASH points
The purpose of this exercise is to help you get some insight and
self-knowledge about your financial position, that is, about the
path you have been following to get to here. Your writing is
likely to show you what your attitudes are to work, wealth
accumulation and spending money. You may find your story
highlights skills with money that you already have, or need to
learn. Sometimes it is only when you look at the whole story
over the years that the habits you have around money become
obvious.
35
6 What is
Chapter
stopping you?
Its a very good idea to work out what is holding you back
because you are then clear about what you have to overcome.
Exercise 5
Which of the following sound/s like you? (You may fit into
more than one category.)
I dont know what I want

Many people stay poor and waste their time and energies all their
lives because they never stop to work out what is really important
to them. Without some clarity about what really matters, people
tend to live from day to day and spend their money and time on
whims. You cant become wealthy behaving like that. If this
sounds like you, you will need to do some work on clarifying your
dreams for your life. This is very important, because if you dont
know what you want it is very hard to put together a wealth-
creation plan to take you there. We find that almost nobody is
motivated by wealth for its own sakerather, people desire the
lives that wealth will give them. You will need to work out what
that life would look like.
I dont know what to do
Some people are very clear about what they want but feel that
they have no idea how to get there. You may think you are
clear about where you want to end up but you dont know
where to start or what strategy to pursue! In the following
chapters we will give you ideas for starting on the path to
wealth creation. You will want to choose a way to create wealth
that suits your skills and circumstances.
36
W H AT I S S T O P P I N G Y O U ?
I dont know how to do it

We often find that people have settled on a way to grow their
wealth but are not making much progress. Some people who
have a business are creating less income than if they had a job
while others may have amassed a property portfolio but have
chosen poor properties and are not managing them well. Many
people with good jobs are not actively managing their career
nor are they making appropriate investments with their high
incomes. All these people may know what they want, but they
have little hope of achieving their dreams because they lack the
skills they need to make their wealth creation a success. In later
chapters we will discuss the secrets of the people who have
done it successfully.
I have poor habits

Even when you know what you want and have the talent and
skills to achieve what you want, you still have to do the hard
work! Many of us know that we are sabotaging ourselves on a
daily basiswe do it when we spend money on stuff we cant
afford or that we should be doing something smart with. Other
poor habits include refusing to learn new skills which would
enable us to become more effective in creating wealth and
getting closer to our dreams.
I have a bad attitude

Mostly people stop themselves before they even start! We do
this because of what is in our heads. Depending on our feelings
about ourselves this can take various forms. Some think they are
too stupid because they have learned to feel that they are not
good enough. Others are fearful, that if they become wealthy
other people (especially family and friends) may disapprove
and may not like them. Some have learned to have a very
ambivalent attitude to wealthon the one hand they want it
and know they can do very good things with it, but on the
other hand they have been taught that wealth is evil and that
only dishonest people become wealthy. If you have attitudes
37
like these you will have to work hard to overcome them. Well
give you some ideas of how to shift these attitudesand thats
all they are, attitudes, not facts.
I dont really want to

Many people say that they want wealth and abundance in their
livesbut they want it all today and they expect it to arrive
effortlessly. In fact, they have no intention of making the effort
to move in the direction of their dreams. Changing their habits
and behaviours is simply not on their agenda so in reality they
dont want wealth and abundance enough to do anything about
creating it.
Consider what might be the biggest obstacle that has so far

prevented you from becoming wealthy. You are not
expected to know everything, be highly skilful in every area
of creating wealth, have perfect habits or attitudesnobody
does. However, it is likely that most of your problems are in
one of the areas above. Can you identify which one?
Try to work out where you are blockedit will be much
easier for you to make progress if you are clear about what
is holding you back.
Write some of your reflections in your workbookyou will
want to refer to this again and you will also find it useful
to see how far you have progressed as you go through the
coaching process. These blockages and obstacles will
disappear as you move forward on the path to wealth.
38
7 Net
Chapter
worth
Facing reality is essentially about looking at how things really are
rather than how wed like them to be. You will have considered
many aspects of your situation by now. One of the most useful
ways of identifying exactly where you are financially is to do a
net worth statement.
This means looking at what you are worth in financial terms
and the types of things you have your money in.
A net worth statement is an easy enough idea, and simple
enough to do. A net worth statement means writing down what
you own (your assets) and deducting what you owe (your liabi-
lities). All you are doing is adding up the pluses and subtracting
the minuses to find out how much capital you have.
Example of a net worth statement

Assets (+) $ Total
House $450 000
Shares $20 000
Investment property $250 000
Car $30 000
$750 000
Liabilities ()
House mortgage ($260 000)
Investment property mortgage ($220 000)
Car hire purchase ($15 000)
Credit card ($5000)
($500 000)
Net Worth $250 000
39
Your net worth statement is a measure of how rich you are. If

you sold everything and repaid all your debts, you would have
that amount of cash. This tells you where you are now.
Exercise 6
Do your own net worth statement.
Assets can include things like the family home, other
property, shares, or a business you own. You can include
vehicles, boats, sports equipment, jewellery and art, but
unless they are very valuable you are probably better to
leave them out. They only clutter up your statement and
often would be worth very little if you had to sell them
tomorrow. (The amount you paid for them is irrelevant
their value is their saleable value.)
Liabilities will include any debts you owe such as the
amount left on the mortgage, bank loans, student loans and
credit card debt. If you have hire purchase agreements (for
example, for cars or home appliances) you should include
the amounts you have left to pay.
Assets (+) $ Total

House ...................
Shares ...................
Investment property ...................
Car ...................
...................
Liabilities ()
House mortgage (...................)
Investment property mortgage (...................)
Car hire purchase (...................)
Credit card (...................)
(...................)
Net Worth ...................
40
N E T W O RT H
Add up your assets. Add up your liabilities. Subtract the

liabilities from the assets. This is your net worth number.
Keep this calculation somewhere safe as you will want to
refer to it often. It tells you where you are starting from and
it will also be the baseline against which you will measure
your progress.
Everyone should do a net worth statement (even those who

are not consciously seeking wealth and abundance). Not only
should they do one, they should do it regularlyat least once
every year. Doing a regular net worth statement allows you to
see your financial progress, and lets you check that you are
moving in the right direction financially, that you are becoming
richer rather than poorer. If that progress is not good over a long
period of time, you are doing something wrong. This means
changing what you do. In the case of those who want financial
freedom, it will probably mean drastic changes to what you are
doing, what you own and how you are spending your money.
Exercise 7
Do net worth statements for the past few years. It does not
matter if you cannot remember the exact numbers for the value
of every asset and every liabilitywhat you are trying to do is
to see how net worth changes and what affects your net worth.
Have you made progress?
How have you made progress?
What has grown in value?
What has decreased in value?
If you do a net worth statement regularly (each year or maybe

every six months) you can graph your progress towards financial
wealth. The graph of your net worth over time could look some-
thing like this:
41
350
300
250
200
150
100
WEALTH
50
0
20 40 60 80 100
50 AGE
In fact, the graph may be more wavy than this, as there are ups
and downs on the pathyour progress towards financial wealth
and abundance is unlikely to go in a nice smooth line!
Graphing your net worth has the very positive effect of
you being able to see how you are doing at a glance. Certainly
you will have dips (and probably a few spikes as well) but the
graph should, over time, run in the right direction.
Exercise 8
Draw a rough graph of your net worth, up to whatever age
you are, and enter it into your workbook or folder. Note
that this does not need to be perfectly accuratewhat
you want to see is the way your line has moved over
the years.
42
N E T W O RT H
350
300
250
WEALTH
200
150
100
50
0
DEBT
20 40 60 80 100
50 TIME
What has caused the biggest gains in your net worth?

What events or decisions have lowered your net worth?
Doing a net worth statement right at the beginning makes you

more conscious of what is happening to your finances. You
become more mindful of the impact of the decisions you are
making. As you calculate your net worth, consider which of
your assets are actually earning you a good return and which are
not. You may, for example, consider your home a wonderful
assetbut it isnt earning rent so, unless it is in an area which
is greatly increasing in capital value, it is not a great asset.
Similarly, consider which liabilities are costing you the most
money. Your credit card debt will be costing you far more than
your mortgage. This will give you useful information to begin
planning where to reduce your liabilities.
Your net worth statement is important because it helps you
to see exactly how your financial position is and how close
43
you are to having the level of wealth that you need for your
desired life. Becoming wealthy is about building net worth. You
need enough net worth to give you the passive income to do
whatever is your dream. Some people find that when they have
done a net worth statement they already have a high net worth.
Their problem is that they do not have their capital in the right
things for financial freedomtheir money is mostly tied up in
a farm, a business or a highly geared property portfolio, all of
which require a lot of management. Others find that their asset
mix is wrong to grow wealththey have a $1 million house
(Security Asset) that earns them no income and only $50 000
in Wealth-Creating Assets that earn income.
You now know what you have to work with. This helps you
make the connections between your dream and what you need
to do with your financial resources in the future.
Your net worth statement tells you how wealthy you are,
where you are starting from and if you do it regularly (say every
six months or annually) it measures your progress. It also tells
you exactly what you own.
You should be very concerned if:
Your net worth is negative, that is, you owe more than you
own.
Your net worth is not growing each year, that is, you have no
more wealth.
Your net worth is shrinking, that is, you are spending more
than your income.
This is a good time to consider what you would like to be
worth. It is also a good time to start thinking about how
much you should be worth in a year (or three years or five
years) from now.
44
N E T W O RT H
KASH points
Understanding your net worth and why it is important is a key
piece of financial knowledge. Adopting an attitude to focus on
growing your net worth is one of the big changes that you will
need to make to grow wealthy.
45
8 Where are your assets?

Chapter
Getting the balance right

Now you have a number telling you what you are worth finan-
cially. However, where you have that money is also important.
Remember, some things are Wealth-Creating Assets (designed to
make you wealthier) and others are Security Assets (designed
as a store for your wealth). You need to get the balance right to
take you to where you want to be. If you want to grow your
wealth strongly you will have to have more in Wealth-Creating
Assets; if you do not want to grow your wealth strongly, if you
value security and want to have more time, you may need to
change the balance to have more in Security Assets. But first you
have to look at your allocation as it is now.
Once you have done a net worth statement, you can categorise
what you own in terms of the WealthCoaches Model. This
means deciding whether each of the things that you own is a
Wealth-Creating Asset or a Security Asset. Remember that Wealth-
Creating Assets are things which give you high returns. They are
risky and are also likely to have high borrowings. Security Assets
have low or no borrowing. They give low returns and are low risk.
Categorising the things you currently own is a very impor-
tant step. Putting each of your investment assets into its proper
category allows you to see at a glance how well you have things
balanced. It may be that you currently have too many passive
Security Assets to get the growth that is required to get rich.
Conversely, you may have too much in aggressive Wealth-
Creating Assets and your task is to start transferring some of
what you own into Security Assets. Spending some time putting
your assets into the correct circles (the Wealth-Creating Assets
circle or the Security Assets circle) lets you see how well you have
things balanced and structured at the moment. When you see what
46
WHERE ARE YOUR ASSETS? GETTING THE BALANCE RIGHT
your current allocation is you can decide if it is right, and if

not, make plans to re-balance by selling some things and buying
others, or by using your income to start investing in whichever
area does not have enough.
The balance you need depends on your age, stage and, most
importantly, your goal.
Ric and Dana are in their thirties. They have no children. Ric is
working full time on their property portfolio and Dana works as
a customer services supervisor earning $45 000 a year. They
have all their net worth in Wealth-Creating Assets. They dont
even have a family home, choosing to rent instead.
At their age and stage what Ric and Dana are doing makes sense.
They can carry the risk of high borrowings (although even at
this stage they should be building a small amount of Security
Assets). Time is on their side; they can afford to be aggressive.
Alex and Wendy are both high school teachers in their

mid-forties. They are mortgage free, and have a diversified
portfolio of shares and super funds. They are comfortable, are
good savers, but do not have a high net worth. Alex and
Wendy would like very much to retire early from teachingit
is a stressful occupation, especially as time goes on.
We feel that Alex and Wendy have too mucheverythingin

Security Assets. Their wealth is accumulating too slowly and
they will not be able to retire early at this rate. With their
combinedand securesalaries they could afford to take a
more aggressive approach to wealth creation.
47
Carlo and Elena own a chain of four restaurants. They have

built this business over the last 20 years. They are in their late
forties and apart from the business own a modest family home.
Some of the extended family members are involved in the
business but 90 per cent of the shares are still owned by Carlo
and Elena.
Carlo and Elena have too much of their net worth invested in
Wealth-Creating Assets. We think that this is too high risk at
this stage and that they should sell down at least half of the
business (worth in total about $2 million). We would like to see
this money invested in Security Assets. The couple have worked
too hard and too long to keep putting all of this achievement on
the line every dayand business is always risky.
Sometimes it is hard to know whether an asset is a Wealth-
Creating Asset or a Security Asset. The real test for classifying
any particular item centres on whether or not the asset is likely
or able to give you a 15 per cent return. If your intention is to
get a 15 per cent return from something that you own, then it
is a Wealth-Creating Asset; if the return is likely to be much less
than this, then it should be classified as a Security Asset.
Another way to think of it is the degree of risk that an asset
hasriskier assets (business, highly geared property and some
shares) go in the Wealth-Creating Asset box.
Some things that you own belong in neither Wealth-Creating
Asset nor Security Asset. These are things that are likely to fall
in value and as such are really part of your consumption because
they will make you poorer. For example, in the net worth
example on page 39 a $30 000 car was listed as an asset (which
in a technical sense it is). However, the car is likely to fall in
value (the ones we buy always seem to). Assuming that these
people are going to keep the car, it should be categorised as
consumption (it will certainly make them poorer).
48
WHERE ARE YOUR ASSETS? GETTING THE BALANCE RIGHT
The common assets which pop up on peoples net worth

statements include:
The house This is a Security Asset in most cases. The only

exception to this is that small group of people who success-
fully buy a house, live in it for a year or so while they do it
up and then sell it with a good profit. Generally, however,
your house should be regarded as a Security Asset (although
there are people who put so much money into their houses
that to some extent at least it is really consumption). It is
completely wrong to think that your house will make you
rich, it wont. It is a Security Asset, nothing more.
Superannuation funds These are clearly Security Assets,
likely to return around 5 per cent p.a. However, it needs to
be said that if they are well diversified they make very good
Security Assets.
The business This ought to be a Wealth-Creating Asset. If
you are not getting a 15 per cent return in the value of the
business, you have to wonder why you own it.
Investment property This may be a Wealth-Creating Asset
or a Security Asset depending on what and where it is, and
how you are managing it. Judicious and aggressive purchasing
of rental property with a lot of borrowings, along with good
active management, can achieve a 15 per cent (or better)
return. If this is your intention, put your investment property
into the Wealth-Creating Assets box. If, however, you make
fairly ordinary purchases, do nothing to enhance the property
and manage it fairly passively it should go into Security Assets.
Shares These are the same as investment propertydepend-
ing upon your intention, and how aggressive you are, they
could go in either box. A widely spread, diversified portfolio
of market leaders is probably a Security Asset; a portfolio of
two or three smaller companies is probably a Wealth-Creating
Asset, especially if you have borrowed to buy them.
49
Hedge funds These are definitely a Wealth-Creating Asset

they look for 1520 per cent or more, and often get it.
However, some of these have capital guarantees, which makes
them Security Assets.
Mutual funds Generally these are Security Assetsthey
are usually fairly conservatively managed and do not often show
returns anything near 15 per cent. There are lots of exceptions,
however. There are managed funds, which have shown very
high returns. We invest in the pharmaceutical/health care indus-
tries via mutual funds, some of which have given very high
returns over long periods of time.
Categorising these things, labelling them Wealth-Creating
Assets or Security Assets lets you see what it is that you are doing
now and the changes that you need to make for your future. You
might eliminate (that is, sell) anything that is not really an asset
at all (for example, a car or boat). Do your net worth statement
and put each thing in the compartment where it belongs.
Exercise 9
Draw another copy of the WealthCoaches Model shown on
page 19.
Allocate your assets to the various compartments and
name the assets, for example, put your family home in
Security Assets and put its market value beside itFamily
Home $500 000 (owe $120 000), and put the rental
property in Wealth-Creating Assets22 Summer St,
$350 000 (owe $290 000). This will allow you to see what
you are doing with what you have.
Look at the balance that you currently have. Is it right for
what you want to achieve? Will this asset allocation grow
your wealth? Will it grow it fast enough?
50
9 What is coming in:

Chapter
Income
Now is the time to look at what is happening to money in
your life, in other words, the way the cash is flowing. Why is
this important? Well, the fundamental problem with becoming
wealthy for many people is not that money does not come into
their lives, rather it is where the money goes. Most people would
have enough income to get the lives of their dreams if they used
it differently.
Examining your cash flows allows you to analyse what is
happening to the money in your life. This is often a reality we
are anxious to avoid! Many of the people we have coached have
said things like, We have no idea where our money goes! or No
matter how much we earn we never seem to have anything left,
and even, We dont spend much!.
The easiest way to work out your income is to do a Statement
of Income. Many people are vague about how much income
they have each year. It can be very simple to calculate if you
are a wage or salary earner. Take your pay slip and figure out
how much you get each year. You may have 12 (or 13) monthly
payments each year or 26 fortnightly payments or 52 weekly
payments. Tax has probably been deducted and if you have no
other income the calculation is quite simple.
If you have income from rental property or from a trust or if
you receive dividends or money from any other source, gather
up all this detail and see how much income you have each year.
Your statement of income is another tool for assessing where you
are at financially. You need to know what is coming in (income)
each year. You can do this before or after taxjust make sure
that you are consistent and that you dont mix amounts that are
before tax with others that are already tax paid.
51
Jim and Moanas statement of income looks like this:
Jims salary $75 000 (after tax)

Rental income $7000 (after expenses and tax)
Moanas wages (part-time) $15 000 (after tax)
Total income $97 000 (after tax)
Jim has a very good job and his annual salary after he pays
tax is $75 000. Moana works part-time as they have two small
children. They also own a rental property (still heavily
indebted), but after they have covered the expenses and paid
tax it nets an extra $7000. So their total annual income
(after tax) is $97 000.
Exercise 10
Do a personal statement of income by working out all your
sources of income after tax
Statement of income
Salary/Wages .........
Interest .........
Rental income .........
Dividends .........
Income from trust .........
Other .........
Total annual income .........
How much income per year do you have?

What is the total income before and after tax?
Put your income into the WealthCoaches Model
52
W H AT I S C O M I N G I N : I N C O M E
INCOME
$
Income
You probably have to collect all this information for your tax
return every year anyway. It is very useful when you are starting
to think about your financial future to have a clear sense of
where you are starting fromit will help you set reasonable
goals and it will show you which areas should get priority in
your plans.
Income matters. Even if your net worth statement shows that
you are quite wealthy, that doesnt necessarily mean you have
enough income to build the life you dream of. A couple who
own a valuable house may have a net worth of hundreds of
thousands of dollarsbut you cant eat that or pay bills with it.
One of the other benefits of doing an income statement
is that it makes you very conscious of how much money flows
into your handseven if you have convinced yourself that you
do not earn enough to ever be wealthy and free to live your
dream life.
53
Take a hypothetical situation. Lets say you earned $40 000

a year and that you worked over a lifetime for 40 years. (Now
we know that no one earns exactly the same each year but lets
pretend.) $40 000 does not seem like a huge amount. But
over 40 years that adds up to $1 600 000over one and a half
million dollars in total. If you look at it like that, its a lot. If
we assured you that you would earn that amount, you would
take money very seriously and you would do a plan for your
finances. But we get our money in small lumpsweekly, fort-
nightly or monthly. We are often desperate for it to arrive and
seem to gobble it up in no time. Because our heads are down
in the detail of managing from payday to payday we never real-
ise the huge sums of money that we are managing. Doing an
income statement is one way of helping you realise just how big
the sums are.
Knowing your net worth and your income lets you begin to
look at the big picture. Many people are very practised at man-
aging the micro detail of each week or month but never stop to
look at the bigger picture of their overall finances. If you want
to become wealthy and have choices about how you live in the
future you have to move beyond the weekly or monthly pay
period and start to think in terms of years and decades.
54
10 What is going out:

Chapter
Expenditure flows
What are you doing with your money now? Where is it going?
Dont feel too bad if you dont knowhardly anyone we have
ever coached had a good sense of where exactly the money was
going. It just went!
Now is a good time to have a good look at what you are
currently doing with your money every week and month. You
have already done a net worth statement and the sums to see
what annual income you have. People we work with often find
these exercises quite shocking. They often say things like, I cant
believe I have this amount of income and yet I never have any
money or I have been earning well for years and yet I have
nothing to show for it or Given how much income I have, why
dont I seem to be able to be or do or have any of these things
I say I want in my life?
These reactions are not from stupid people, rather they come
about because we are often shocked when we finally write down
our expenditures and look at the numbers. Perhaps its because
we secretly know that we are not going to like what we see
that we avoid ever doing these sums!
Exercise 11
Ask yourself:
Am I always in debt?
Is there any money left over in each pay period?
Am I living from one pay cheque to the next?
Do expenses like rates come out of the blue?
Do I have blow-outs in certain areas or at certain times?
Do I resist the idea of a plan/budget?
55
Theres probably another shock on the wayand thats the one

we get when we finally do a proper record of what we are doing
with whatever income we have. Business calls this an audit
but all it means is that you need to track (on paper) where every
cent is going. Every cent because its the small stuff that you tend
to ignore or forget about that is often using up all your dis-
cretionary dollars that could be funding all those things you
would like to be, have, and do.
The first thing to look at is your consumption. People we
have coached find that the easiest way to do this is to carry a
small notebook around for a few weeks or months and note
every expenditureeven parking money, ice-creams for the
kids when you get petrol, cups of coffee, etc. Remember
every dollar that goes on consumption is a dollar out of the
system. Every dollar that does not go on consumption is a dollar
that can be invested for growth towards building the life that
you want.
When you have enough data you can add it up under various
headings. We all find it easy to remember that we pay hundreds
of dollars for power and phone and petrolbut we can get huge
surprises in some of the other categories, depending on our
habits. People tend to be most surprised at the small items or
categories that we tend to think of as incidentals (like dry-
cleaning) or timesavers (like takeaways, purchases at the corner
shop) or small change (like magazines, parking). But when you
add all these together it often comes to a very significant sum
usually more than enough to fund many of the dreams that
we thought were out of reach. You are on a hunt for these spare
dollars to build the life that you want.
As WealthCoaches we never make any criticism of how any-
one spends incomeafter all its your money. But our clients
often find that there is already enough being spent on stuff that
they dont care about very much (for example, coffee, lunches,
wine) to fund dreams that they really do care about and thought
56
W H AT I S G O I N G O U T: E X P E N D I T U R E F L O W S
were out of the question (for example, travel, mortgage, share

investments, education, change of career, early retirement).
You can collect your spending information under whatever
categories you like. If you use a smaller number it will be more
manageablebut you may miss some critical information.
Jim and Elena both work and have their five-year-old son Tad
cared for after school. They called us because despite both
working full time they felt that they were making no progress.
When we worked with them to track their expenditure Elena
found she was spending $350 a week at the supermarket. It
was only when she broke this into further categories that she
realised nearly $60 of that was going on hot takeaway food
on the evenings she shopped. All very understandableshe
had already put in a full day at work and the shopping made
her late in starting to prepare a meal. But Jim and
Elena identified that this was $60 that they could easily
harvest to grow a deposit on a do-up property to grow
their wealth.
Likewise, its easy to miss what you are really doing at the service
stationthat $50 of petrol may end up being $75 after each
fill when you add on the cigarettes, ice-creams, papers and
occasional groceries. Some of the other often-forgotten places
where hard-earned income leaks include the chemist (we go in
for a prescription and come out with all sorts of other goodies)
and social occasions, which tend to take on a life of their own
(we believe that we are going out for a beer and end up paying
for food and a taxi home!).
57
The short list of categories would include majors like:

Rent or mortgage
Utilities (like electricity, water)
Transport (car, bus)
Food
Clothes
Entertainment (hobbies, outings, sport)
Gifts (birthdays, charity)
Medical/dental
Miscellaneous
Exercise 12
Find out exactly where the money goes. Buy a notebook and
find where every cent of your money is going. When you
have enough data (several weeks or months) add up the
expenditure under the different categories.
Its probably best to keep this quite simple to start with. If
you find that a category seems quite high, then you might
want to break it down in some detail. Unaccounted for
spending or categories like miscellaneous may also be where
your expenditure woes lie. Miscellaneous is not a slush fund
in the Bahamas! Rather it might include frightening levels of
expenditure under such sub-headings as:
Laundry Cigarettes Flowers
Drycleaning Chocolate Greeting cards
Coffee Treats for kids Babysitting
Lunches Ice-creams Eating out
Magazines School lunches Manicures
Taxis Takeaways Hairdresser
Car accessories Cosmetics
You can file these expenses under any of the above headings
you like but dont lose sight of themthey may be the
consuming all the money that could make you rich and free.
58
We are all experts at self-justification. One couple we worked with

had a huge amount under Repairs and maintenance. When we
enquired with great concern if the house was falling down,
we discovered that she was addicted to redecorating and he had
bought enough motor tools and accessories to open a commercial
garage! It was their money and their choice of course, but they
were not making any gains by hiding this realisation from
themselves. When they confronted where their money was really
going they were empowered to choose to spend it to move
towards the life that they really wanteda small rural holding
with enough passive income to allow them to work part-
time only.
So its really up to you. Above all else, you dont want to
fool yourself on this. Its your money and you can spend it
however you like. But you cant choose to do anything else with
it until you can find where it is going now. Resolve to become a
sleuthtake your notebook and go find out where you are
spending your money.
Some people even like to use a small diary because it can
be very interesting to see what the patterns of spending are
over the weekfor example, you might spend without thinking
on Friday nights after a drink or two, or you might be very
vulnerable to impulse spending when you are tired or rushing
home after work. Just as when we are tempted to break a diet,
spending is often triggered by different things. Many people
overspend on groceries when they are hungry, others get carried
away when they go for an after-work drink and end up spending
on dinner out and a taxi home. Working late can be a trigger
we are tired, we feel we should be rewarded, or we may feel
guilty because we are late home and so treat the kids. Again,
all of these are your choices but it does help to be aware of
what you do and what events, or timing or feelings trigger your
spending. It may help you to note the day, the time, and even
how you were feeling when you made purchasesespecially if
59
you feel your spending is getting away from you. And if you
spend all your income every pay period or if you have debt on
your credit card, then your spending is out of control.
Exercise 13
Write your consumption figure into the WealthCoaches Model
you used for Exercises 9 and 10.
CONSUMPTION
$
INCOME
$
Income
Do you have a surplus of income over expenditure?

Can you increase the surplus by growing income and/or
cutting expenditure?
What are you doing with your surplus income?
Where is your surplus income going?
You can do your analysis of what you find with a friendyou

will probably both laugh and cry! Ask yourself if this is how
you wish to spend your income. Is your spending serving you
60
or enslaving youare you trapped in this pattern and therefore

will never have money to fund all those other things you said
were important? You will find yourself starting to reallocate your
income in your head. Some of your categories can be eliminated
altogether if you wish (takeaway lunches, magazines) whereas
others can be reduced (utilities, entertainment).
Many people earn enough to become wealthy. What you do
with the money is critical. It goes without saying that if you
consume all your income you will be neither wealthy nor secure.
You will, in fact, have a rather large problem once the income
stops.
To become wealthy it is not usually enough to earn income
and invest in Security Assets such as a home and a diversified
portfolio. This can work for some very high-income earners,
however. After all, if you are earning several hundred thousand
dollars a year, and have the discipline to avoid letting your
standard of living rise to match that income, you should be able
to save a great deal. Security Assets will accumulate rapidly
enough for someone with that level of income to allow them to
become wealthy.
Most people do not have that level of income. Investing their
surplus in Security Assets will not be enough to make them
wealthy. You will need to invest some (and probably most in the
early years) of your money in Wealth-Creating Assets so that you
get the higher returns you need to grow your wealth.
Others have too much of their surplus income going into
Wealth-Creating Assets. If you are reinvesting all of your
income in Wealth-Creating Assets even though you have accu-
mulated most of the net worth that you need to live your
dream, you should be investing more in Security Assets.
Putting everything into Wealth-Creating Assets is a risk you do
not need to take if you are close to your dream. It is a risk you
definitely should not take if you are nearing the end of your
working life.
61
Exercise 14
Copy the model below, and work out what you are doing with
your surplus income. Show where the income that is not spent
(consumed) is goingeither to Wealth-Creating Assets or to
Security Assets.
Review whether you have enough invested in Wealth-
Creating Assets to achieve your dreams.
Reallocate income as necessary to Wealth-Creating or
Security Assets.
$ data
$ data $ data
INCOME
$ data
Security
Income $ data Assets
If necessary, sell things in either Wealth-Creating Assets or

Security Assets and reallocate to get the balance right
for you.
Is enough of your income being invested in Wealth-
Creating Assets to allow you to grow your wealth so that
62
you can meet your big goal and live the life of your dreams?
Is too much going into Wealth-Creating Assets and
therefore unnecessarily increasing the risks you are taking?
Factors that you should consider to get the balance right for
you include:
Age Younger people have more time on their side and can
therefore afford to take more risks.
Dependents Those without children can take a more
aggressive approach to the risks of Wealth-Creating Assets.
Stage The closer you are to achieving the dream the more
you should invest in Security Assets. It makes little sense at
this stage to continue to take high risks or play double or
quits with your wealth.
63
Part III
Your desired position:
What do you want?
Chapter 11 Whats the dream? 67
Chapter 12 Who will share the dream? 72
Chapter 13 What do you really value? 75
11 Whats the dream?

Chapter
Money isnt importantits what money does that matters.

Nobody gets out of bed in the morning for a numberthey
do it because there are things they want to do, people they love
who they want to help, a vision of themselves they want to fulfil.
Research shows that if you are to make successful change you
need to be able to visualise that change first. In other words,
you need to be able to see yourself living the new life, doing
different things, life being the way you want it to be. It is very
difficult to make anything happen if you cannot visualise it first.
In our experience the people who achieve the most on the
path to wealth are those who are highly motivated by clear pic-
tures of what they want. Sure, if you are poor, just the idea of
having some more money is very enticing. However, once you
have a reasonable standard of living and your daily needs are met
you will need greater motivating power than just a few more
dollars. Dreams are really important because they motivate you.
It is only when you have a clear vision of what life could be like
or what it is that you would really like to be doing that you will
find the motivation to make the changes. Dreams provide the
why. When you know why you want to become wealthy it will
be relatively easy to work out what needs to be done and how
to go about it.
A clear dream also allows you to set a figure for your goals
when you know what you want in your life it is easy to cost that
dream. The dream sets the price for living that life. If you know
what you want, it is fairly easy to work out how much wealth
you need to create so you can live the life of your dreams. We
often find that people are much closer than they think to being
able to stop what they are doing and start living their dream life.
67
Exercise 15
Start thinking about what the idea of wealth represents for
you.
If you had enough money so that you did not need to work
again, how would you choose to live your life?
What would a day in that life look like?
What sorts of things would you be doing over a month in
that life?
How would a year of your dream life look?
Many people first respond with a vision of spending life sprawled

on a beach in Fiji with someone plying them with coloured
drinks trimmed with umbrellas! On reflection, most people
know that they would tire of such indolence very quickly. In
short, while we might all enjoy an island holiday, very few of us
wish to do nothing for the rest of our lives.
It can take a lot of soul-searching to clarify your dreams.
We are not encouraged to dream much in our normal lives
there are always people ready to tell us to stop dreaming and get
on with it. If we are discouraging and even scornful of others
dreams, we learn to suppress our own. We were all full of dreams
as children and adolescents, but all too often we lose the habit
of dreaming in our adult lives. Dreaming is very important. It
goes without saying that we will be living in the future (rather
than in the past) and we should take every opportunity to
imagine (dream) the future that we want to have. There may be
parts of it that we will have little choice about but we should try
to shape the parts we can in the way that we want.
You need to re-engage with your deepest dreams. Take the
time to pay attention to your feelings. What is it that makes
your heart sing? You can interview yourself about your deepest
desires. When were you happiest in your life? What were you
68
W H AT S T H E D R E A M ?
doing and how were you living? If you were not afraid, what
would you change in your life? Most likely you can have a great
deal of what you wantso what is it that you want?
Exercise 16
There are many different ways you can connect with your
dreams. Try the following ideas.
What would you do if you won a lottery? You would no

longer have financial constraints. You might continue to
work, but only because you like to. So what would you do?
How would you spend your time?
What would you do if you found you had only a year to
live? That concentrates the mind. Your priorities will
become very clear as you think through such a scenario.
In the time you have left on earth, who do you want to be?
What do you want to do? What do you want to have in
your life? Make lists of your answers.
This exercise asks very hard questions. Daily life usually keeps
us so busy that we never get to consider them. We all have
flights of fancy over the summer holidays when we get a few
weeks off, but we usually get back to normal fairly quickly
once the holidays are over. Thats a pity, as these are lifes most
important questions. They have engaged the best philosophical
minds for centuries, but in the end we all have to answer them
for ourselves.
Dont expect this process to be quickyou will probably
want to spend lots of time thinking about what you really want.
We stress that this is a very important part of the process, after
all, the goal of creating wealth is not money; rather it is to have
the life that wealth can allow you. You need to develop a picture
of what that life would look like for you.
69
Dreams are about the future. As well as asking yourself about

where you want to be in the future, ask about when. It wont
help in your quest for wealth and freedom if the dream appears
to be a place and time so far over the horizon that you will never
get to it. Try to date it roughly. It often helps to imagine yourself
at a particular age, for example, when I am 45 I will be . . .
This picture does not have to be too precise. And most likely
as time goes on you will modify the picture. But your dreams
should be clear enough to be motivating and worth striving for.
You are going to devote considerable time and effort to making
changes that will take you towards your dream so you need to
have a good sense of what your ideal future would look like.
And when you clarify your dreams, make them non-negotiable.
You can of course modify your dreams, or dream new dreams as
time passes, but dont send out any messages to yourself or
others that your dreams are up for debate. They are important
to yoube determined to make them real.
Exercise 17
More dreaming ideas.
Think back to times when you were happiest. What were
you doing? Who were you with? Who were you being?
What made those times special?
You might find it useful to draw as well as write. Some people
enjoy finding snatches of music or song lyrics that express their
desires. Others enjoy collecting images of their ideal lifeyou
could even build a collage of pictures you find attractive from
magazines.
You should keep all your dreaming work in your workbook or

someplace else that is safeyou will want to look at it again and
70
W H AT S T H E D R E A M ?
add to it as time goes on. You may also want to share this work
with people who are close to you and who will support you in
the achievement of your dreams.
KASH points
Self-knowledge about what is important to you and how you
want your life to be is an essential step on the path to wealth.
There is no point in accumulating wealth if you have no idea of
what matters to you. You will almost certainly find that your
attitude is changing as you do this workyou will probably be
getting quite determined that you will have the life of your
dreams and that you will learn to do what you need to get that
life of wealth and freedom. We think dreaming is a vastly
underrated habitdream as big and as much as you can. The
important thing is to commit to making some of your dreams
come true!
71
12 Who will share

Chapter
the dream?
Different people like to do things differentlysome of us like
to share things more than others. You must do whatever feels
right for you.
We have found that most people achieve much more in their
quest for wealth creation if they have good support. It is very hard
to make the changes you need to make if significant people in your
life are opposing you and pulling against you. You can still succeed
but it will be harder.
We have very few rules in our WealthCoaching work, but
one of them is that we work for and with both partners. Where
a couple exists we do not take on individual clientsboth
parties have to be involved. We think the chances are low of
either person becoming wealthy without engaging the full sup-
port and commitment of the other. In a couple, both partners
need to be aligned with shared dreams and goals.
If you have a significant othera spouse or partner or even
a business partnerit is in your interests to share your dreams
and get them onside as early as possible. They are going to
notice the changes you will be making and almost certainly will
be affected. When we start to spend our energies and money
differently other peoples lives are affected. They are likely to
object unless they understand.
At best, you will want the key people in your life to share the
dream and to actively support you. At the very least you will
want respect and understanding even if they do not offer active
support.
We believe couples should do a lot of dreaming together. It is
best to start by asking the other person what is important to
them, what they want out of life and what they dream of for
72
WHO WILL SHARE THE DREAM?
your future together. You too will need to share your dreams. We
recommend you spend a lot of time talking about the life you
want to create together. If you find that you share very little in
the way of dreams you will have issues to confront other than
wealth creation.
Exercise 18
Consider whom in your life you can share your dreams
with. If you have a life partner you should work on sharing
your individual dreams and work on building a shared
dream together. Get him/her to clarify dreams. Share your
dreams. Do some of the exercises in the last chapter
individually and then compare your answers.
Negotiate a shared dream of your future together.
In our experience the most successful couples are those who

have clear shared dreams. They help and support each other
along the way. When they face difficult changes they are pulling
together and supporting each other. They use their combined
talents and energies to make sure they are successful.
There may be other people with whom you can share who
will offer support. Many of our clients have had significant
help from parentswise, experienced people who lend a hand
or an ear, and who often provide support for grandchildren
when parents are busy. Some people are lucky enough to have
managers who applaud their efforts and contribute experience
and encouragement. If you have a supportive manager you may
want to talk to them about your dreams and ask them for
guidance and support. Others have good friends who act as
a sounding board and cheer you on to success. If you have a
business partner you will need to inform them of your plans.
Your dreams will affect how you approach the business.
73
A word of caution. Think about whom you will share with.

You may find that your wider family and friends feel threatened
by your intentions. So be careful about sharing with those who
might undermine youthe path will be hard enough without
having to deal with people who want you to fail so that they can
feel better about doing nothing themselves. These people are
toxic to your dreams, and it is probably in your interests to
keep them well away from your plans.
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13 What do you
Chapter
really value?
Lets say it again: its not the wealth itself that is important, its
the life and lifestyle that the wealth will allow you to have. If you
dont know what matters to you, you run the risk of becoming
a miserable wealthy person rather than a miserable poor one!
You will simply be a little more comfortable in your general state
of unhappiness.
Barring unavoidable disasters, it is not necessary to be miser-
able. You will be making choices every day which determine what
your future will be like so you need to know what you value
really care aboutas you make these decisions and choices.
When people first talk to us about what we do there is often
an assumption that the people we work with simply want to be
rich, even filthy rich! Many assume our clients only care about
money and only care about themselves. Nothing could be fur-
ther from the truth.
Something prompted you to pick up this book. Perhaps you
want more choice and control in your life or you yearn for a
better future than the one you are facing at the moment. Many
will be seeking radical change in their lives and fortunes. The
better you understand what is driving you, the easier it will be
to get started on the change.
Over and over again we have found that the people we work
with are driven by very attractive values. The details of what they
dream of varyyoud expect that. However, when you strip
away those differences we find that people want to make sure
that all the good values are metthings like:
family
leisure time
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love
security
personal growth
health
learning
service
success
contribution
These are the values that people are expressing when they
describe dreams of:
spending more time at home with my children;
being available to participate in childrens school and sport-
ing lives;
training my sons rugby team;
taking my kids away to the bush;
spending time just being with my ageing parents;
travelling less so that I see more of family and friends;
having more time to walk/swim/play golf ;
going back to school just for me, learning how to play a
musical instrument;
building my own boat;
making sure my elderly parents can be well taken care of ;
helping some younger people succeed;
mentoring some start-up businesses; and
contributing to the community.
Its really important to know what you mean by wealth. Values

like independence, choices, security and health are all forms of
wealth. Most people never stop to think long enough to figure
out what really matters to them. We often only find out when
we have lost something or someone in our lives or when one of
our deeply held values has been violated in some way.
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W H AT D O Y O U R E A L LY VA L U E ?
Exercise 19
Its helpful to try to figure out the underlying values behind
your dreams. When you know what your core values are it is
easier to figure out different ways of meeting those values.
While we might all sign up to a very large list of worthwhile
values, typically we find that people are really driven by a small
number. In other words, when you have to choose which few
values are the most dear to you.
Achievement Freedom Power

Adventure Fun Recognition
Community Harmony Religion
Contribution Health Respect
Creativity Independence Society
Excellence Inspiration Spirituality
Family Involvement Sucess
Friendship Love
Which of the values above are very important to you?

Try completing some sentences that would show your
values:
Successful people . . .
I would feel wealthy and abundant if . . .
If my life were truly successful I would . . .
If I couldnt fail Id . . .
Symbols of success for me include . . .
If you could only hold four or five values, which ones
would you hold?
How would you like these values expressed in your life?
What life experiences so far have shown you what is really
important to you?
What would you be prepared to give up to have these values
in your life?
77
KASH points
Get to know what matters to you at a deep levelotherwise
you dont know whats worth fighting for. Clarifying your values
is all about discovering what is purposeful for you. There is no
point in pursuing wealth if you dont know what wealth really
means for youyou wont have enough sense of purpose and
meaning to sustain you on the journey. There is no point in
soldiering away to achieve a list of what others value (or
things you have been told you should value!) if you never
get what you value yourself. You will be doing a lot of work
coaching yourself to wealthmake sure that you are fighting
the battle for the right stuff for you. Above all, dont spend your
lifes energies working hard to create a future you dont want.
Having a clear set of values will help you change your
attitude and habits around money. When you are clear about
what really matters to you, you will feel much more determined
to make sure that it happens. It will also help you change your
behaviour around finance so that you build new habits that will
help you become wealthy and free.
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Part IV
Your Freedom Figure:
How much will you need?
Chapter 14 Whats enough? 81
Chapter 15 SMART goals 91
Chapter 16 Now, what do you really want? 97
14 Whats enough?
Chapter
Its really important that you know what you want so you can
direct all your efforts to making sure you achieve it. Its also
important to begin to cost those dreams and valueswhats
the bill going to be? Theres a big difference between having a
dream and knowing exactly what you will need to allow you to
live that dream. The bridge consists of converting your dreams
into concrete goals with numbers attached. Being financially
free to live the life you want is a great dream, but its a very
vague goal.
The next step is to get clear about the precise numbers re-
quired for the version of financial freedom that you want.
When you know how much you will need to live your dream
you will have your Freedom Figurea dollar figure that is the
amount of wealth you need to create. This will be different for
each individual.
The Freedom Figure is the amount of net worth that you need
to give you the passive income required to live your life in the
way that you want. This figure can vary hugely, depending on
the dream. If your dream is to have a house in Tuscany, a flat
in Knightsbridge, a house on Sydney Harbour, a loft apartment
in New York and a Lear Jet to fly between them, then your
Freedom Figure will need to be very large (perhaps $50 million!).
On the other hand, if you are perfectly happy in the house
you already have and would like, perhaps $50 000 p.a. of passive
income so you can afford to work part time, your Freedom
Figure will be much less (perhaps $1 million). Note that it is the
dream that dictates the Freedom Figurebig, expensive dreams
require big Freedom Figures and therefore require more time,
effort, energy (and risk!) to achieve.
81
We often find that clients are much closer to living the life of
their dreams than they realise. People tend to think they need to
be very, very rich in dollar terms to have what they want but that
is not always the case. Sometimes modest amounts of wealth are
sufficientand what a joy to find that you are almost there! It
is a real shame to spend years and effort accumulating wealth
that you dont need just because you were unclear about what
was important to you.
When people know what they want it is relatively simple to
work out what it would take in wealth terms for them to live
that life.
Hans and Marie owned a market garden. They were in their

early forties and the kids were almost grown upone finishing
a degree and the other in the last year of high school. Hans
and Marie had worked very hard over two decades to build up
their businessacquiring more land, buying Hanss brother out
and developing the excellent relationships they had with
customers and suppliers. They worked at least six days a week
and hardly knew what a holiday wasmarket gardening is like
any other kind of farming in that it is almost impossible to get
away from.
Hans and Marie were so used to working hard that they had
never thought very much about life beyond their weekly round.
They came to us because they wanted to develop a plan to be
financially free by their early fifties, which meant they were
willing to put in another ten hard years.
After spending quite a bit of time with them working on their
dreams we estimated that they would need $100 000 a year in
addition to their home (they already owned a home, mortgage
free). The business was fairly conservatively valued at
$2.8 million. We were delighted to be able to assure them that
if they wished they could start living their dream life right away.
82
W H AT S E N O U G H ?
The money they would get for their business would more than
amply cover the price of their dream life. If they sold the
business and invested the $2.8 million they could expect over
$200 000 p.a. in passive income. This would more than meet
the cost of their dream life. At the very least they could sell half
the business and work a great deal less.
You will need to work out how much income you need each year
to fund your dream life. If you do not intend to work for any of
that income, then it will all have to come from your invest-
mentsas dividends, rentals or interestincome that you no
longer have to do any work for. If, for example, you decided
that you needed $100 000 a year (before tax) to live the life
you want, then you would need about ten times that amount
($1 million) invested well (returning 10 per cent before tax) to
have that amount of income. However, if you were willing
to continue to do part-time work or the occasional contract you
might well need far less in order to start your dream life.
Everyones circumstances are different. You will need to
juggle with several options to find the best mix for you. These
options are your choices; all of them involve trade-offs. The
more you want in the life of your dreams, the more you will
have to work to achieve it. If your dream life is looking very
expensive you may want to review some of the things you think
you want. For example, do you really have to have that flat in
Knightsbridge? Is it really so important to you that you are
going to keep on working for several years to achieve it? Would
you be just as happy without it? These are the sorts of things we
all have to make choices and trade-offs about.
Some peoples dreams are much more costly than others.
Clearly if your dream life is to live modestly in a less expensive
area with plenty of free time, that will be much cheaper than
wishing to live lavishly in an expensive suburb with lots of
83
overseas travel and holidays! You can see why it is important to

know what you want.
Toni is single and in her mid-thirties. Now divorced, she has a

good job at a senior supervisory level in a call centre and earns
$65 000. She lives in her own small townhouse and is paying
off the mortgage steadily. She still owes $55 000 on the
mortgage and the house is worth about $450 000.
Tonis dream for her future is very modest. She wants to
retire from full-time work before she is 50. She feels that she
can live the life she wants on $40 000 (before tax) if she has a
place of her own. Her requirements for housing are very
modestshe is happy to move to a less expensive rural centre,
and is also willing to continue to do some part-time work such
as customer service management for a mid-sized business or
office management for a smaller business. So Toni has 15 years
to create her Freedom Figure. What will she need? Housing in
the areas she would consider moving to will cost about
$250 000. She will need approximately $400 000 to provide
income so in total her Freedom Figure will be around
$650 000. She already has almost $400 000 of net worth in
her house. Her challenge will be to manage consumption very
well so that she can invest as much of her salary as possible to
create the additional $250 000 she needs to live her dream.
That looks very achievable over 15 years.
The other variable that is important is time. If you wish to live

a non-working dream life that requires $100 000 before tax
and you want to achieve that in three years time, it will be
relatively easy if you already have several hundred thousand
dollars of investments. However, if you are starting with very
little it will be a real challenge to achieve that amount of wealth
84
in that amount of time. You could (and we could write you a

plan) but your path would be both difficult and risky and there
is a high chance that you would lose it all.
Very expensive dreams are achievable, but they usually take
longer to fulfil. It all depends on where you are starting from
and how much time you have. Amassing a lot of wealth quickly
is achievable, and many have done it before you, but the faster
you wish to grow wealth the riskier the path will bein other
words, your chances of losing your money are higher.
Each individual (or couple) has to make such choices and
trade-offs in terms of goals and time.
Defining the dollar figure of the wealth that you need to
create your dream life (your Freedom Figure) means that you
have a clear goal. This is not a fuzzy dreamthis is a number
that you must now achieve in order to live your dream life.
Numbers are very usefulthey are clear and unambiguous. You
cant fudge a number like $850 000you either achieve it or
you dont.
Pricing your dreams gives you a very clear target. It also
shows you how big the jump is between where you are today
and where you need to be in order to begin living the life of your
dreams. A number in itself will not motivate you (its the dream
that is motivating) but it helps you see very clearly what you are
aiming for. The number also allows you to track your progress
month by month and year by year you can see how well your
actions and efforts are working to take you closer to your goal.
Research shows that the clearer the goal the greater the effect it
has on peoples behaviour and performance.
So how exactly do you work out how much your dream life
will cost? How much wealth do you need to create so you can
stop working and begin the life of your dreams?
The first step is to decide how much annual income you need
to live your dream life.
85
Exercise 20
Try to price your dreamwhat it would cost you per
annum to live that life. You have already done some work
on how much income you are consuming at present. Use
the same categories as before and consider groceries,
utilities, transport, clothes, holidays, gifts, etc. How much
would you need each year before tax in order to live your
dream life? (It is best to assume here that you will own your
house at the point you want to stop working.) This is
important, because until you know how much it will cost
you (approximately) to live the life you want, it is
impossible to say how much wealth you need to create.
Multiply that figure by 10. On the assumption that you
can get a 10 per cent return approximately (before tax) on
your wealth (and you should if it is well invested), this is
your Freedom Figurethe amount of wealth that you need
to create so that you can stop and live the life of your
dreams. Remember, this is in addition to the value of
your house.
So, if you believe that you can live the life you want on
$75 000 a year (before tax), then you will need to create
approximately $750 000 in addition to your home so that
you can stop and live the life of your dreams. The
$750 000, well invested, should give you about 10 per cent
return before tax so you should receive approximately
$75 000 p.a.
Obviously, all the figures in this exercise are approximate. At the

moment of writing, for example, both property and share
markets are quite highly valued so that it is very difficult to
get 10 per cent before tax. But most of the time, your returns
should be in that area. There is also the problem of even quite a
86
low rate of inflation eating away at the spending power of the

passive income that you expect to get from your capital sum.
Nonetheless, at most times you ought to be able to receive a
return of close to 10 per cent from dividends and rents coming
from a spread of shares and ungeared property investments.
Moreover, you can also plan to spend a little of your capital each
year as you live the dream. That would mean that you would get
a little poorer each year (and the kids would get a smaller
inheritance) but spending modest amounts of capital when you
have stopped working is a perfectly valid plan for many people.
Calculating a Freedom Figure
Step 1
What is the value of the house you want? $1 000 000
Stan and Anya would like to have a house worth
$1 million when they are free.
Step 2
Do you want another holiday house? Value? $500 000
Stan and Anya would like an apartment somewhere
in south-east Queensland.
Step 3
What income do you need for the life of your choice?
They have decided that they could live very well
on $150 000 before tax $150 000
Step 4
What income will you receive from working in your
dream life?
They will continue to do some work as consultants and
would expect to earn at least $30 000 each per annum $60 000
Step 5
Deduct the income from working (Step 4) from Step 3.
This is the amount of passive income that you require $90 000
87
Step 6
Multiply passive income required (Step 5) by 10.
This is the amount of investment capital you need to
live the life of your dreams. $900 000
Step 7
Add together the house(s) that you want (Steps 1 and 2)
and the investment capital needed (Step 6)
This is Stan and Anyas Freedom Figure $2 400 000
How much you need comes down to your shopping listthe

value of the home you want to live in and the cost of the life-
style that you want. Depending on where you want to live and
the expense of your lifestyle your Freedom Figure could vary
from a few hundred thousand dollars to many millions. Thats
your choice. And the remaining chapters in the book will
show you how to create the wealth.
You also need to consider the timeframe. If you are quite
young and are willing to work at wealth creation for many years
it will be relatively easy to create the amounts of capital that you
need to be financially free. If you wish to live your dream life
quite soon, then you will need to take more risks and the path
is likely to be more difficult.
Exercise 21
Consider your timeframethe longer you are willing to
wait to live your dream life the easier it will be. How many
years are you prepared to wait to live the life of your
dreams?
Calculate your own Freedom Figure following Steps 1 to 7.
88
Step 1
What is the value of the house you want? $.................
Step 2
Do you want another holiday house? Value? $.................
Step 3
What income do you need for the life of
your choice? $.................
Step 4
What income will you receive from working
in your dream life? $.................
Step 5
Deduct the income from working (Step 4) from
Step 3. This is the amount of passive income
that you require. $.................
Step 6
Multiply passive income required (Step 5)
by 10. This is the amount of investment capital
you need to live the life of your dreams. $.................
Step 7
Add together the house(s) that you want
(Steps 1 and 2) and the investment capital
needed (Step 6).
This is your Freedom Figure $.................
You should now have a Freedom Figure and a date for when
you wish to be financially free, for example, I need to
create $2.5 million by 2012. That is, $1 million for the
house and $1.5 million to give approximately $150 000
of income (before tax) each year.
Write this information down and keep it somewhere you
can see it regularly.
89
The knowledge that is important here is understanding or work-

ing out what you would need as income in order to live the life
of your dreams. This allows you to answer the question, How
much is enough? You should work on the basis that you will
need 10 times this income invested in order to give you that
income (on top of owning the home where you want to live).
Working on your dream with the actual numbers you need will
help make your journey towards wealth feel very realit takes
you away from fantasies about wealth and helps you cultivate an
attitude of reality.
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15 SMART goals
Chapter
Goals are incredibly important for guiding our efforts and

behaviour. Research has shown that people who set goals
written goals especiallyoutperform those who dont. It sounds
obviousbut not many people have clear goals and even fewer
write them down. If you are serious about becoming wealthy
and living the life of your dreams you need to settle on clear
goals, record them in writing and review them frequently. You
will need some big overarching goals about the amount of
wealth you need to create.
Your most important goal is your Freedom Figure. It is
critical that this is a SMART goal (see over), that you put this in
writing and keep it somewhere you can see it regularly.
You will probably also want some other goals detailing some
of the intermediate steps and milestones along the way. Research
shows that goal-setting is most effective when people believe
that the goal is achievable. It is hard to apply yourself to a
goal like your Freedom Figure when it has a due date 10 years
henceif your Freedom Figure is to create $5 million by 2015
you will need to set yourself some sub-goals between now
and 2015. A sub-goal that sees you creating $50 000 of net
worth this year is much more immediate and perhaps more
believable than the final Freedom Figure. Once you experience
achieving a few smaller, shorter-term goals you will be far
more convinced that goal-setting works! You will also find it
easier to set more difficult goals because you will have a base
of success and more confidence in yourself to attain whatever
goal you set.
91
One of the better ideas that you can borrow from the busi-
ness world is to make your goal statements SMART:
S = Specific
M = Measurable
A = Attainable
R = Relevant
T = Time-bound
These concepts work as a kind of checklist to make sure that
your goal is clear. Lets look at each in turn and consider how
you might use the idea to firm up your goal statements.
Specific means detailed. Vague goals are impotent. The more
specific and detailed you can be, the clearer the image in your
mind about what you want. Research shows that the more
explicit or specific the goal is the better we are able to regulate
our behaviour to achieve the goal. A very precise goal is much
more compelling than a muddy idea of what you want to
achieve. If your goal was to own a lovely home, for example,
you need to make this precise by defining location, value,
style, age, number of bedrooms, school zone, etc.
Measurable refers to writing a goal in a way you can trackyou
need to be able to measure and evaluate your performance in
achieving the goal. While you could not measure or track a goal
of become more secure, you certainly can determine if you buy
a house that meets the above specifications. The more precisely
you specify the measurements of achievement the easier it is
to monitor your behaviour and keep it aligned with your goal.
Attainable is a check on whether your goal has any realism
are you capable of achieving the goal? For example, if your
desired home has a specified value of $1 million and your net
worth at the moment is $50 000, that does not appear to be
an attainable goal any time in the foreseeable future. Not that
you shouldnt dream bigyou should. But youd probably
be better to consider a more modest house to start with or
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S M A RT G O A L S
alternatively extend the timeframe to allow you to achieve

the bigger goal. If you dont believe that the goal is achievable
you are likely to give up quickly.
Relevant is a check on whether your goal is relevant to your
dreams or values. Buying a house is relevant to the values
of security and independence but probably does not satisfy
a value of spirituality nor contribute to the value of lifelong
personal development. And, of course, owning a bigger home
may mean that there is too much capital in your house to be
able to achieve your Freedom Figure. For a goal to be relevant
it needs to be attractive and compelling to youthere is no
point in setting goals that you dont really care about as you
will never put in the necessary effort to achieve them. So be
very careful that you dont take on the goals or expectations
of others or those of the wider society or market forces around
you. Its hard enough to work for the things we truly want
without having to make the effort to achieve the things other
people think we should want! So make sure that the goals you
set are important to youagain research shows that people
are most committed to goals that they view as important.
Time-bound means that you have dates and deadlines. Its all
too easy to let yourself off the hook by ignoring the timeline.
Deadlines and timeframes are very good for keeping us
focused and making us take action every day as the deadline
looms. For example, if you say you will make $120 000
profit by the end of the year you know you only have
12 months, therefore you must average $12 000 per month
or $2300 per week . . . This is very focusing.
If you had a goal to buy a home, good time-bound questions
might include:
When will you have the deposit?
Within what timeframe will you purchase?
Over what period will you repay the mortgage?
93
The whole point of SMART goals is to pin yourself down so

that all these questions are answered. Then you can get busy on
the execution of your goal because you know the details. Here
are some examples of SMART goals.
Caseys SMART goals for owning her home look like this:
Buy a three-bedroom detached house with verandah and

garden in a suburb close to work. (Specific)
Value between $200 000 and $250 000. (Measurable)
Provide a $20 000 deposit (already have $15 000) and
make monthly payments similar to my current rent.
(Attainable)
This will meet my value of security and I really care about
that. (Relevant)
Purchase home before the end of this year. (Time-bound)
Again, if you are finding this a bit difficult get a friend or

partner to ask you questions until you are really clear about what
you are going to do.
George places a high value on his personal development, and

also on improving his prospects of employment and higher
income. Gaining a qualification is an appropriate goal in those
circumstances. A SMART goal version looks something like this:
Enrol in a correspondence course to complete a Diploma in

Accounting. (Specific)
Complete and pass the course with a C+ grade or better in
each module. (Measurable)
Avail myself of offer of support from manager at work and
apply for study leave time as per company policy. (Attainable)
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S M A RT G O A L S
This will make me more employable, will likely get me a pay

rise, and will allow me to be eligible for better positions with
my current employer or assist me when I open my own
business. (Relevant)
Investigate options by the end of this month. Complete
Diploma within three years. (Time-bound)
There are a lot of words here but its all really just a way of
helping yourself to tease out exactly what it is you are going to
do. And SMART goals make it much easier for you to make
them happen.
Dreams are very importantthey are powerful because we
think in pictures and we use our senses to connect with what is
important to us. We dont tend to visualise numbers and dates!
However, when it come to making your dreams a reality you will
need to be much more precise and business-likethe dream
will give you the energy but it is the clear, well-specified goals
which will form the basis of your plan of action. SMARTing
your goals will give you a great tool for turning your desires into
reality with as little wasted time and effort as possible.
Exercise 22
You should have your Freedom Figure written as a SMART
goal, for example, I will create $2.5 million (Specific) by 2012
(Time-bound). I will do this by growing my income by at least
10 per cent p.a. and by keeping my consumption at its existing
level (both Measurable and Attainable). I will invest my surplus
income in geared property in order to grow my wealth
(Relevant).
Start converting your values and dreams into specific goals.
You may find it easier to begin with a small goal or project
95
as practice. A good tip is to revisit something you have

already done (like a house extension or a major trip) and
SMART it in reverse, as you already know so much about
itespecially what went wrong!
Is it Specific?
Is it Measurable?
Is it Attainable?
Is it Relevant?
Is it Time-bound?
Use a friend to help you clarify and make your goals as
SMART as possiblethey can ask you very useful questions
which force you to be clearer.
Write everything down. You will want to revisit these often
to check how you are doing and also to update them.
Your Freedom Figure is the big goal. Most people will want to
meet goals along the way, such as owning a house, growing
income, acquiring a promotion, creating a property or share
portfolioand each of these goals should be SMARTed.
KASH points
The skill that you need to acquire here is the ability to make
your goals clear and unequivocal. This skill will help you firm
up your habits around setting and meeting goals. This will be
very important when you begin to take action on the strategies
that will create your wealth.
96
16 Now, what do you

Chapter
really want?
Its not an easy question, is it? It can seem very frivolous but
nothing could be more serious than deciding what you will
devote your attention and focus and energies to.
Now that you have calculated an approximate Freedom
Figure you should have a sense of how big the goal is. Some of
you will have enough or nearly enough to live the life you want
and will be feeling very good. Others among you may be reeling
at the price of your dream. You may have priced your dream life
at many millions of dollars and feel that:
you do not have enough years left to create that kind of

wealth;
you will have to work very hard for a long time to make that
amount of money;
you just dont want the dream enough to set a goal that high.
If this has happened to you, now is a good time to think again,

and dig down deep about what is really important to you.
Some of the things you described in your dream might be
blue sky, for example, spending winter overseas each year in
your own villa in Tuscany. You should examine your dream list
again and ask which things on it are really important for your
happiness and which are just icing. Obviously, every item you
cross off lowers the price of the dream, and that means you have
to create less wealth or work for far fewer years to achieve your
Freedom Figure.
97
Nic and Maria are in their early forties with three children. Nic
has run a successful business for years and they have a
comfortable if not lavish lifestyle. When we priced their dream
life, their Freedom Figure came out at $7.75 million! Not too
surprising when you consider that it included:
Seaside family home $2 million

Yacht $1 million
Holiday home in Fiji $1.5 million
Holiday home on Gold Coast $750 000
Annual income $250 000 (needing $2.5 million capital
to fund)
When we revisited the list with Nic and Maria, they were quick
to agree that what they really wanted was a home by the sea
(and a $1.5 million one would do) and $150 000 income and
a very basic holiday home ($500 000) in the mountains where
they could take the kids fishing and tramping. This version of
their dream was priced at approximately $3.5 million. Given
that their net worth was already over $2 million this new
Freedom Figure was not out of reach within a few years if they
continued to drive the business well and kept control of their
consumption.
You are going to have to make many changes and do a lot

of work to achieve your dreams, so make sure you are clear
about what you really want. If you dont really want the dream
you wont have the motivation to do the hard stuff to achieve
itand are likely to end up even less satisfied than before.
You will find it very hard to work towards a dream that will take
30 years to realise. So dont dream of a future that you cant
really commit to.
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N O W, W H AT D O Y O U R E A L LY WA N T ?
Exercise 23
Now that you have done a lot of thinking about your dreams
and values you need to decide what it is that you really want.
Part of this decision is trading off between what you want
and how much you are prepared to do to get itwhat are you
willing to give up to get the dream; what part of the dream are
you prepared to negotiate on so you can achieve your dream in
a reasonable timeframe? And with a reasonable level of risk?
So what would be the perfect fit for you and your family? Dreams
need money so that they can become real. You and your partner
have to keep discussing what you really want until you are agreed
that you are willing to create the wealth that your particular dream
will cost.
KASH point
The key skill to master here is the trade-off between the cost of
the dream and the wealth you will need to accumulate. You
(and your partner) are answering the question, How much is
enough? You can choose to dream very big if you are willing
to make the huge effort that it will take to meet the cost of that
dream. Or you can choose a more modest dream life and the
probability of getting it more easily and sooner. Your choice.
99
Part V
Strategies for wealth:
How will you create
wealth?
Chapter 17 How wealth is created 103
Chapter 18 How income makes you wealthy 106
Chapter 19 How wealth is destroyed 110
Chapter 20 How to protect wealth 114
Chapter 21 You have to own Wealth-Creating Assets 118
Chapter 22 Choose only one Wealth-Creating Asset 122
Chapter 23 How to choose a Wealth-Creating Asset 124
Chapter 24 Getting asset allocation right 126
Chapter 25 What if you have a job? 137
Chapter 26 You must create a surplus 141
Chapter 27 You should maximise income 149
Chapter 28 You have to learn to borrow 156
Chapter 29 How to maximise your returns 161
17 How wealth
Chapter
is created
If you really want to become wealthy you first need to under-
stand how wealth works. Many people approach wealth as if it
were a matter of luck! Others think that you have to have a lot
of money to make money. Neither is true: wealth is created
following some basic rules that you need to understand so that
you can make use of them.
Being wealthy is not about having a lot of income. It is about
having a lot of capital. The ultimate aim, financial freedom so that
you have the life you want, is to have a lot of income, but this has
to be passive incomethat is, income that you get without having
to work. Passive income can only come from capital, and so you
have to grow your capital (your wealth) so that you can get plenty
of passive income. Capitalism is the name of the game.
This sounds simple enough. But many people confuse hav-
ing high income with being rich. People who have high income
(especially when it is from a job) give every appearance of being
rich (they have all the toys and trappings of the rich), but they
are not. Being rich is about having capital, capital that can
be converted into assets that will give you passive income. It is
passive income (income that you do not have to work for) that
allows you to live the life of your dreams. Then you are free to
spend your time on what is important to youand you have
enough income to do so.
Exercise 24
Look again at your net worth figure and compare it with your
level of income. Are you rich in income but poor in wealth
(probably because everything is being consumed)?
103
Having lots of capital is the final objectiveremember, capital-

ism is the name of the game. You have to be an owner: an owner
of the right things. What you do with your income during the
time that you are trying to get rich is important. A lot of people
manage to get high incomes from their businesses or investment
activities but because of how they use this income, not all of
them get rich.
Income has four important uses:
Consumption You have to live. A proportion of your income
will have to be spent on groceries, transport, utilities, etc.
Reinvestment If you retain income (that is, do not spend it)
it is added to your capital and will grow. When income is
added to a Wealth-Creating Asset it will compound at a high
rate and so grow very quickly.
Paying for borrowings Nearly everyone who becomes rich
gears up the capital that they have by borrowing. Borrowing
reduces the amount of disposable income that you have
(because you have to pay interest) but increases the amount
of your growth of capital (because by borrowing you have
increased your Wealth-Creating Assets).
Setting capital value The income that you get from your
assets values those assets. Regardless of whether it is a business,
shares or property, the value is set by the amount of income
that comes from them. Therefore, increase the amount of
income from your Wealth-Creating Assets (business, property
investments, etc.) and you increase the value of them. For
example, an increase in the rents that you get from a ware-
house that you own not only increases your income but also
makes the warehouse more valuable.
To become rich, to grow your capital quickly, you need to own
Wealth-Creating Assets, things that will give a total return
(capital growth plus income) of at least 15 per cent p.a. on your
money. As we have said before there are only three things that
104
H O W W E A LT H I S C R E AT E D
will give that sort of returna business (this includes farms),

property investment and/or development, and shares.
To get rich, you have to own something from one of these
three categories. This is what you will have your capital in, what
you will get your income from and what will make you wealthy.
If you can average 15 per cent p.a. from your business or other
activities, you will become rich. You will almost certainly have
to gear (borrow) to get a 15 per cent returnthere is more
about gearing in Chapter 28.
Exercise 25
Consider how you view wealth and incomehave you been
confusing the two?
Do you see income as a means to increasing wealth, rather
than as wealth in itself?
Are you focused on increasing your wealth?
How will you use your income to grow your wealth?
Do you value your income highly enough?
You cannot continue to own these Wealth-Creating Assets

if you want financial freedom. Living the life of your dreams
means that you need to be free to do what you want with your
time and to have enough money to do so. But to get a 15 per cent
return from your Wealth-Creating Assets, you will have to
manage what you own actively and take risks. As we have said
before, active management (that is, work) and being in a high-
risk situation is not our idea of financial freedom. Therefore you
need to become rich (have a lot of capital) through some risky
enterprise, but over time move that capital into something that
will give passive income with low risk (Security Assets).
The first thing to think about is how to get rich. The follow-
ing chapters will focus on the skills of wealth creation.
105
18 How income makes

Chapter
you wealthy
Although having a lot of income is not in itself being rich,
income is critical to becoming rich. To become rich you must
generate a lot of income from your Wealth-Creating Assets, and
then use this income wisely and well.
When financially astute people have an increase in their income,
they celebrate. When they have a good year with their businesses
and the annual profit increases, when they manage to increase
the rents on their properties, when the companies that they
have invested in increase their earnings and dividends, they are
delighted and happy, and they celebrate. In all of these things,
their income has increased and that is very good news.
However, the increased income is not good news by itself.
Sure, the extra income is usefulit could be taken out and
spent. But few people who are serious about getting rich would
care to do that. The increased income is not terribly important
in itselfrather it is what the extra income can do for them that
is important.
In fact, it is the attitude towards increased income that distin-
guishes the successful from the unsuccessful. The unsuccessful
(those never likely to become free) are likely to look at the extra
income and start to think what they can do with itanother
overseas holiday, a boat, increase the mortgage on the house to
build a swimming pool.
Those who are determined to be rich and successful view
the extra income quite differently: instead of thinking about
what they can do with this extra income, they think about what
the extra income can do for them. Instead of thinking about the
fun that they can have with the additional money, people who
know how to become rich are thinking about the effect on their
106
H O W I N C O M E M A K E S Y O U W E A LT H Y
positions and the opportunities that the increased income has

brought about.
This difference in attitude towards income is the divide be-
tween those who will become rich and free, and those who
will not. Those who will not achieve financial freedom think
only of consumption.
Those of you who will achieve financial freedom will think
of your income like this:
Extra income means that our assets will have a higher value
All Wealth-Creating Assets are valued by their incomethe
family business is valued by the profits it makes, property
investments by the rent they bring in, and shares by their
earnings (in much the same way as the family business). If you
own a small commercial property you might be able to increase
the rent by $5000 p.a. You will celebrate the extra rent not
because of the income itself and its spending power but because
the value of the property will be greater (perhaps by as much
as $50 000). The extra rent (or business profits) increases the
value of the asset because a potential buyer would agree to
pay more for it to get the higher income. The extra income
means that you have become richer (you have more capital).
This additional capital growth is often worth several times the
additional income that was generated.
The extra income can be used to borrow more Not only will
you have higher capital values to use as security but you
will also have more income to fund borrowings. The ability to
borrow more means that you can dramatically increase the
total amount that you have invested in your Wealth-Creating
Assets. This in turn will generate even more income for you,
spinning a Virtuous Circle of Wealth even faster.
This is, of course, the compounding effectit is no less potent
for Wealth-Creating Assets than it is for other investments. (In
fact it is more potent because the returns are even higher.)
107
The Virtuous Circle of Wealth
Increased
Income
Higher Asset
Re-invest Values
Additional
Borrowings
Exercise 26
What have you been doing with your incomeis there any
surplus or are you consuming it all?
If there is a surplus where have you been putting it?
108
H O W I N C O M E M A K E S Y O U W E A LT H Y
KASH points
The critical factor is your attitude to your income, and in
particular to the increases in income that you win. Most people
simply spend it, consume it in one way or another. Of course,
when you do this, it is goneit is out of the system.
What you do with your income is critical to becoming
wealthy. Those of you who are determined to become wealthy
will keep it in the system. You will plough it back to keep the
virtuous circle of wealth turning for your future benefit: using
extra capital in your businesses as you buy new plant and
equipment, increase stock levels, add a new product range or
division, etc., or purchase more investment property or shares.
You will re-invest, continuing to strive to grow your wealth at
15 per cent or greater, compounding your returns to riches.
This is the habit that you need to create wealth.
Your attitude to your income, your knowledge of how your
income can become capital that in turn gets more income, is
critical. People become rich because they handle the income
that they have wellthey have a plan for their income and
they work the plan. They work very hard to get more income
out of their businesses and properties, not for its own sake but
for how it grows their capital. The rich use the virtuous circle,
growing their wealth with each turn.
109
19 How wealth
Chapter
is destroyed
The same mechanisms that make you rich can also make you
bankrupt! It is all too easy for the Virtuous Circle of Wealth to
go too fast, spin out of control and into a Vicious Spiral of
Bankruptcy. If you play double or quits for long enough, some
time it will be quits.
There are risks involved in chasing high returns. There are
risks involved in being in business (just look at statistics on how
many fail), risks in highly geared property, risks from shares and
any other high-return endeavour that you might try. To become
rich you have to look for high returns, always remembering that
high returns come with high risk. At any point the Virtuous
Circle of Wealth can be brokenand send you into a downward
spiral towards insolvency.
It is not just that WealthCreating Assets are risky. They
certainly are risky but these risks are exacerbated and magnified
by the two key components of the Virtuous Circle of Wealth,
borrowings and reinvestment.
Borrowings Nobody gets rich without borrowing to buy

income-earning assets. Gearing or leverage is a necessary part
of getting rich as it greatly increases the return that you will
get on your own capital. You may as well get used to the idea
that you will have to borrow to become wealthy. However,
although borrowing greatly increases the returns on your
capital, if things go the wrong way it also greatly increases
your losses. Gearing or leverage speed up the process to
wealthbut speed kills. Borrowings speed up the Virtuous
Circle of Wealth, but of course the faster you go, the bigger
the mess that can result when things go wrong.
110
H O W W E A LT H I S D E S T R O Y E D
Reinvestment You will be tempted. You will want to reinvest

all the surplus income back into your Wealth-Creating Assets
you will want to expand the business, buy more property or
more shares. But in doing this you are ploughing everything
back into just one areacertainly a high-performing area, but
one that you know to be risky (and those risks are accentuated
by high borrowings). You will want the growth that comes
from reinvesting your income, but in reinvesting all of it you
develop the opposite of a diversified portfolioeverything is
in just one area. This is double or quits, and you are playing
for the familys fortunes.
These two things, borrowings and reinvestment, so important
for making you wealthy, the very things that drive the Circle of
Wealth, are at the same time the circles Achilles heel. The two
things that will help you grow wealth are the things that will not
let you remain wealthy and free.
The Virtuous Circle of Wealth will give you success for a time.
When the circle turns well and reinvested profits are leveraged
further with debt, income and wealth increase hand in hand. This
success is your greatest enemy: it leads to over-confidence and feel-
ings of invulnerability. Too many entrepreneurs cannot imagine
that they will ever have a failurethey keep reinvesting every-
thing that they make, gearing it up further for even more wealth.
Exercise 27
Is all your net worth tied up in Wealth-Creating Assets? This is
a risky allocation. Read on for advice about making your
position more secure.
When the Virtuous Circle of Wealth fails, the people who

have reinvested everything are shocked. They have planned for
111
success with no thought of failure. They have no fallback position,

nothing outside their Wealth-Creating Assets. And these are
now in the downward Vicious Spiral of Bankruptcy. With noth-
ing in Security Assets, this is a spiral that is very hard to stop.
Exercise 28
What Security Assets do you have?
Do you have any plans for securing your wealth?
In hindsight, over-confidence is the greatest problem leading to

the downward spiral. When things are going well, it is imposs-
ible to imagine them turning bad, there seems to be no need
to think about what you might do if the Virtuous Circle of
Wealth stops turning.
In business and investment things go wrong for all sorts of
reasons: sometimes it is the owners fault; sometimes it is not.
Often it is because the entrepreneur has tried to go too far too
fast, gearing up to grow the business faster or buy more shares or
property, only to be caught in an economic or industry downturn
coupled with a hike in interest rates. The Virtuous Circle of
Wealth, with profits being reinvested and with ever-higher levels
of borrowing, can quickly turn into the downward spiral: income
starts to fall, asset values fall with it, cash is difficult to find and
the lower asset values mean that the gearing rate (the proportion
of borrowings to assets) climbs. The owner becomes a forced or
distressed seller, and this means that asset values are crystallised
at a level even lower than expected. Before long, the spiral has
the owner out of the game, perhaps pushed by the bank, maybe
jumping before the bank has to start pushing.
What can you do about this vicious spiral? Well, once it starts
happening, not much. Falling income and asset values are hard
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H O W W E A LT H I S D E S T R O Y E D
to turn around. In most markets, things will eventually come

right but that will take time. If you can survive through some
bad times, you may thrive in the next economic cycle. But most
entrepreneurs who get caught in the Vicious Spiral of Bank-
ruptcy do not have timethey have nothing to get them
through to the next downturn except their businesses and the
very investments that are the cause of their problems.
Once the vicious spiral starts it is very hard to stop. The time
to manage downturns is before they start. You know that in your
drive for financial freedom there will be tough timesyou are
bound to have to survive at least one and perhaps several
economic cycles. There will be times when business and invest-
ment conditions are difficult, when income falls and interest
payments are hard to find. You know that this will happenit
is inevitable. You have to stop playing double or quits, stop
having everything resting on the performance of one asset. You
need a plan to lower the stakes.
KASH points
The critical knowledge here is understanding how you can lose
your wealth. This should help create an attitude that will help
you build the skill to protect your wealthinvesting in Security
Assets. The habit of protecting wealth is just as important as the
one of creating wealthyou need to be sure that you are going
to keep most of what you have worked so hard to make.
113
20 How to protect
Chapter
your wealth
You need to use the Virtuous Circle of Wealth but at the same
time guard against the Vicious Spiral of Bankruptcy. It is
actually not that difficult to create wealth, but if you want to
remain wealthy and be free your wealth must be secure.
We have always been concerned about the possibility of any of
our clients losing the wealth they have created. The Wealth-
Coaches Model is designed to help them go on the offensive to
create wealth while still having some defence plays. It allows
you to plan and structure your affairs to achieve financial free-
dom without being stopped halfway through by some financial
adversity. It is a plan that means you can survive the bad times so
you are still there to thrive in the good times. In order to win, it
is not enough to be able to play on the offence; you have to play
a good defensive game as well.
Money never takes care of itself! We have heard so many
passionate entrepreneurs, and share and property investors, tell
us that if they love what they do and are passionate about it, the
money will take care of itself. The truth is so different. All your
time and toil will probably be for nought if you do not take
steps to lock in some of your gains as you go.
Suffice to say here, a plan has to be developed so that money
is moved to Security Assets that will be secure, and separated
from Wealth-Creating Assets. You need a deliberate policy of
using a part of the income from your Wealth-Creating Assets
to put aside in Security Assets. The purpose of doing this is to
give you a fallback position so that if you do get caught in a
vicious spiral you will have other assets that you can use to
help you survive. Getting rich takes place over a number of
years. You want to be set up in such a way that you can weather
114
H O W T O P R O T E C T Y O U R W E A LT H
adverse economic conditions (such as recession), problems in

your particular wealth-creating activity, and even difficult per-
sonal circumstances such as illness or family problems. A smart
wealth creator knows that some or all of these obstacles will be
encountered and prepares to overcome them.
The final goal of financial freedom is to have significant
wealth in secure investments that will generate passive income
(Security Assets). You should start shifting some of your profits
from your Wealth-Creating Assets right from the beginning.
Moving money to Security Assets from your Wealth-Creating
Assets may seem counter-intuitive (most people want all their
profits to go back into the thing that is making them rich so that
they can accelerate the process). However, investing outside
your Wealth-Creating Assets is a very good habit to get into,
constantly reminding you that the aim is not just to get rich
but to be in a position where you will always stay rich as well
and have enough passive income to be able to choose how to
spend your time.
In some ways, this model or plan is simplicity itself. Certainly
no one has trouble understanding itthere is nothing very
complicated about the idea of shifting some of your wealth
outside whatever venture you are using to become rich. However,
what is not simple is actually working the plan.
Most people who have successful Wealth-Creating Assets
instinctively plough all of their profits back into them. Not a
great deal of thought goes into thisexpansion is carried on
as cash becomes available. Little thought is given to, or plans
made for, use of the cash generated by the profits. That this is
done instinctively is the problem. Ploughing back everything
that you make, using every bit of cash that comes out of the
Wealth-Creating Asset is not a thoughtful approach: rather it is
an unplanned, unexamined, unquestioned habit. Smart entre-
preneurs will take a much more informed, business-like approach
to their wealth-creating activity. Not only is reinvesting all
115
profits likely to be less than optimal business practice, but it is

also likely to prevent you from realising your dreams of financial
freedom.
This is the real benefit of our model: it forces you to think about
what you are going to do with your profits; forces you to plan
to split the profits three ways: for consumption (you have to live);
for the Wealth-Creating Assets (you have to reinvest some of the
profits); for Security Assets (you have to diversify some of your
wealth out to investments which will generate passive income).
Exercise 29
Where do I get my income from?
Where does it go?
How much do I have in Wealth-Creating Assets?
How much do I have in Security Assets?
Is the balance right to meet my dreams and goals?
Security Assets are what most entrepreneurs missthey do

not invest outside their Wealth-Creating Assets. All their wealth
is employed to make them rich; none of it to help them stay
rich and become free. Yes, you have to invest in Wealth-Creating
Assets, and keep on investing in them. But you also need Sec-
urity Assets which are isolated from your Wealth-Creating Assets.
The model helps you do that. It keeps the different things
that you own in different compartments (in your mind at least).
It encourages you to use part of the income that you have on an
ongoing basis to move into things that are secure. Best of all
perhaps, it reminds you why you are setting out to become rich:
that it is not just money that is important but financial freedom.
Money, wealth and riches are only important for the kind of life
that they givethe kind of life that you want.
116
H O W T O P R O T E C T Y O U R W E A LT H
KASH points
The attitude and habit of protecting wealth are the keys to
making sure you become financially free.
117
21 You have to own

Chapter
It is time to start to think about the things that are going
to make you wealthy and how you can use them. You have a
dream and you know how much you need to create to live
that dream (your Freedom Figure). Next you have to choose a
strategy to create that wealth.
For many people who have not thought much about money
and wealth, it is the Wealth-Creating Assets that seem to be
the hardest part. For them the really big question is, How do I
get rich?
In fact this is not really the hard part at all! Provided that you:
have the desire to be rich;
are prepared to take some risks;
have a strategy to manage those risks, and
are patient.
With all of the above you can accumulate the sort of wealth you
need. As has already been seen (and we will show further) there
are ways of getting 15 per cent and more on your money. They are
not without risk. But they are available.
The things that are going to make you wealthy, and grow your
money at a fast enough rate must have these two characteristics:
Produce a 15 per cent return of income and capital, after tax
and any fees. You must be growing your wealth at this rate
that means that any income that you use for consumption
cannot be counted. (To get a 15 per cent return you will
almost certainly have to gear.)
Be saleable, that is, the Wealth-Creating Asset must be able
to be owned, and then sold. You cannot become wealthy by
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Y O U H AV E T O O W N W E A LT H - C R E AT I N G A S S E T S
growing an assets value if you cannot sell it at some point in

the future. This precludes your career from being a Wealth-
Creating Asset. There are a few people who become wealthy
through their careers, but not many. To get wealthy through
your career you must first have a very successful career, and
second make sure that you do not increase your consumption
each time you get a pay rise.
The only three things we know which meet these two criteria,
that you can own to make you wealthy, are, once again, a
business, property investment and development, and shares.
Your job at the moment is to choose which of these is the vehicle
to make you rich.
People often do not really choose what will make them
rich at all, rather they go into some sort of activity almost
by default. Thus, they go into a particular business because the
opportunity arises, property investment because they attend a
seminar, shares because of a tip from their cousin, etc. There
is no great thought, no consideration from which a judgment
can be made.
This is not necessarily a bad thing. You must have some sort
of affinity with what you are going to do for the next 10 or even
20 years. You are hardly likely to keep up enthusiasm for that
period of time unless it is something that you want to do.
The way that some people try to choose their Wealth-
Creating activity, what sort of business or property to go into,
is to analyse and then enter the business (or property type).
Although you can do this kind of analysis when buying shares,
it is often difficult when setting up or buying into smaller
businesses. Choosing your Wealth-Creating Assets by this pro-
cess can seem like the best way, but without some affinity to
the activity or point of introduction to the industry it will be
hard. Certainly, you will need some passion about what you do
in order to be successful. But passion is not enough in itself:
119
business, property and shares all take specific knowledge and

skills that must be mastered if you are to succeed.
Magda and Colin live in a typical suburb with their two

children. Magda is a full-time mother and Colin works for
salary as a civil engineer. Magda and Colin own five rental
properties. They called us because they felt that they were not
making enough progress on their path to wealth.
They were clear about their dreamthey wanted to be
financially free by 45 and they had another eight years to go.
They wanted to be able to travel with the children and live
for months at a time overseas, putting the children in local
schools for the experience. They had settled on property as a
Wealth-Creating Asset. They both studied property with
enthusiasm and Magda did all the day-to-day management of
their rentals.
We worked with them on a plan to accelerate their wealth
creation that included actions such as restructuring their
property portfolio and better debt management. Colin earned
very well as a civil engineer. They could easily have settled for a
high standard of living with little savings, but they were
determined to create a large surplus from Colins salary and put
it to work. Time was on their sidethey could afford to invest
aggressively with high levels of borrowing. They turned their
combined skills and education to making property investment
work for them.
Most people will choose how they are going to become wealthy
by looking at activities that they are already involved in, already
have some interest in or already have some knowledge of. This
choice by default may not sound the best way, but at least it does
mean that you go into something with a bit of a start.
120
Y O U H AV E T O O W N W E A LT H - C R E AT I N G A S S E T S
Exercise 30
Do you have a Wealth-Creating Asset?
What might be a Wealth-Creating Asset for you?
What attracts you about business, property or shares?
What skills or experience do you have that might support
your choice?
Before you start, before you commit any capital, just check that
the activity really is capable of making you rich. It does not have
to be the most likely way to riches but it does need to give you
a fairly good chance. On the one hand, do not enter into an
activity that you know nothing about solely because it seems to
be in the most rapidly growing industry; on the other hand,
do not go into something which you are passionate about but
which is an industry in rapid decline. The knowledge that you
need to acquire before choosing your Wealth-Creating Asset
includes understanding how you will create wealth through
property, shares or a business, and self-knowledge about which
you are best suited to. Do not rush into a venture hereyou will
be working long and hard and have lots of risk to carry so you
need to get this choice right at the start. And you must choose
only one Wealth-Creating Asset.
121
22 Choose only one

Chapter
Wealth-Creating Asset
Your Wealth-Creating Assets are the opposite of your Security
Assets. Your Security Assets are spread arounda diversified
portfolio of quality investments that require little or no looking
after. Wealth-Creating Assets still require quality, but not a
spread of a whole lot of different things. Getting rich requires
concentrating your assets, staying rich requires spreading them.
Your Wealth-Creating Assets need to be focused on just one
area. You need to focus on the one thing that will make you
wealthya business, some properties, or sharesbut not all
of them.
Some people try a lot of different things to make them
wealthy. They own some investment properties and dabble a bit
in shares, then set up a business and after a while push that
business into areas outside its core concerns. Such people have a
series of things, one of which they hope will come off and make
them wealthy.
Thats the wrong approach. We know very few people who
have become wealthy by chancing with a whole bunch of things.
It is far better to concentrate on just one thingand doing that
thing well. Certainly, this is a bit more risky, but that risk is
reduced by the focus and care that you bring to it. You can have
all your eggs in the one basket, provided that you make sure that
it is a good basket, keep the basket in good repair and carry it
over rough ground with a firm footing.
People who become wealthy do it by having one really good
activity that they put all their time and energy into. Such people
live, eat and breathe this activityit occupies them completely.
That is the sort of commitment that you need to get rich.
You have to know everything that there is to know about your
122
C H O O S E O N LY O N E W E A LT H - C R E AT I N G A S S E T
activityall the gossip about who is doing what, where the

markets are heading, where the gaps in the market are and where
the biggest opportunities lie. You do not get that sort of intelli-
gence by spreading yourself across several unconnected things.
You get it by concentrating and focusing on one specialist area.
Remember that you are (in the early days at least) putting
nearly all of your capital into this one thing. Drive it hard, and
guard it carefully.
123
23 How to choose a
Chapter
Wealth-Creating Asset
You may be suited to business if:
you have worked in a business;
you have an underlying business skill, for example, in service
or manufacturing;
you are good with people;
you like dealing with customers;
you are prepared to work long hours;
you can do lots of different things, for example, buy, sell, hire
staff, deal with complaints, understand numbers.
You may be suited to property if:
you have owned rental property;
you have handyman skills;
you enjoy or are able to renovate;
you are able and willing to deal with tenants;
you can develop good relationships with real estate agents;
you like real things like buildings;
you are willing to learn the basics, for example, calculating yields;
you are a good negotiator;
you are patient.
You may be suited to shares if:
you like analysis;
you are a good reader;
you can cope with lots of information;
you are interested in business, markets, and what makes shares
work;
you like abstract ideas, for example, price-earnings ratios;
you have a good understanding of business and finance.
124
H O W T O C H O O S E A W E A LT H - C R E AT I N G A S S E T
Exercise 31
Choose the Wealth-Creating Asset which best suits your
skills and circumstances.
If you have been dabbling in several Wealth-Creating Assets
consider which to disinvestyou are unlikely to be
successful if you are spread thinly.
125
24 Getting asset
Chapter
allocation right
We help our clients look at the allocation of their assets on
the WealthCoaches Model. Then we work with them to get the
right balance and allocation of their assets to get the life that
they have said they want.
The two main problems that we see are having too little
in Wealth-Creating Assets, and having too much in Wealth-
Creating Assets.
Too little in Wealth-Creating Assets

It is almost impossible to grow your wealth fast enough to
become financially free unless you have enough in Wealth-
Creating Assets. Many people who have put all their money into
a home have a high net worth and a good Security Asset, but it
is very difficult for them to grow their wealth as Security Assets
do not tend to appreciate very well. (We have had recent excep-
tions with the surge in the property marketbut it is just a
surge and cannot be depended on as a sustainable way to grow
wealth.) The second problem with this approach is that there
is no passive incomeyour house may be worth more (thereby
increasing your net worth) but you cannot stop working as there
is no income. You cannot use the wealth in your house unless
you sell it and trade down or move away to somewhere con-
siderably cheaper. People who put all their surplus income
into Security Assets (like paying down the mortgage or buying
a diversified portfolio) will be relatively comfortable and safe,
but are highly unlikely to achieve the wealth and freedom of
their dreams. To do that, money needs to be released for invest-
ment in Wealth-Creating Assets that will grow at a higher rate
126
G E T T I N G A S S E T A L L O C AT I O N R I G H T
(15 per cent or more). This often involves making big and
radical changes.
Mike and Melba were in their early forties. Mike ran his own
professional practice and had enjoyed very high income for
years. The couple had only one child who had almost finished
tertiary study and was about to go overseas for a few years.
Mike and Melba were devoted homebodies. Melba had worked
part time (she had been an accountant) for many years but now
devoted herself to looking after their beautiful semi-rural
homestead with extensive gardens. She was talented at both
the house and garden were stunning and she had done most of
the design as well as the actual work.
They had called us because they were worried about the
future. Sure, they enjoyed a high income and a great, albeit
quiet, lifestyle. The problem was that Mike wanted, indeed
needed, according to his doctor, to slow down. However, if
Mike worked less there was less income.
As always, we began with talking about the dream. Mike
and Melba wanted a similar lifestyle with much less work for
Mike. This of course meant that they would need to find a way
to get some passive income.
We then did a net worth statement:
Assets
House $1 200 000
Business $200 000
Shares $20 000
Liabilities
Business loan $50 000
Net worth $1 370 000
Mike was doing very well, bringing home $150 000 after tax
each year
127
We used the WealthCoaches Model to allocate these assets.
Business $200 000
Consumption
$130 000
Security Assets
Home $1 200 000
Income $20 000 Shares $20 000
$150 000
The picture tells the story: Mike and Melba looked very wealthy
from the outsidepeople regularly stopped and admired the
house and gardens. They certainly enjoyed their income
spending a great deal on entertaining at home, keeping the
house and grounds as a showpiece, and enjoying several
expensive breaks during the year.
This was an enjoyable way to live as far as it went but it was
totally reliant on Mike continuing to work hard and long and
bring in a high income. The picture showed that they had no
other source of income apart from Mike. The business was in his
name but, as most professional practices do, only provided a
name and a group of colleagues to work with. If Mike were to
sell up and leave there was a small amount of goodwill value
128
that we felt his partners would buy out. We valued this at

$200 000.
Virtually all of Mike and Melbas net worth was tied up in
Security Assets (the house). They had been putting money into
the sharemarket for a few years but the tech-wreck of a few
years ago had rendered their portfolio of fairly low value
($20 000). The rest was tied up in the family home that
brought in no income at all.
We talked a lot over some weeks. Mike and Melba
understood that they had to make some changes. They could
choose to live somewhere much more modest and release a lot
of the capital in their house to invest for passive income.
Another option was to use the capital in the house by
borrowing to grow their wealth over the next decade so that
they had the best of all worldsthe same or similar home and
enough passive income so that Mike could move towards
semi-retirement. We agreed that they needed to create an
additional $1 million to provide the kind of income that would
allow the life they dreamed of.
The following decisions were made:
Mike and Melba decided to sell the house. They realised that
if they were to have the life that they wanted in the future,
they couldnt afford to have all their assets tied up in non-
income-producing Security Assets.
Some of the money from the sale ($500 000) would be used
to buy land in a place that they would be happy to live in
the future. That might be close to where they sold or
somewhere else. They did not have to commit to building on
that landit was a way of making sure that they would
have the landor rather the land valuewhen they needed
it. Put another way, they were buying a hedgeif land
were to take a great jump in value (as it sometimes does)
they would have land that would appreciate in value at the
129
same rate. Otherwise they risked being locked out of the

property market when they came to build again.
The balance of the money released from the sale of the
house ($700 000) would be put to work to create
wealth.
They would also sell the business. This would raise
$150 000 after the business loan was repaid. This money
would also be put to wealth creation.
Mike and Melba decided to use this money to create wealth
through aggressive share investment and option trading.
Their professional backgrounds gave them the underlying
skills they needed for analysis and, just as importantly, they
were both interested in business and the markets. They
understood the risks involved and agreed that they would
work to a set of investment rules.
Melba felt that she would also enjoy a return to part-time
workif she were no longer supporting Mike in a more
than full-time and stressful career she would have plenty of
time and energy to do some work. She was confident that
she could bring in $25 000 after tax.
Mike was also confident of doing some part-time
consultancy for his former partners and could expect to earn
$50 000.
This would represent a considerable reduction in consumption.
However, Mike and Melba felt that with less stress in their lives
(and without a huge house and garden to maintain) they would
manage very well on $70 000 even after paying rent.
With these changes Mike and Melbas model would look
like this:
130
Shares $850 000
Consumption
$70 000
Security Assets
Land $500 000
Income $5000 Shares $20 000
$75 000
Change is never easyand making big changes to what you

own is a difficult change. This is where it really helps if you are
both committed to the dream and are able to talk well together
about the future that you are hoping to create. Otherwise the
focus tends to go on what you are losing or giving up rather
than on what you are gaining and where you are headed.
Your dream needs to be powerful enough to make to want to
embrace the changes that need to be made.
Too much in Wealth-Creating Assets
Having too much in Wealth-Creating Assets is typical of business

owners, property investors and farmers. They have everything
(except the house) in their investments and often see no problem
with this. However, this is a high-risk position and depending on
131
their age and wealth usually needs rebalancing. This group is

playing double or quitsalmost everything is being reinvested.
It is all too easy to get carried away by the apparent success of
a business or property portfolio and keep piling money back in
there. Such people are often very reluctant to accept the lower
returns offered by lower risk Security Assets but they need to
understand that they are playing a high-risk game. High risk-
taking can be appropriate: if you are young you can afford to take
big risks. If you fail you have plenty of time to recover and try
again. Many people who are early on the journey to wealth and
freedom will have to take considerable risks but we believe that
this needs to be offset with some Security Assets so that if you fail
you will at least have a small stake that allows you to get back in
the game. Obviously, people with young families will want some
kind of backstop in the event of business failure or a meltdown in
their property investments. Another group who typically have
far too much still at risk in Wealth-Creating Assets are those who
have achieved high net worth and who do not need to continue
to take the risks associated with wealth creation.
Jill and Brian were in their early sixties. Brian had run the
family business for nearly 40 years and still worked hard at it,
despite some health problems. Jill had taken almost full
responsibility for family life, including their three now grown-up
children. She had always run the familys finances and had
over the years made some investments in property, as well as
done a couple of property developments. Brians whole life had
been around the business and he did not know how to stop
going into the factory every day (and, yes, that included
Sundays!). At Jills insistence, a general manager had been
appointed but Brian still tried to put in the hours, believing that
if he left the business for long it would collapse.
The first thing we did was a net worth positioning:
132
Assets
House $700 000
Business $2 500 000
Land (for development) $600 000
Property investments $750 000
Shares $25 000
$4 575 000
Liabilities
Mortgage (on land and property developments) $650 000
Net worth $3 925 000
The business was profitable, making $400 000 p.a. after tax.
The next thing to do was decide what category each asset

should go in. The only difficult categorisations were the land for
development and the property investments. We decided that
these should go into Wealth-Creating Assets as they had quite
high borrowings and the aim was certainly to make big profits.
The land and the property investments were together worth
$1 350 000, the mortgage was $650 000, and so we put these
into the Wealth-Creating Asset category at a net value of
$700 000.
Their current position looked like the diagram on p. 134.
A quick glance at the triangle showed how badly balanced
they were for a quite wealthy couple in their sixties: they had
$3 200 000 of their net worth in Wealth-Creating Assets and
only $725 000 in Security Assets. Virtually all of the profits
from the business were going back into it. Putting the current
numbers into the model showed us quickly where the starting
position was and what needed to be done.
We could now help Jill and Brians future. The following
decisions were made:
133
Business $2 500 000
Section/Property $700 000
Consumption
$80 000
REINVESTMENT
$320 000
Security Assets
Home $700 000
Income Shares $25 000
$400 000
Half the business would be sold to the general manager (he

had been asking to buy it for years). An arrangement would
be made for the financing to help him buy a half share.
The proceeds from the sale of half the business would be
invested in well-diversified funds.
With the general manager now a part-owner, Brian could
relax a bit and work only when he wanted to. A board of
directors would be formed with two independent directors to
help govern and guide the manager.
A policy of paying out 75 per cent of the profits to share-
holders would be adoptedhalf to Jill and Brian, half to the
general manager. On this basis $150 000 would be paid
to Jill and Brian, $150 000 to the general manager, and
the remaining 25 per cent would be retained in the company.
The development land would be sold (the couple did not
need more big projects) and the proceeds would be used to
retire debt. Because the property investments would now be
134
mortgage free, they could be considered Security Assets

(and would give some useful passive income).
More money would be budgeted for consumption for travel,
holidays, etc.
When these steps were taken, the model would look like this:
50% Business $1 250 000
Consumption
$120 000
$150 000
Rentals
$30 000 Security Assets
Home $700 000
Shares $25 000
$60 000 Diversified Funds $1 250 000
Income Investment Property $700 000
$180 000
Changing your asset allocation is often a painful experience

even though it is necessary to get the results that you want. It
often involves selling a business or propertythings that people
tend to be very committed to. Sometimes it even involves selling
the family homemany people have almost all of their net
worth tied up in the family home. They are heavy in Security
Assets but have no money to invest in Wealth-Creating Assets to
grow their wealth. Selling the family home is a big step both
financially and emotionally. So too is deciding to re-invest less
in a business or shares or property so that you can build up
Security Assets.
135
Exercise 32
Revisit the model showing your asset allocation (you did this in
Exercise 9 on p. 50).
Decide where you need to make changes: have you too little
in Wealth-Creating Assets? In this case you will need to take
from Security Assets and/or Consumption and re-allocate to
help grow your wealth.
Have you too much in Wealth-Creating Assets? In this case
you have little or no Security Assets and may need to sell
down or borrow and re-allocate some wealth to Security
Assets. You will be settling for a lower return on your
money but you will have some wealth protection.
KASH points
Understanding how your assets need to be allocated so that you
can grow your wealth sufficiently quickly to achieve your
Freedom Figure is a key piece of your financial knowledge.
Using the model you should practise re-allocating your assets so
that you get the right balance of Wealth-Creating and Security
Assets to allow you to meet your goalsthis is a skill that you
will need to return to over the years as your asset allocation will
need to be changed as the years go by.
136
25 What if you
Chapter
have a job?
Many readers will derive almost all their income from a wage
or salary. Many of you may earn a considerable amount, even
several hundred thousand dollars per annum between both part-
ners. The problem with a career is that no matter how much
income it gives you, you cannot sell a career. The day you stop
working, the income ends. The income is entirely dependent on
your presence and time. This poses a number of issues.
If you are highly paid it seems to make little sense to give
away your high income to try your hand at wealth creation in
a field that is new to you, and risky to boot. If you decide to
continue to work you will have to make some disciplined
decisions in order to become wealthy and stay free.
Most of these decisions concern consumption. Our experi-
ence with high-earning clients is that their lifestyle matchesand
sometimes exceedstheir income. In other words, as income
levels rise they adjust their consumption upwardsmove to a
better home, drive a better (second) car, take more (and more
expensive) holidays, and buy the toys. There is considerable social
pressure on executive types to do all of the aboveboth from
within and outside their own families.
To become rich and free, a significant amount of this income
will need to be diverted into a Wealth-Creating Asset. Not only will
this imply a change of lifestyle from a consumption point of
view, but you will also have to put the time and effort into
wealth creation as well as continue your demanding job(s). Some-
times one partner gives up their job to manage this full time.
It is very difficult to run a business part time. Managing an
aggressive share portfolio would probably be easier if/once
you have the necessary skills. Managing a property portfolio is
137
probably easiest if you still need to work full time, as the work
and effort can be done out of office hours.
Surprisingly, many people who have earned high incomes for
years have very little net worth. This also affects their Security
Asset portfolio. They may live in a beautiful home but have little
equity in the asset. A concerted effort needs to be made to pay
off the mortgage and get some security. Many of you who are
committed to becoming financially free will begin by trading
down to a more modest home and ensuring that it becomes
mortgage free as soon as possible.
Exercise 33
Can you afford to take some risks?
How much surplus could you create from your income?
What Wealth-Creating Asset could you invest in on the side?
How could you and your partner make the best use of your
income, skills and time?
Where could you start?
If you decide to remain employed (and self-employed as a con-

tractor or consultant is only another form of job; you cant sell
the business), then you should take steps to maximise that
income. It is astonishing, really, how reticent many highly skilled
people are in asking for a salary increase, investigating other
employment at more lucrative rates, or upskilling themselves
at their own expense in order to be more valuable in the
marketplace. Even a relatively small increase in salary diverted
into Wealth-Creating Assets can make a great difference over a
10-year period.
Many people feel at this point that there is little that they can
do as all of their time and effort is consumed by a job. They look
at the difficulties of starting a business or developing a property
138
W H AT I F Y O U H AV E A J O B ?
portfolio or becoming an aggressive investor in shares and feel

that this is way beyond their reach. You might, for example,
feel that you could have a shot at running a business but where
will you get the capital to buy one and how will you survive in
the interim period until the business shows a profit? Most
people who have a job will need to continue to provide income
from that job. Others have such high incomes that it perhaps
makes little sense to forgo that (certain) income for much less
(uncertain) income from a business.
The key for career people is to create a surplus of income
(either by earning more or spending lessor both!) and putting
that surplus into wealth creation. Because wage and salary earners
cannot devote themselves full time to active wealth-creating
activities they are unlikely to try to run a business. They can,
however, invest aggressively. Too many salary earners in secure
jobs or industries invest too passively. They can, in fact, afford
to take risks and if they really want to become wealthy that is
exactly what they should do.
However, they might invest heavily in someone elses busi-
ness and act as a sleeping partner or as someone who provides
limited input. A marketing executive might supply his or her
capital and part-time skills to a manufacturing partner who is
full time in the business.
Other people who for various reasons must or should
remain in their jobs might build up a property or share
portfolio, doing the necessary work in the evenings or weekend.
Couples often find that a part-time/non-working partner can
carry the load of the wealth creation for a while. In the initial
stages of wealth creation through property there is not a lot of
property to manage because you are unlikely to own very
much. What takes the time is scouring the ads, visiting pros-
pective properties, putting in bids, arranging finance, meeting
with agents, etc. None of this is very complicated, but it does
take time.
139
KASH points
The knowledge gem here is the understanding that it is all
about creating a surplusno matter how large or small your
income is. If your attitude is committed to wealth creation,
you will acquire the habit of investing that surplus in
Wealth-Creating Assets.
140
26 You must create

Chapter
a surplus
It ought to be obvious by now but growing your wealth is all
about creating a surplus. No matter how much or little income
you have you will need to avoid consuming all of it. The amount
leftyour surplusneeds to be put to work to create wealth.
This will be especially true for those individuals who have high
income and little time.
Its a simple equation:
Surplus = Income Consumption
This is very easy to grasp at an intellectual level but it is where
the hard work is for most people because it usually means that
habits and lifestyle have to change. And other people around
youfriends and familymay object to these changes.
Like all simple equations you can play with the variables: if
you want more surplus you can either lower your consumption
or increase your income or both!
This is where you will find it very useful to start to work to
a money plana budget. People get very strange when the word
budget is mentioned. It has connotations of meanness and
misery. We think that it is very helpful to think of it as a business
doesnot as a way to scrimp and scrape but rather as a way to
plan income and expenditure for a period of time. Remember
that the choices are all yoursits your money! But unless you
create a reasonable-sized surplus you will have a very slow path
to wealth.
Hopefully, by now you will have chosen or be ready to begin
your wealth-creating activity. You will need a stake to begin with.
Unless you are releasing capital from your home or another
Security Asset, that start-up money will have to come from
141
income. You or your partner may still have jobs. Your Wealth-
Creating Asset will be hungry. In all likelihood it will need almost
all of its cash reinvested to keep it going. You will probably also
have borrowings (because the Wealth-Creating Asset will be
geared to give you high returns) to service.
All this means that you will need to manage income and
consumption very closely. You really need a budget. This should
be based on whatever time period is most convenient for you in
terms of income (weekly, fortnightly, monthly). The budget
should show your expected income for each period and your
planned consumption.
Most people find that given the motivation to get on the
journey to wealth and freedom they can take many dollars out
of their consumption. We would advise against making your
budget too strictif you do you are unlikely to keep to it. Its just
like dietingif you starve yourself, sooner or later you will attack
the chocolate biscuits and eat the whole packet. You want a
reasonable budget that you can live with and which will avoid
big blowouts.
By now you will be firming up on the dream for your life
and you have probably established your Freedom Figurehow
much you will need, what timeframe you want to achieve it in
and what rate of return on your Wealth-Creating Asset you will
need to reach your dream in that timeframe. Every dollar you
dont consume can be put to work in wealth creation.
Exercise 34
The first part of any budget is to look at what income you have
coming in. This could come from a number of sources:
Your job.
Your partners income.
142
Y O U M U S T C R E AT E A S U R P L U S
Your Wealth-Creating Assets.

Your Security Assets (although any income that these
generate should be ignored as it needs to be reinvested in
Security Assets).
CONSUMPTION
$
INCOME
$
Income
Add up all the income you are receiving.

When you are sure that you have all of your income, you
need to allocate it:
some for consumption;
some to be invested in Wealth-Creating Assets;
some to be invested in Security Assets.
Now is the appropriate time to sit down and begin to discuss

what you will agree to consume from now on. You will need
to talk about all the categoriesthe fixed expenses such as
housing, transport, groceries and the discretionary ones such
143
as entertainment, holidays and hobbies. This will take a lot of

effort and discussion, especially if you have never worked to a
budget before.
This is where the going gets toughto achieve wealth and
financial freedom, you probably have to cut your consumption,
the amount that you spend on things. It is tough because there
are great and powerful forces telling you to do just the opposite.
We are accustomed to living up to, and even living beyond, our
means. We consume more of everything than we need, or even
really want in some cases. Most people are over-spending,
many of us are overeating, overdressing, and so on! Every big
business in the land is telling you to spend, spend, spendand
they are backed with huge marketing budgets.
You have to resist a lot of this. You have to stop being like
most people, stop mindless spending. Mindless spending is
buying things that you do not need to buy (like very expensive
groceries) or things that do not give you real pleasure. Mindless
spending is buying things that you have never really thought of
buying. Largely this mindless spending is buying things to make
you look good in the eyes of othersit is ego-spending, things
that are purchased on emotion, rather than by thinking. To get to
financial freedom you have to cut this, be your own person with
your own aims (which have nothing to do with how you appear
to others). Living below your means (rather than above your
means) is a key step in becoming rich and then financially free.
Every dollar that you spend is a dollar further away from
your dream and your goals. In fact, it is worse than that: the
dollar that is spent is gone; the dollar that goes into Wealth-
Creating Assets remains and as well grows at a rate of 15 per cent
(or hopefully more). You need to be thinking about cutting the
spending (money that immediately disappears for ever) and
increasing the money that goes into Wealth-Creating Assets
(money that is likely to earn you a 15 per cent return). Remem-
ber, every dollar you dont spend can be put to work for you for
144
24 hours a day every day. This is the money that will make you
wealthy and buy you the life of your dreams.
We tell our clients two things:
Before you spend some money on something, imagine that
you are not spending dollars but GPG shares. (GPG is a pet
company of ours that has performed extremely well for its
shareholders for a decade. At the time of writing the shares
are trading at around 210 cents and they look like they still
have a future. Dont just take our word for it thoughcheck
them out first.) Imagine then that the currency you are
spending is GPG shares. That means that if you forgo that
suit for $800 you are gaining about 400 GPG shares.
Owning the GPG shares now may be better than owning the
suit. But in 20 years time it is far betterthe suit has gone
off to be a duster, but if GPG shares grow at 20 per cent p.a.,
they will be worth $30 670. (You should be able to buy a few
suits with that!)
Now, we are not saying do not buy a suit (or anything else for
that matter). What we are saying is think about the cost not just
in dollars today, but dollars in the future. The real cost of your
spending is the future value of the dollars you are spending
today if they had been invested well instead. There is a very real
benefit in forgoing something today for a better tomorrow.
The ability to delay gratification is a hallmark of successful
individuals in all areas of life. The success here is achieving your
dream of financial freedom.
Changing your currency to GPG shares (or some other proxy
that is meaningful to you) is a good way of recognising the
real cost of unnecessary expenditure. That cost is primarily what
you can have instead in the future. The only thing that you
need to be careful of is taking it too far, and ending up mean,
miserable and no fun to be around. Which leads us to the
second thing.
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By all means spend money, but make your spending count.

Your spending should be mindful. The latest pitch from David
Jones or Michael Hill Jewellers should not dictate your expendi-
ture. These are companies that maybe you should own through
the share market, rather than have them own your credit card!
Buy quality things that will give you great pleasure. Buy things
that you really want and need. Think about your purchases
beforehand, rather than buying on impulse because some slick
marketing campaign has pushed a product at you.
Mindful spending means buying what you want, not what
you are told you want. If you get a lot of pleasure from owning
a nice car, you might have one. However, do not own a nice car
because that is what others expect. Indulge yourself with things
that make you happy, not with things that are designed to make
you look good. This is a great time to revisit your dream and
vision for the future. Many of the things we spend money on do
not take us in the direction of our dreams; in fact they take us
away. It is much easier to bypass the temptation of mindless
expenditure if you are clear about what you really wantyou
can distinguish easily between the big things that matter, and
the trivia that does not.
A key part of anyones plan for wealth is a budget. There is
a price to be paid for financial freedom, and a reduction of
consumption is often a part of that price. Some of our clients
call the budget the B wordits another unmentionable. But
all that a budget does is help you spend in line with your
valuesspending on what matters to you and not spending on
things that are of low value to you. This allows you to make your
spending much more valuable.
The budgeting process, and then living to that budget, is an
important part of your plan for financial freedom. This is
especially true for those starting offmaking those first few
steps, developing a little bit of wealth to get things going is
the greatest hurdle. Everyone says that the first $1 million is the
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Exercise 35
If you have not already done so, start a draft budget. There
are several websites that provide useful categories to budget
underthe main value of this is that you will not leave out
items that occur infrequently, for example, rates, car
registration, back-to-school expenses, etc.
Decide on an overall amount that you will spend per year,
for example, $30 000 after tax. What you spend this money
on is irrelevant to your wealth creationwe have no
opinions on whether you should buy vegetables instead of
wine! All that really matters is that there is a surplus left
that can be used to grow your wealth. So you will need to
choose a consumption amount that allows for enough
surplus to let you reach your Freedom Figure in the
timeframe you have chosen.
hardest; we have heard people say that their first $1 billion was
their hardest. (Well have to take their word on that!) This is just
as true for the first $100 000 (or even the first $10 000).
If you are starting with next to nothing, your first invest-
ments can only really come from increased income and/or
reduced consumption. If you are starting with a little but not
very much, reduced consumption will accelerate the process.
And dont feel hopeless if you are young and poor and with very
little available for surplusstarting early is the best wealth-
creating strategy of all. Time is your biggest ally.
Many people could become financially free just by spending
less and investing the remaining money well. We have seen clients
save thousand of dollars per month from their budgets and
develop an impressive investment portfolio within a year! Living
below your means becomes a new habit quicklyand a very
rewarding one when you see the resulting assets accumulate.
147
The wealthy people we coach are not mean. They are, in fact,
nearly always generous. However, almost all of them are very
mindful spenders. They know what they want and they have
what they want. But they do not have what they do not want
they are quite happy to go without if they are not getting the full
measure of enjoyment for each dollar spent.
KASH points
The key bit of knowledge you need here is to understand how

a smart budget underpins all your efforts towards financial
freedom. As you play with various options you will develop the
skill of allocating income towards the consumption essentials
(like power and food) and some valued discretionary items (for
example, entertainment, hobbies, holidays) and away from
things that are less important to you. You will find that your
attitude to spending will changeyou will start to ask whether
you want this or that item more than your dream. Over
time, you will develop the habits of the wealthymanaging
consumption well, ensuring that there is a surplus, and using
that surplus to create wealth.
Switch from mindless spending to mindful spending so that you

get what you want.
148
27 You should
Chapter
maximise income
We have spent a lot of time discussing how important it is to
manage income, or rather the consumption of income. Often
people stop with consumption. Remember that equation:
Surplus = Income Consumption
You can make a big difference to the surplus you have to invest
if you can raise income. Maximising any sources of income that
you have should be a constant goal.
Income from employment
Have you or your partner asked for a raise in salary lately?

Increasing your income will accelerate your path to wealth and
freedomthe more income you have the more you can invest
in Wealth-Creating Assets. A very small increase can make a very
big difference.
Take a basic wage for semi-skilled worklets say $15 per
hour. If you work a 40-hour week, thats $600 and if you work
a full year you will earn $31 200. If you could get a $2 an hour
increasewhich does not seem very muchthe changes to the
numbers are quite dramatic. You would now earn $680 a week
($80 extra). Your annual earning would be $35 360 ($4160
extra). It is worth looking at your own income and doing some
calculations to see what difference an increase would make to
your earnings. Try increases of 3 per cent, 5 per cent, 10 per cent
and convince yourself that even relatively small increases
are worth fighting for. Pay rates for a particular job rarely go
backwardsthey tend to get locked in. So look for every
149
increase you can getthat becomes the new baseline for the
following year.
The numbers on the previous page are significant even for
a modestly paid job. If you or your partner are already earning
well, then trying to increase that income will have an even greater
impact on your wealth creation. There are several strategies you
can pursue to raise your income from employment.
Get paid what youre worth Ask your manager how pay
levels are determined in your organisation. Youll be surprised
how often this works if you do your homework and have all
the facts you need. You can check out equivalent jobs in
other places by following up on ads in the paper or phoning
a recruitment agency and asking about current rates for the
work you do. Even a dollar or two an hour will make a big
difference to what you can saveand you could be talking
thousands of dollars a year depending on your job.
Ask for a raise If you are a valued employee your chances of
a raise are very goodthey wont want to lose you and they
know it will cost them more than your pay rise to recruit a
new person. Obviously you need to go about this the right
way and be ready to remind your manager of the contri-
bution you make and your achievements at work. They are
not obliged to pay you more but you are entitled to have
your salary reviewed regularly. Make sure it happens. Asking
for a raise also sends a signal that you care and that you
expect to be valuedthat will be remembered the following
year. And if you can do whatever it is that you are being
paid for you can get yourself a raise! Dont be afraid to ask
for more.
Find a new job It is often much easier to get a pay rise by
changing jobseither to a different organisation or to a
different role. The biggest leaps in pay are usually achieved by
changing your joba new employer usually feels obliged to
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YOU SHOULD MAXIMISE INCOME
offer more. By the time they reach the point of making you
a job offer they have already invested a lot of time and money
in the process. They have seen the other available candidates
and they want you. This is the best time to look for an
increase in payunless your request is outrageous for the
role and your skill and experience level youll probably be
successful. So be ready to negotiate. You may not get all you
ask for but you will get some of it. So, polish up your CV,
have a good audit of your skills and experience and go
looking for a better job with better pay. Keep an eye on the
employment pages in the paper or on websites and get a clear
sense of what employers are looking for that you can offer.
Often the longer you stay in a job the less notice anyone
takesit can be much easier to make an impression and be
properly valued by a new employer.
Make yourself more valuable In the end, employers pay for
the knowledge, the skills and the track record you bring to
their business. No matter how you earn moneyeven if you
dont consider it very specialyou should treat your work as
a career. It pays to take every opportunity you can to learn
more. Ask your manager for training, take every opportunity
to learn new skills, both on the job and on any courses that
are on offer. Volunteer for new tasks and projects. Get a
reputation for being flexible and willing and quick to take on
new things. These attributes can be highly valued in the
workplace as hard skills.
Invest in yourself Some organisations and industries are
much better at developing their employees than others.
While a good employer will invest in your training, your
future is your responsibility. It makes great financial sense for
you to invest in yourself. This might mean paying for some
additional study, going on a course or buying yourself a PC
so that you can improve your skills. If it applies to your area
of work, take the time to read books and listen to tapes that
151
will help you be better at what you do. Investing time and
money in your own development will give you a very good
pay-off over time. Its never too lateand its never too
earlyto start to make yourself more employable and more
valuable. And you should never stopthis isnt just a good
idea for young people. Choose to learn in order to earn.
Even on relatively low wages and salaries the average person
earns millions of dollars over a lifetime. If you can get your
hourly or annual pay increased by even a small amount you will
not only benefit from that this year but it could be multiplying
by 40 hours a week and 52 weeks a year for the rest of your
working life. When you use that money for wealth creation it
will make a huge difference to your future.
Income from a business
Are you sure your business is as profitable as possible? We see

many business owners as clients. It is rare to find one who is
maximising profits. And thats what you are in business for!
The profits represent your income, they are also needed for
reinvestment in the business, and when you come to sell they
will largely determine the value of your business. Strategies for
driving up your business income (profits) include:
Putting your prices up Business owners tend to have price
fright! Nothing makes as big an impact on your success as the
ability to charge a higher price while keeping your costs
down. This extra money flows straight to the bottom line.
Reducing your costs Owners of small businesses are usually
good at this but there is often room for improvement.
Checking your business structure We still come across
many businesses that are very poorly structured for tax
purposes. Sole traders and partnerships will usually be more
152
heavily taxed than companies. Trusts can offer good benefits

for some businesses.
Income from property
Are the rents on your properties at full market value? Many

property investors are poor property managers. Again, you are
in this business for rental income. When you come to sell the
rental income will also be a major factor in setting the price of
the property. Strategies for driving up your property income
(rentals) include:
Conducting regular rent reviews Make sure that you know

what equivalent properties are rented at. Many property
investors get lazy and allow a rental to stand for years even
when the market has moved up.
Making improvements Many of the things that cost you
very little will provide increased rentals. Such improvements
include carports, lock-up garages, dividing a large room to
create an extra bedroom, providing outdoor furniture or a
paved play area.
Treating tenants well Happy tenants stay and they take care
of the property. This drives up your income because you do
not have any vacant weeks and it reduces your repairs and
maintenance costs.
Exercise 36
Choose one or more of the above (depending on your
sources of income) and start immediately on your plan to
grow your income. (This should be one of the key strategies
on your one-page planmore about that in Chapter 31.)
153
Example
Objective: To grow my income from employment
Goals: Increase (pre-tax) income from $60k to $90k

(a 50% growth) within 2 years
Strategies Milestones Actions

Ask for pay rises get 5% every 6 months Compile dossier
Revise CV Updated by xx/yy/zz of achievements
Improve qualifications Do 2 papers each year Get examples
Get high-profile Operational by xx/yy/zz Enrol in course
project One grade higher by end Do project proposal
Get promoted of year Make a case for review
Get better job offer Get offer of 50% more Monitor ads, contact
recruiters, practise
interview skills
KASH points
The key knowledge here is understanding that maximising
income is fundamental to becoming wealthy. It works by
giving you more surplus to invest and also by allowing you to
borrow more (gear) and even by raising the value of your
assets (for example, a property with higher rentals is worth
more). You can revisit these ideas in more detail in Chapter 18.
You should return to the ideas in this chapter frequently and
check if you are growing your skill at maximising income.
Successful wealth creators develop the habit of always seeking
to grow income from whatever source they can.
154
There is a tendency for people to think only about expenditure

when they are budgeting, but just as in any business, the income
side is at least as important as the expenses. So you should
always be looking for ways to drive up income.
155
28 You have to learn

Chapter
to borrow
The most important thing to know about borrowing is what to
borrow for. Wealthy people almost always have high borrowings
at some time in their lives. Poor people often have a lot of debt
as well. But there is a difference: those who are seeking to
become wealthy only ever borrow for assets that build wealth.
The poor borrow for consumptioncars, holidays, credit card
consumption. The most important thing about borrowing is
what to borrow forassets that give you income and that grow
in value.
You can get an even better result by borrowing money to add
to your initial capital. This is risky, but borrowing (often called
gearing or leverage) can really speed up wealth creation. Nearly
everyone who has ever become wealthy has used OPM (other
peoples money) to enhance and multiply their returns. How
does this work?
Lets look at the example of a property investor (it is easy to
borrow money for property investment). Suppose you see a
rental property that you would like to invest in that costs
$400 000 but you have only $50 000 to invest. You could
borrow $350 000. Your $50 000 is the owners equitythe
amount of the money in the property that is actually yours. Lets
say that you have to pay 10 per cent interest for the loanthat
will be $35 000 p.a. For the sake of simplicity, lets assume that
the rent you get for the property is also $35 000. So your rent
covers the cost of the loan each year. You will only pay the
interest and not any of the principal amount ($350 000) that
you borrowed. Imagine that in five years time the house is
worth $500 000. You sell. You pay back the loan and are left
with $150 000. Your owners equity of $50 000 has grown to
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Y O U H AV E T O L E A R N T O B O R R O W
$150 000 in five yearsa good return. The value of the build-
ing has compounded and you have been able to avail yourself
of this effect but without using much of your own money.
While the property rose 25 per cent in value (from $400 000 to
$500 000), your capital has risen 200 per cent (from $50 000
to $150 000).
Gearing for wealth in this example looks like this:
Building cost $400 000

Deposit $50 000
Borrowed (at 10%) $350 000
Interest $35 000
Rent/Income $35 000
Sold at $500 000

Profit $100 000
Return on investment = 200% of $50 000
You have used someone elses money to cash in on the effect of

compounding. You have in effect turbocharged your investment
of $50 000 and received the benefit of the compounding on a
far larger sum. The return on your $50 000 over five years has
been nearly 25 per cent p.a. (that is, 25 per cent compounded
each year), significantly higher than our benchmark of 15 per
cent. Borrowing to buy good income-earning assets, whether a
business, property or shares, is how smart people get wealthy.
Borrowing to invest in this way is variously called gearing or
leveraging. Its easy to see why these debts are so calledyou
get the effect of using a bigger gear or of operating a giant lever.
(Archimedes said he could move the whole world if he had a
lever long enough!) You are using other peoples money to add
to your initial stake and getting the benefit of the compounding
of the total sum. Essentially, leverage is about making other
157
peoples money work for you. But you only have to pay back
what you borrowed, not all the money you made with that
money!
This also works with income, as with rentals or profits or
dividends. Again, lets use a property example.
Suppose that you bought a building for $650 000 with a
rental of $52 000 and paid a 10 per cent deposit of $65 000.
You borrow the rest, $585 000 at 7 per cent. This means your
interest each year would be $41 000. However, your rental
income is $52 000 so you have a profit each year of $11 000
($52 000 minus $41 000). You are getting $11 000 profit on the
$65 000 you deposited. This means you are getting a 17 per cent
cash return on your investmentand thats before any capital
gain. In this example, the sums look like this:
Building cost $650 000

Deposit $65 000
Borrowed (at 7%) $585 000
Interest $41 000
Rent/Income $52 000
Profit $11 000
Cash return on investment = 17%

Plus capital gain!
Businesses almost always borrow money to achieve this effect. If

they are good at what they do, that is, profitable, then it is logical
that they should do more of it and return the benefit of the extra
money generated to the shareholders. This gives shareholders
a much higher return on the equity they have in the business
than if there were no borrowings. We are often asked how highly
geared or leveraged a business should be: there is no right answer,
as it varies from business to business and person to person. In
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Y O U H AV E T O L E A R N T O B O R R O W
general, the principle is that if you can make more money with
the borrowings than it costs to have the loan then it is worth
having some borrowings. Obviously you have to assess the costs
of the borrowing and the risks that you are taking. Many highly
profitable and growing businesses pay out no dividends because
they are making the judgment that it is more in the shareholders
interest (that is, they will get a higher return) to have this money
re-invested in the business. Conversely, when a business is hold-
ing a great deal of cash/paying out very high dividends you
should be asking why they cannot find a better use for the
money. (Clearly, it is a little more complicated than this, and is
greatly influenced by factors such as the industry, the business
cycle, the product lifecycle, etc.)
Property is little different. It is often easier to borrow to
buy property as there is a real asset for the bank to reclaim
should you default on your loan. You can invest in property in
this way with very little of your own money10 per cent or
even less. A good investment property will give rentals to cover
all or most of the interest repayments and the loan can be repaid
when you sell. If you buy well to begin with you should achieve
a very handsome return through the leverage of your borrow-
ings. Many property investors own several properties that are
financed and geared in this way.
Similarly for shares. It is just as easy to use other peoples
money to buy shares as it is to borrow to buy property or take
out an overdraft for a business.
Gearing really works for Wealth-Creating Assets because of
the high returns. Borrowing to buy things which return 15 per
cent or more makes great sense when you are only paying the
other person 78 per cent for his or her money.
Now to state the obvious: this all works in reverse as well!
Leveraging or gearing is a wonderful way to turbocharge com-
pounding which works to make you rich. Equally well, the
turbocharge effect can make you very poor, even bankrupt.
159
Exercise 37
What kinds of things have you borrowed for?
Are you borrowing for the right things? (You get worse than
no return when you borrow for value-losing assets like cars
or home appliances.)
Are you borrowing for Wealth-Creating Assets or just for
consumption?
Does your attitude to borrowing need to change?
The acceleration works in both directionsif your business

wobbles, if your property purchase drops in value, if your shares
go through the floor you not only lose your own money but
the borrowed money as well. While your Wealth-Creating Asset
is worth less, the borrowings are still the same sizeand
ultimately the other person will want his or her money back.
Then the debt will rapidly compound as you are unable to
pay even the interest, never mind the principal. This is the
process through which many seemingly very successful people
go spectacularly broke.
KASH points
The key knowledge is that while leveraging makes a good
investment better it makes a bad investment even worse! The
right attitude and habits will see you borrowing only for wealth
creation and never for consumption. Skill in borrowing is about
making sure that you borrow well, that is, that you get a good
rate of interest and that you manage your debt actively.
160
29 How to maximise
Chapter
your returns
Putting up a little of your own money and using a lot of some-
one elses to buy a high-performance asset is how people become
rich. It does not really matter what the high-performance asset
is, provided that you can borrow against it, and that it provides
high returns. Smart people know that they need to use other
peoples money to lever the relatively small amount of money
they have at the start. They know that the game is to increase
their wealthto keep driving up their net worth until they have
enough for financial freedom. They want the Wealth-Creating
Assets to grow and grow, and for their share of those assets to be
greater and greater.
Clever people know that they need to keep getting a high
return on their money so that their equity is growing. This return
on your money is called the Internal Rate of Return. This is
jargon for the rate at which you are growing your own money, the
rate at which you are growing the equity that you have in your
property or share portfolio or business. This of course is the only
thing that is important: the rate that your capital is growing will
dictate how much you have in the future.
This internal rate of return is different from the capital
growth and returns that the Wealth-Creating Asset is getting.
For example, your property might be growing at 5 per cent p.a.,
but your equity (your capital, your investment, your stake) is
growing at 29 per cent p.a.
For example, an investor buys a property at $100 000 with a
$10 000 deposit and borrowings at $90 000 at 8 per cent interest.
The rent is $10 000 p.a. after all costs.
161
Property value $100 000

Borrowings $90 000
Equity $10 000
Rent $10 000
Interest $8 000
Cash profit $2 000
Capital growth (@5%) $5 000
Total profit $7 000
This investor has made a profit of $7000 on the $10 000 that
was invested. This is an internal rate of return of 70 per cent
(the investor has 70 per cent more equity than at the start of the
year). While the property is not a particularly high-performing
one, the investor has quite successfully used gearing to rapidly
grow the quite small amount of initial equity.
This example is illustrative only. It is only to show how
smart people get high rates of return and grow their net worth
quickly. The example is made up and in some respects un-
realistic (for example, it doesnt include any provision for tax).
This next example, however, is both realistic and true.
Jenna and Mike began investing in property when they were

28. They had married a few years before and with her job
(nursing), his fencing contracts, and buying, doing up and
selling a few houses, they had managed to save $65 000.
That $65 000, with some borrowings, was enough to start
them off as property investors. As they grew their wealth they
added to their property portfolio, borrowing as much as
they could to buy properties that met their strict criteria for
investment.
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HOW TO MAXIMISE YOUR RETURNS
Today they have a portfolio which is worth $3 500 000.

Their borrowings are at $750 000. They therefore have a net
worth of $2 750 000. This couple has grown their net worth
from $65 000 to $2 750 000 in 14 years. That is a rate of
return on the $65 000 they started with of 27 per cent (that is,
an average of 27 per cent return, compounded every year, for
14 years!).
They have worked very hard to get where they arelong
days and few holidays. They have taken high risks. They have
nearly gone broke twice, once during a major property slump
when they had vacant properties and again during a rural
downturn when there was very little work for Mike. At both
times their very large borrowings were very difficult to cover.
The bank was less than helpful despite the enthusiasm with
which it had lent the money!
This is one very smart couplethey are good property
investors, good with the finances and good business people.
At age 42, they could easily sell their property portfolio and
sit back and enjoy the freedom that they have created. They
do not want to retire from property but they are making some
changes: we were working with them to develop a Security
Assets portfolio (some secure non-property investments) and to
take on some staff so that they can get a bit more time for
holidays and so that they can work on the business rather than
in the business.
The key thing for you to think of is how fast you can grow the
capital that you have now. Use the engine of compounding by
retaining most of your profits, and turbocharge the engine with
leverage. It is the turbo that will give you the grunt that you
really needthe use of other peoples money is the way to grow
yours.
163
Exercise 38
What internal rate of return are you getting on your equity?
KASH points
It is important to your wealth-creation knowledge that you
understand the internal rate of return (IRR) that you are getting
on your Wealth-Creation Assets. You should develop the habit
of calculating the return you are getting each year.
164
Part VI
Action plans:
What will you do?
Chapter 30 Bridging the gap 167
Chapter 31 Do a one-page plan 171
Chapter 32 Turning strategies into actions 176
30 Bridging the gap

Chapter
Your dreams provide the inspiration for wealth creationthey

answer the why question. You should already have looked at
your current position by calculating your net worth and have
decided where you want it to be by setting your Freedom Figure
as your main goal. Now you have to start planning to bridge the
gap from where you are now to where you have to be to live
the life that you want. But while you know why you want to
make changes and have a good picture of the how of wealth
creation, you still need to look at the what that needs to be
done. Everyone is a little different when it comes to creating the
life of their dreams so you will end up with some different things
on your list of what has to be done.
People who become wealthy and live the life of their dreams
set goals and make plans in order to ensure that the dream
becomes a reality. We always advise our clients to set numeric
goalsthey are effectively the amount of money that you will
need to afford the lifestyle of your dreams. People who become
successful in any field set goalsand they put those goals in
writing. Written goals are much more effectiveit seems that
goals that are committed to paper are committed to mind. Time
and time again it is proved that written goals are more powerful.
Even when you have a compelling dream of your ideal life it
can be very difficult to know where to start. Goals are about
making the dream more concrete. The goals that you set should
be numerical, for example:
I will have a net worth of $5 million by the year 2015.

I will have $2 million in Security Assets by 2010.
I will invest $20 000 in shares each year for the next five years.
167
I will get a 25 per cent return from my business.

I will buy three investment properties this year.
Goals have to be tailored and customised for each individual

or couple in line with their dream. You will want to set goals
that will stretch youbig dreams will need big goals.
The great value of numbers is that they cannot be fudged
if you put these numbers down on a piece of paper, you cannot
lie to yourself about what you meant. It is easy to wax lyrical
about our dreamsand we can keep shifting them if we do not
want to be pinned down. Having a Freedom Figure set so starkly
gives the determination to achieve them, because if you do not
there is no doubt that you have failed. (This is why business is
so wedded to numbersnumbers force people to get concrete
and definite about their intentions!)
As well as the Freedom Figure, you may put in some shorter
term, subordinate or milestone goals, for example, By 2009 I
will own my own business and it will be making $200 000 p.a.,
or By 2008 I will own eight rental properties. Be wary of these
milestone goals, because the quest for wealth does not move
along in a perfectly smooth upward line. Things are likely to be
much more lumpy, with a rush of success followed by a long
period of going sideways, or even a decline.
It is the long-term, final goal (the achievement of your
Freedom Figure) that is really important; the shorter term goals
are only to ensure that you are on the right trackmilestones to
guide you on your way and to check your progress.
Goals are importantbut they are not as important as the
dream that creates them. It is your vision or dream of financial
freedom that will really motivate you to do what is necessary.
Now that you know your current position and know where
you want to be, it is time to make a plan to bridge the gap.
A 10-year timeframe to achieve financial freedom is not at all
unreasonable. It may sound like an impossibly long period of
168
BRIDGING THE GAP
time for some people, but it does mean that a 40-year-old will
be free before being 50 years old (and, yes, there is still life at
50). Some will achieve it much quicker than this. Those in
business or property development and some other activities
probably look out no more than 10 years.
Your aim should be to achieve financial freedom within 10
years because it is difficult to plan for more than this. Perhaps
more importantly, it is hard to maintain enthusiasm and moti-
vation if the time period seems too long. If you are 35 years old
now, it is hard to imagine yourself at 50 or 55 years. It is hard
to imagine or envision where you will be or what you will be
like in, say, 20 years, so your timeframe needs to be less than
that period.
Exercise 39
Write down your Freedom Figure.
Work out how many years you are prepared to work to
achieve it.
Calculate the rate of return you will need to get on your
Wealth-Creating Assets.
You will need to set goals that work for your dream. This can
take a bit of hard work and debate. Its worth it. Your mind loves
goals! When you have set your goals your mind will be focused
firmly on themall the time. Goals are very powerful and the
fewer and the clearer the better!
The next step is to make a plan to make all this a reality.
169
KASH points
The key knowledge here is to understand what numbers you
have to achieve to close the gap between where you are now
and where you want to be. How much wealth has to be
created? What rate of return will you need to achieve that
wealth in however many years you will take? Obviously these
numbers are interrelated: you can achieve your Freedom Figure
faster or with a lower rate of return if you set the Freedom
Figure at a lower level; you can achieve the Freedom Figure at
a lower rate of return if you are prepared to wait for longer; if
you are in a great hurry, your rate of return will have to be
very high to achieve the same Freedom Figure. Play with these
numbers and develop your skill at making trade-offs between
them and deciding what key benchmark numbers you will set.
170
31 Do a
Chapter
one-page plan
The plan is about getting yourself from here to there. Plan is
one of those words that many of our clients hate: it seems to
mean drudgery and constraint to them. One of our clients
describes it as a four-letter word! Our view is very different and
clients usually agree after they have found how useful a simple
clear plan is.
It is very easy to feel that you are getting lost in all these
words and ideas. Our clients find that it really helps if you can
get everything you are committing to down on a single sheet of
paper. You can, of course, change what is on that piece of paper
at any time but it will always represent your most up-to-date
thinking on your wealth-creation plan.
We find that the following one-page format works really well.
Dream (words)
Goals (numbers)

(words) (numbers) (words)
171
Dreams
Your dream should be written down in words. Keep working at
it and get it to a point where you can clearly state it in a sentence
or two. (If you cant state it simply that shows that the dream
is still fuzzy and that you need to continue to work to clarify
it.) You dont need every detail but you do need all the main
components; otherwise it will be impossible to cost your dream
with any accuracy.
Marnie and Jacs one-page plan looked like this when they
started:
Dream: TTo live by the sea on a small holding near the children.
T spend our time reading and painting and contributing
To
to the local community.y
Goals: To
T spend a month overseas each winter.r

172
D O A O N E - PA G E P L A N
Goals
The next part of the one-page plan captures your numerical
goalsthe amount of wealth you need to create, the timeframe
you need to achieve it in, and the rate of growth you need to get
on your current level of wealth.
Dream: To live by the sea on a small holding near the children.

To spend our time reading and painting and contributing
to the local community.
Goals: To spend a month overseas each winter.

Strategies, milestones and actions

The strategies section will include the main things you need to
do to create the wealth. This might include things like buying
a business or growing an existing business, trading down the
family home to release wealth or buying several rental properties.
Well deal more with these strategies in the next chapter.
173
The milestones section allows you to capture milestones and

measures along the way. You might for example have a strategy
to expand your business and your milestone/target might be to
have a second premises open by July 2007 with revenues of
$200 000.
The actions section allows you to make notes of key things
you need to do to make your strategy effective. In the case
above you might make a note to start to headhunt someone
who is capable of managing your second premises.
At this point you should be able to complete both the dreams
and goals sections of your own one-page plan.
Exercise 40
Copy the one-page plan format from page 171 into your
workbook and write in your dream and your major
numerical goals.
Start to think about some of the strategies you will have
to undertake to achieve these goals and ultimately your
dreamyou might consider some of the wealth-creating
activities you can enter, some of the things you might
get out of (for example, selling some non-Wealth-
Creating Assets), career development (if you have a
job), etc.
174
D O A O N E - PA G E P L A N
KASH points
The skill you need to develop here is that of making a simple
plan to show how you will achieve your goals and dreams. A
plan helps you outline the path to take you from where you are
to where you want to be with a few key stages or changes.
Once you have mastered the skill of making simple plans you
are free to spend your time doing the things that need to be
doneusing the plan to keep you on track and help you
monitor your progress. We think that the habit of planning is
essentialour most successful clients have become very good at
making simple plans to ensure that they get the changes that
they want and to make sure that they meet their targets along
the way. The planning habit is a great tool for wealth creation.
175
32 Turning strategies
Chapter
into actions
It can be very difficult when you are starting out to know how
to convert your dreams and goals into strategies and actions that
will take you towards your goals and eventually achieve your
Freedom Figure.
In the last chapter the one-page plan showed an example
of some clients dream statements and the goals they had set
(which included the Freedom Figure). The next step is to choose

To spend a month overseas each winter.
Goals: To have a net worth of $2.5m by 2015

To grow our business by 20% p.a. (currently worth $500k)

Sell family home
Double income from jobs
Invest in rental properties
Live on $40k (after tax)
Double profits from
family business
Build share portfolio
Buy a business
Sell the farm
176
T U R N I N G S T R AT E G I E S I N T O A C T I O N S
which strategies will take you there. On the previous page is an

example of several strategies that might be relevant depending on
the clients circumstances.
Obviously you would not want all these strategiesyou
would only choose one main wealth-creating strategy, that is,
invest in property or build a share portfolio or buy a business.
The list of strategies is merely illustrative of the kinds of things
you might choose to do in order to get on the path to wealth and
freedom. Everyone will have their own preferred wealth-creating
strategy. You will also have other things to choose (such as down-
sizing the family home in order to release funds or deciding on a
consumption figure in order to create the surplus you need to
invest or deciding to grow your income so that you will have
more to invest in wealth creation).
The strategies are the main decisions that you will make in
order to get from where you are (current position) to where
you want to be (desired position). These decisions are really
important and you will need to spend some time thinking about
what your main strategies will be. It really helps to get them
down on paper in a one-page format because you can carry it
around with you and use it to help you keep on track. It is much
too hard to try to keep all of this in your head.
Exercise 41
Use the example on page 176 to write down some strategies on
your one-page plan.
You will have noticed that each of the strategies should have one
or more milestones attached to it. These are targets or markers
to help you define what has to be achieved for each strategy, for
example, if you decided to downsize the family home in order
to release funds for investment you should set a price you expect
177
to reach and a date by when it should be sold. These milestones

tend to make the strategies very real and help you make what
might feel like a vague idea very concrete. You cant fudge these
milestones eitheryou either do achieve them or you do
not. They will keep you on track and help prompt you into
taking action.



Sell family home In 6 months, for $750k
Double income from jobs Within 3 years
Invest in rental properties 1 by year end, 2 a year
Live on $40k (after tax) Budget by end of month
Double profits from $550k by xx/yy/zz,
family business Plan by xx/yy/zz
Build share portfolio Invest $30k by xx/yy/zz
Buy a business <$2m, within 18 months
Sell the farm Within year, >$4.5m
Each milestone also has some initial actions attached. These

are intended to give you ideas of what you have to do and how
to get started. If you were to sell the family home, for example,
you might make a note to first fix up the garage and then put
the house on the market.
178



Sell family home In 6 months, for $750k Fix garage, Put on market
Double income from jobs Within 3 years Upskill & get promotion
Invest in rental properties 1 by year end, 2 a year Reading program, course
Live on $40k (after tax) Budget by end of month Monitor consumption
Double profits from $550k by xx/yy/zz, Courses on profitability,
family business Plan by xx/yy/zz get consultant
Build share portfolio Invest $30k by xx/yy/zz Reading program, course
Buy a business <$2m, within 18 months Investigate food industry
Sell the farm Within year, >$4.5m Finish fencing, paint shed
The core idea of these plans is to take you from the big vague
ideas right down to do-able tasks that you can take action on
immediatelysuch as fixing the garage. After all, nothing will
change until you take action and do something! It can be hard
to know where to start, and our clients find that having simple
one-page plans makes everything much easier.
You can take this idea further: each strategy can have its own
one-page plan. In fact, you can use a one-page plan for any
aspect of your wealth creation that you like. Over the page
is a plan for the strategy of growing the profitability of the
businessa specific objective.
179
Objective: To double profits from the family business.
Goals: Increase profits from $27k to $550k

Increase prices Increase margin by Review pricing
Reduce costs 5% by product
Sell building and lease Take out $100k Delegate to Mike
back Sold by xx/yy/zz Call agent and list, call
Recruit 2 more in sales Operational by lawyer re lease document
Exit consumer business xx/yy/zz Advertise, call recruiters
& focus on trade only Trade only by xx/yy/zz Do project plan, Jim(?)
to manage
Some of the actions on this plan might in turn need a plan of

their own, for example, a plan for the recruitment of two more
salespeople, or Mike might want to do a plan for cost reduction
in the business.
KASH points
The knowledge here is the understanding of how dreams and
big goals are turned into plans that are actionable. Try doing a
few of these one-page plans and you will find that your skill
will develop very quickly. Having one-page plans will help you
feel that the tasks that are ahead of you are do-able and that
they will be easy to track and manage. This will help give you
an attitude of optimism and confidence as you start to make
big changesand buying Wealth-Creating Assets or changing
jobs or selling other things are very big changes. The habit of
180
planning on one page will give you a tool to think about what
has to be done and will also help you to stay in control of all of
the things you will be doing.
Making decisions and acting on them is what wealth creation

is all about. The one-page plans are a tool to help you focus on
the few things that matter and help you execute your decisions
by indicating what you need to do.
181
Part VII
Where can you find help?
Chapter 33 Whos on your side? 185
Chapter 34 Networking: Winners work with winners! 188
Chapter 35 Assembling a dream team 192
Chapter 36 Are you getting the best? 196
Chapter 37 Making your team work for you 199
Chapter 38 Tips for choosing professionals 204
Chapter 39 Learning from the masters 207
Chapter 40 The last menu item: Frogs! 215
33 Whos on
Chapter
your side?
The company you keep really matters.
It can be very tempting to assume that family and friends will
be automatically on your side as you work to make your dreams
come true. They may bebut dont assume it. You need to
surround yourself with people who support your dreams and
really want you to be successful.
Most of us are very fussy about all sorts of thingsthe food
we eat, where we shop, what we wear, which school our children
attend. But at the same time we may be letting just anyone
influence our dreams, interfere with our goals and negatively
affect our success.
Are the people around you working to help you get what you
wantor are they (consciously or unconsciously) working to
pull you back down to a level that they find more comfortable?
Look at the people you surround yourself with. Will they
support you when the going gets tough? Are they on your side?
We dont get to choose most of our family and relativesbut we
do get a lot of choice about how much time we spend with them
or how much we listen to them. If you are surrounded by nega-
tive, low-aspirational people, take steps to limit their influence
on you as much as possible.
Similarly with friends. Choose carefully in the first place.
Avoid becoming a home for victim types who simply want to
complain about their lot and blame everyone else for their
circumstances. As much as possible, associate with people who
are positive in outlook, who are achievers, who set goals for
themselves and take action to meet their goals and dreams. The
path to success and abundance in life is tough enough without
negative typesyou need good companions for the journey.
185
If you have a partner you will have talked a lot together about
your dreams and hopefully have collaborated on setting the
goals you need to reach to have your dream life. Ideally you have
done your planning together and have discussed in detail how
you will take action on these plans.
The most successful couples work as a team on wealth
creation. They play to each others strengths and contribute the
stuff they do best. They use their respective skills and person-
alities to help the other partner be the best that he or she can
be. Two are far better than oneif they are in harmony about
the life they want and what they need to change to get it. Effec-
tive teamsin sport, business or any disciplinealways share
a dream about their destination and they talk a lot about the
journey and the tasks they each will need to perform along
the way.
Not all couples are so lucky: some people find themselves
with a partner who is at best neutral and at worst hostile to
the idea of having a vision for a better life and doing what is
necessary to get there. Partners are sometimes very threatened by
the changes that are implied when the other partner wants to
pursue a dream of a bigger and better life. This lack of interest,
sometimes even ridicule, can extend to the wider family.
We can only encourage people in this situation to persevere.
Early signs of success will often bring others on board. If you are
finding the going tough among your closer family members and
friends, then wed advise you to keep much of your dreaming
and planning to yourself in their presence. Seek out like minds
in other placeswhether your interest is in business, property
or shares you will find that there are many formal and informal
groups which get together to discuss these topics. These people
are likely to have similar dreams and ambitions to yours and will
give you a sounding board and some much-needed support.
186
WHOS ON YOUR SIDE?
Exercise 42
Make a diagram of your close friends and family.
Tick the ones whose support you can count on.
Be careful about discussing your plans or progress with those

who will ridicule your dreams or scoff at the plans you are imple-
menting.
In general, however, take every care to keep your partner as
involved as possible. Encourage him or her to talk about their
dreamsno matter how reluctant they are at first. Share the
things you are reading. Talk about the plans you are developing.
Ask your partner for helppeople usually respond very posi-
tively to such an appeal, even if they do not feel at this stage
that they have anything to contribute. Your partner will almost
certainly be better at some aspects of wealth creation than you
aremaybe its dealing with people, budgeting, pinning down
what the dream would look like, the discipline of sticking to a
plan, doing the numbers . . . acknowledge his or her skills in
that area and ask for support.
No matter how little active help you get from your partner,
keep him or her in the picture as much as possible. What you
are doing is life-changing and both of you need to stay informed
about what is going on. Some partners find it hard to commit
to these changes until they see some positive results.
The knowledge and insight you are seeking here is to under-
stand how those who surround you can affect your success.
You need to develop the habit of enlisting all the support you
can from family and friends who understand your dreams and
minimising contact with those who pour scorn on you or try
to undermine your efforts.
187
34 Networking: Winners
Chapter
work with winners!

We rarely meet a successful person who doesnt have a good
network. Its not just that others are attracted to them because
they are successful; its that they have built a good network that
helped make them a success in their field in the first place.
Networking well with others is essential for success in all areas
of wealth creation. No business can succeed without a great
network of customers, employees, and other businesses that
act as suppliers. No matter how talented you are in particular
aspects of your business, you will be less expert in others. In
these areas you need others to call on to discuss the problems
you are facing. Some of these people will know how to solve
your problem; others will be able to recommend people they
have used to help in similar situations.
Similarly with property investment. Good property investors
are in the know. They hear all the gossip about what is happen-
ing with planning changes and consents in their area. They know
what is happening in their market. How? Because they make sure
that they are out and about talking to others in their network of
real estate agents, conveyancers, lawyers and accountants. They
meet with other investors who are interested in property and
chew the fat about what is going on.
Share investors have another networkthis time of brokers,
business people, accountants and other share investors.
Some people have an oddly negative view of networking
they think it is somehow grubby, that is uses people. Nothing
could be further from the truth. All successful ventures involve
a network. The only alternative is to be expert at everything and
do everything all by yourself. If you take that path you will need
to keep everything on a very small scale. All of society operates
188
NETWORKING: WINNERS WORK WITH WINNERS!
in networkswhether it is young parents sharing babysitting

and school runs or wider family groups which can look after
those who need help and extra attention. Businesses have always
acknowledged the importance of networks and actively hire and
promote those who are effective in developing their circle.
The more people you know and are on good terms with,
the more powerful your network is. Everyone knows someone
who knows someone who knows what you need help with or
want to find out. So get busy on enlarging your network. Some-
one once worked out that there are only six people between
you and anyone in the world you want to meet. Thats an
intriguing and powerful idea.
Networking allows you to hitch a ride on the experience,
skills and contacts of others. They can give you a leg-up on your
way to successand you too can be of help to them. Network-
ing is a give-and-take proposition. People are usually generous
in their giving as long as they see you giving somewhere else.
Nobody likes someone who is always a taker.
Good ideas for improving your network include:
Business cards If you dont already carry cards get some

printed. They will help you take what you are doing seriously
but, more importantly, they make it much easier to exchange
contact details with others. You dont need anything on the
card except your name and contact details, including email
address. Collect cards from others as you go. It helps to
remember who each person is if you note the date and place
you met them on their card (for example, Jan 2005 at
Jims New Year BBQ). Email makes it very easy to follow up
with people. Take cards with you everywhere.
Associations There are many groups you can join that will
grow your network. General business and professionally ori-
ented groups like Rotary are excellent places to meet people
from all kinds of backgrounds who will be interested in you
189
and will want to understand what you are doing. There

are specialised associations whatever your wealth-creation
interest. Business has networks like Chambers of Commerce.
Property investors can usually find a property investors
association, and share-interest groups abound. You can always
form your own, of course. Small informal support groups
work very well.
Seminars and events If you attend a course or seminar on
a topic of interest to your form of wealth creation you are
bound to meet people who are trying to do what you do.
You have to make an effort when there to meet and talk
to peopleand dont forget the business cards so you can
follow up!
Never underestimate the value of your network. The people you
know and the people they in turn know can make a huge dif-
ference to your success. All smart business people know this
thats why they spend so much energy catching up with and
developing their network. The web of people you know who will
support you, can teach you, can advise you, is invaluable. Some of
this you clearly have to pay for, but youll get lots more as well.
Exercise 43
Draw a diagram or mindmap of all of your family, friends
and contacts.
Study that diagram and imagine how many other people
each of these people know.
Identify the gaps in your network. Do you know people
who will be able to tell you what rental levels are in your
area? Do you know people who know the latest on what is
going on in your industry? Is there someone you can call on
if you need information on tax?, etc.
190
NETWORKING: WINNERS WORK WITH WINNERS!
Understand that you already have access to a vast

networkyou just have to get out there and engage with it.
Note in your diary events to attend or people to contact
and start to build your network consciously.
KASH points
The skill that you need to focus on here is the development and
maintenance of a network that can help you on your journey to
wealth and freedom. There is nothing nasty or manipulative in
thisall these people will be delighted to have your knowledge
and skill in their networks. It is easier to achieve when you have
access to a big group of people who know things and people,
and who have expertise and contacts that you may lack.
191
35 Assembling a
Chapter
dream team
While no one is going to take care of your finances for you, you
dont have to do this all on your own. While you are responsible
and have to take charge, no matter how organised you are or
how well disciplined you become, you will need expert help
from time to time. And there are lots of people who can help.
If you are committed to wealth creation you will make sure
that you surround yourself with a dream team of professionals
who will assist you in making good decisions and providing
good advice.
Winners work with winners! Every time we deal with suc-
cessful people or successful businesses we find a team of winners
around them. Success is almost always underpinned by a dream
teampeople who are winners in their own professions and
who can also function well as a team. Beware of professional
jealousies, however. You need a team, not just a number of indi-
viduals, to make your wealth creation a success.
We all need help and advice from time to time. Unqualified
friends and relations, no matter how supportive, will not know
all they need to know to give you good advice. No matter how
hard you work at learning what you need to know, you will
never be across all the professional fields, nor be as up to date as
you need to be. When the going gets tough you will want to call
on a heavyweight in the right field.
Those on the path to wealth and abundance will need one or
more of the following from time to time:
Lawyer;
Accountant;
Real estate agent;
192
ASSEMBLING A DREAM TEAM
Sharebroker;
Tax specialist;
Insurance broker;
Investment adviser;
Trust lawyer.
Just as with your medical professionals, you do not want to be
picking these people from the Yellow Pages or indeed meeting
them for the first time when you are in crisis. You should start
to build up a team of advisers as soon as possible.
The level of professional you need depends on your circum-
stances and what you are planning to do: the bigger your goals,
the more complicated your affairs, the heavier the advice you
will need. If your affairs are fairly straightforward, for example,
you have a mortgage and some rent from a rental property, a
general accountant will be all you need to help you file your tax
return and minimise your tax liabilities. If you have several
rental properties or own your own business or have become
involved in trading shares you will need an accountant with a
degree of specialisation in your area. Other people who invest in
the same things as you should be able to recommend someone
experienced and appropriate, and its easy to find a property
investment association or share investment group to join where
you can get recommendations.
Who should be on your dream team? What do you need
from each team member? Lets consider the two most important
roles in the dream team:
Accountant No business can succeed without solid financial
and tax advice. Is your accountant a winner? Does s/he work
with other very successful people? Is s/he proactive in advising
you in your business or are you dealing with a historian
someone who can tell you in great detail what happened when
it is too late to do anything about it? Is your accountant wired-
in to the best tax ideas and practices? Will your accountant
193
work well with your lawyer to ensure that your assets are
properly structured and managed tax-effectively?
Lawyer Wealth creation can be a complicated business. Does
your lawyer understand business? Is your lawyer proactive in
advising you about business structures (partnerships, com-
panies, trusts)? Does your lawyer ensure that your wills and
Enduring Power of Attorney are up to date? Is your trust being
managed properly?
Exercise 44
Do you have the right individuals on your dream team?
Are they winners?
Do they work with other wealth creators who are winners?
Do they associate with other professionals who are winners?
How well do these people cooperate with each otherin
your interests?
Do you encourage them to function as a dream team in
the interest of your wealth creation?
You may need some further specialists:
Trust lawyer/adviser/trustees If your affairs are at all com-

plicated you may need advice that is beyond the experience
of a family lawyer. Is your trust up to date with legislation?
Is the gifting schedule properly maintained? Are decisions
properly minuted? Are you confident that your trustees will
execute your wishes in your absence?
Succession planner Many businesses have complicated
family and business issues to address for succession. Do you
have the level of help you need?
Business consultant You are likely to have Wealth-Creating
Assets worth hundreds of thousands (and maybe millions) of
dollars. Is your business advice making the most of that asset?
194
ASSEMBLING A DREAM TEAM
Directors Some wealth creators now have their own board

of directors (or at least some sort of consultative group). You
dont have to think of this as a formal board (like Vodafone
or Qantas have). Rather think of it as a sounding boarda
group to bounce ideas off. Are they adding value?
The benefits these experts bring are obvious. Your family and
your wealth-creation business need access to individuals who are
leaders in their own fields and who are committed to seeing you
succeed.
KASH point
The key knowledge here is that expert help will be necessary
from time to time. These people are critical to your success and
you need the best that can be found. It is very seductive in
business to spend all your energy on operational and financial
issues. However, it is a rare business that outperforms the
people in it. Are you doing everything you can to get a dream
team working on your business?
195
36 Are you getting

Chapter
the best?
Good advisers are often the difference between the successful
and the rest. Often we only know that we have been well served
or badly served in hindsight. It can be very difficult to work out
what you should expect from the professionals that you usein
other words, what should you ask for?
The Table of Service Providers below gives an indication of
the services provided by different types of professionals. You can
use it to evaluate the service you are getting and to seek more
from the professionals in your life.
Professional Usually Should be able Ideally provides

provides to advise on
Accountant Accounts Business structures Planning for

Tax returns Busines issues changes,
Tax for example,
Debt growth of
business,
Tax
minimisation.
Lawyer Company Business structures Keeping wills

formation Trust management up-to-date.
Trust Succession Anticipating
formation planning changes in
Contracts legislation.
Wills
196
ARE YOU GETTING THE BEST?
Professional Usually Should be able Ideally provides

provides to advise on
Financial Insurance Investments A highly
planner Investments Debt management customised plan.
Financial plans Ongoing
guidance
Proactive
communication
on changes
which may affect
you.
Real estate Agreements Trends Updates on
agent for sale or Where the property in your
purchase market is area of interest.
Leasing Whats going on.
Business General Some specialty, Conduit to other

consultant business for example, experts.
advice marketing Counsel on
direction of
business.
Valued sounding
board
Stockbroker Sale or Recommendations Priority for new
purchase of for sale/purchase. listings.
shares, New listings Ongoing advice/
bonds, funds. Research research in
companies of
interest.
Risk adviser Insurance Buy/Sell Regular review
agreements of your risk
Risk management profile.
Risk mitigation.
197
KASH point
The knowledge to focus on here is to understand what you
need and should get from each expert. You will need to
consciously continue to build your skill around managing your
professionals so that they do a great job for youthis is not
something you should just assume will happen.
198
37 Making your team

Chapter
work for you

Wealth creators are not intimidated by their advisers. The advisers
are working for you, after all, and you are paying for the service.
If you are not satisfied with a particular adviser, fire them and get
a new one. Your financial self-sufficiency and security are far too
important to be stymied by an inadequate or worse, incompetent,
adviser. As always, winners work with winners: ask the people
whose achievements you respect for recommendations. Typically,
once you find one good professional they will be able to
recommend others who can be of use to youthey too like to
work with other good people. Ideally, you will end up surrounded
by a team of well-informed advisers who are all willing to work
with each other to secure the best outcomes for you.
To get the best from a team of advisers you should ask
yourself, before any meeting, which specific area or element you
need the most help with. At any one time it is probably easy to
identify which particular area is holding you back. Which is the
one financial thing that if dealt with could transform your
position? Different people will need different help at different
times. You might need specialist help with the creation or
management of a trust, or help to clarify what it is that you
are trying to achieve, in setting goals and plans, some coaching
to achieve these plans. If you are getting involved in property
investment you will want to focus on finding a good real estate
agent, building a relationship with a good valuer, finding a good
tax accountant and dealing with a good mortgage broker.
People who own a business will want specialist advisers.
You might also need a general business coach. Depending on
whats important to the success of your business you may need
some specialist consultants. You will need to perform superbly at
199
whatever is the most important aspect of your business. If you

are in retail, for example, your purchasing or your merchan-
dising might be critical to your success. In another business
the most important function might be your marketing or your
distribution. Whatever you business needs to excel at will deter-
mine what kind of specialist you need to find.
Most importantly, when you assemble these advisers you
need to get them to work as a team.
Jane and Jim are determined to create significant wealth through

acquiring well-priced properties, refurbishing them and tenanting
them. To do this successfully they must find the right properties
and buy them at the right price. They have developed a very
good relationship with a real estate agent in their area and
frequently have good properties offered to them before they are
publicly advertised. Their accountant has a real interest in what
they are doing and helps them do the numbers to ensure that
they are making a good purchase. She also sees to it that they
do not become over-extended with their loans. She has been
very helpful in ensuring that the properties are revalued appro-
priately so that they can leverage well. Jane and Jim use their
builder to give them recommendations for purchase and do-up
they have collaborated on so many projects now that they
understand each others requirements well. The mortgage broker
arranges the finance that they need. Their lawyer has made sure
that all of their structures are optimised for tax purposes. She
also plays a significant role in ensuring that the whole team is
kept up to date with changes in legislation, and protects Jane
and Jim by ensuring that all the other advisers operate within the
law. Most importantly, Jane and Jim get this group of people
together regularly so that they understand the big picture of what
they are trying to do. They all work well together and liaise if
necessary without any prompting from Jane and Jim.
200
MAKING YOUR TEAM WORK FOR YOU
Dream Team of Advisers
Accountant
Real Estate Lawyer

Agent
Jane & Jims
Property Business
Builder Mortgage
Broker
You will also need to manage your team of advisers well. You will
need to be fair but firm and must expect them to perform. Make
sure that you get what you are paying for. If you are not satisfied
you will need to replace the adviser.
It is very hard for you to outperform the teamyour success
is unlikely to be better than the teams performance. If you are
serious you will get a good team together and take care to keep
them working for you. And make them operate as a team
quite often they will need to talk to each other in helping to
arrange your affairs. Make sure that they meet each other and
talk to each other about your finances and what is best for you.
A serious wealth creator will be at the centre of this team of
professionals demanding the best from each of them, separately
and together.
You cant go to sleep on the job once youve assembled a team
and just assume that your accountant, financial planner and
201
sharebroker will now take care of everything. You can delegate

authority to professionals to do certain things for you but you
cannot delegate your responsibility for your finances and your
future. Its your money and your life, so dont abdicate your role.
Exercise 45
Decide what type of specialist help you need to help you
achieve financial independence.
Find some people who fit these roles.
Put them to work as your dream team to ensure you
achieve your plans.
Manage them wellits your money!
It costs to hire advisersit can cost hundreds of dollars an hour

for a good one. But it will cost you even more for poor advice
or no advice at all. (Someone once said that if you think its
expensive dealing with professionals, just wait until you deal
with an amateur!) As with most things, you get what you pay
for. You can make sure you get value by choosing your adviser
with care. You also need to brief them well so that you do not
waste time (and your money). Make sure you have available all
of the information that you need, and brief them on your overall
plans and objectives. Introduce them to other advisers in your
team so that there is no doubling-up.
202
MAKING YOUR TEAM WORK FOR YOU
KASH points
The knowledge to focus on here is that it takes a team of good
advisers to make your wealth-creation enterprise as successful
as it can be. You should also focus on developing the skill to
bring your team together and motivate them to work towards a
common goalyour wealth creation. You will need to manage
them so that they develop the habit of communicating well with
each other about your wealth creationdont allow them to
play games of professional jealousy with each other as you,
and your wealth, will be the only victims.
203
38 Tips for choosing

Chapter
professionals
We all need good professionals to help us get things right. The
thing we are most often asked by clients is to recommend other
good advisersaccountants, lawyers, coaches, counsellors,
investment planners and so on. Getting recommendations from
people you know and trust is the best way to find a good
professional, but you still have some work to do.
We have two main rules:
Good professionals do whats right for younot whats

right for them
Even though they are in business and have to earn a living it
is you, the client, who should come first. Sometimes that will
mean telling you they cant help, sending your business away,
or advising you to do nothing (and therefore pay them little
or nothing). Our definition of a professional is one who puts
the clients interests before their own.
Good professionals advise yourather than sell to you
One of the problems for many professionals (especially in the
finance field) is that they only get paid if you buy, sell or
change something, as they are paid for transactions or on
commission. Thus, for example, it takes a very professional
share-broker to tell you to wait for a month or two.
A key issue is to inquire how the professional is rewarded. Ask

how they are paidwhether by fee or commission. If its by
commission, its in their interest to sell you something
(otherwise they dont get paid). If its by fee their advice will cost
you no matter what you decide to do, but the adviser has no
reason to steer you in the direction of anything that is not right
204
TIPS FOR CHOOSING PROFESSIONALS
for you. And there is no conflict of interest. Theres no right

answer, but its better for you to know.
You do need to understand how the system works and take
care to both choose well and manage well. No adviser is perfect
(neither are you)and they will make mistakes from time to
time. Stay focused on managing your professionals. If they make
mistakes consistently, fire them.
How do you find these people? Well, you can use the obvi-
ous criteria of qualifications and experience, but with all the
professionals in your life, word of mouth is usually the best.
Use your network. Ask around. Inquire whom others use. Ask
about satisfaction and levels of service. Get referrals. Good
people will lead you to other good people.
Here are some good questions to ask:
What are your qualifications?

What kinds of clients do you serve?
How much experience do you have in working with people
in my situation?
What do you specialise in?
What do you think that you do better than the rest?
Can you tell me about some of your success stories?
What professional associations do you belong to?
Does your association have a code of professional conduct?
How do you stay up-to-date with what is happening in your
industry?
What fees do you charge?
What is your hourly rate?
What percentage is your commission?
How do you get paid?
Are you affiliated with any other institution? Are you
independent?
What research and support do you have access to?
What sort of services do you provide?
205
What companies, if any, do you represent?

How will that affect your advice?
Who else in your business would be working on my affairs?
Can I meet them?
How do you work with clients?
How are complaints dealt with?
Ultimately, you will have to trust your judgment. You have to be

comfortable with the person and find them easy to ask questions
and confide in. You are expecting to have a long-term relation-
ship with each of your advisers, so choose with care.
Exercise 46
Decide what you need and ask for recommendations.
Interview professionals to decide whether you would find
them easy to approach and work closely with.
Be sure you understand how they get paidit may affect
the advice they give you.
KASH point
The skill that you need to focus on here is the interviewing and
selection of people to work on your team. We know that this is
not easyespecially when you are starting out. (We are asked
to recommend good professionals more than any other thing in
our WealthCoaching work.) However, this is a skill you want to
persevere with as it is critical. It does get easieryou get better
at knowing what will work for you and, in addition, good
people will lead you to other good people. This is also an area
where your growing network may be of great help.
206
39 Learning from
Chapter
the masters
One of the most interesting things about those who have suc-
ceeded in building wealth is that they are in most other ways
ordinary and average people. That may seem surprising but for
the most part successful people are not marked out by having
much greater talents or education or abilities than the rest of us.
But:
They behave differently.
They work to different rules.
They think differently.
You can learn much from the people who have already achieved
wealth and freedom. Forget the ones who have stumbled into
itthose who have married wealth or inherited it, or who have
won a lottery. None of these people have gone out to deliber-
ately grasp financial freedomthey have been lucky. (And some
not so lucky! Research in the UK suggests that a lot of those who
are lucky enough to have a major lottery win are back where
they started from within five years). These people are not useful
models for you. Look instead at the people who have set out to
become wealthy and free, and have succeeded.
Masters in any field dont just keep popping coins in a slot
machine, hoping for a lucky break. They apply tried and true
principles in their field and they discipline themselves to do
what works. Sure, they continuously try to improve but they
certainly dont ignore the methods that have been shown to
work over and over again. You get lucky when you are prepared
and when you have learned your tradeexpecting to be lucky
just by sitting there waiting for the wind to change is rather
foolish. There is more information available today about how to
207
succeed in any field of endeavour than ever before in history

and into the bargain, most of it is available at your fingertips in
your own home and often for free!
We have been thinking, writing and talking about success
and money for nearly 20 years. Over that time we have met a lot
of people who have succeeded, and a lot who have failed. Those
who reach wealth and freedom tend to have some things in
common (some of which are quite surprising).
They are modest
These people are not ego-driven. They do not do what they

do because they are concerned about what other people might
think about them. They are quite happy to invest in un-
glamorous industriesthey do not need to be in airlines or
fashion or the ski industry. They know that there is money in
dirt. Many of them get their hands very dirtyliterally. In
many cases the whole family was involved in the operation, with
children running errands, older children babysitting, and both
parents working hands-on and all hours to make a go of their
business venture. We have worked with clients who have used
property as a wealth-creation vehicle who have lived in very
modest accommodation for years so that more of their capital
could be diverted to wealth creation. They did not need tobut
they chose to in order to meet their dream in their determined
timeline. Their neighbours probably thought they were
strugglingwe knew they had millions!
They are careful consumers
They do not live in especially expensive houses nor drive flash

carsnot, at least, when they are developing their wealth, and
208
LEARNING FROM THE MASTERS
often not even when they have made it. They are quite happy to
go without the toys that many of us think are necessary but
which in reality are simply things to make us look good in
our own eyes or in the eyes of others. We have seen clients run a
garage sale to cash up sports equipment, special household
appliances and other luxuries to raise money for their wealth-
creation portfolio. Another very sporting family gave each family
member a budget figure for leisure activities which was adhered
tothat was good going for people who had been boating,
skiing, golfing, swimming and playing tennis, all of which
require expensive equipment and/or membership fees. Many of
our clients who have achieved their goals still live modestly on
the surfacebut have the luxury of Security Assets that ensure
income and choices for the rest of their days. And they will never
need to work againunless they wish to.
They are independent-minded
They do not move with the herd; are not derailed by talk of
recession or a boom in a different market or international
events. This takes courage. They have analysed, they have plan-
nedand they back themselves to be right, even when others
think they are wrong. They listen to others, but in the end they
are their own people. They have a dream, goals and plans, and
even though the path is never perfectly smooth they are never
deflected from their journey. Being able to stick to a plan (with
modifications, obviously) is a key hallmark of the successful.
The unsuccessful are always entering the market just when they
should exitand vice versa. Successful wealth creators have
rules for their activities, such as the prices they will purchase
at. They stick to these well-thought-out principles even when
the market is going crazy around them. The clients we have
who have weathered the storms of the tech-wreck, the 9/11
209
disaster and the SARS epidemic had sensible plans and had
not overreached.
They have good long-term relationships and marriages
Whether this is because they are good with people (have a high
emotional intelligence) or whether their wealth has not been
halved by a marriage break-up is uncertain. Nevertheless it is true
that people who are wealthy tend to have good long-term
relationships. Two people are far more powerful than one. We see
this effect so strongly that we never take on a couple as clients
unless both are involved right from the start and in all decisions.
Couples who are well aligned in their dreams and who have
agreed on the same goals support each other and help to do
the heavy lifting. The path to wealth and freedom is difficult
enough without a reluctant partner undermining your efforts and
blaming you for the difficulties encountered along the way.
They have a high FQ (financial quotient)
They know about stuff like money and tax. They understand
their accounts. They learn to do a budget. The hard skills are a
prerequisite, although they are easier to learn than the soft
skills. Many of our most successful clients began with almost no
knowledge of money and numbersthey had a very low FQ at
the startbut they were willing to learn, and read and studied
what they needed to know.
They love what they do
They chose the right business for them. That does not mean
that they are always doing what they love. However, whatever
210
wealth-creating activity they are in, property, shares or a busi-

ness, they have committed to it and driven it hard. It is hard to
imagine people loving some of the wealth-creating enterprises
we have seen, but the important thing is that our successful
clients behaved as if they didthey paid attention, they learned
everything they needed to know, they knew the business inside
out, no detail was overlooked. They understood that you can
do well in any industry if you are prepared to understand it
well enough.
They take a position
You cannot succeed if you just stand there and dither! They do not
hedge their bets or equivocate. Sometimes this can be a fault
many get rich but do not stay rich. But if you are to succeed in
business, property or shares you have to engage in the marketplace,
buy properties or continue to put money into the sharemarket.
Doing nothing will achieve just thatnothing! The successful
people that we see are bravebut not reckless.
They can see both sides of a situation
They think about what they are going to do and can see both
the pros and the cons of it. In doing so they analyse well and
make informed choices. A useful technique to have is, before
making an important decision, pretend that you have to make
the case for not doing what you want to do. This forces you to
look at both sides of a question. Successful clients are good at
debating with themselves. They also tend to surround them-
selves with people who can debate the issues with them. Many
of our successful clients have formed a small informal board of
directors for just this purpose.
211
They are persistent
Many have said that they have become instantly rich after
20 years! Some of our most impressive clients have been work-
ing on their dreams for over 20 years. They never give up. Some
have even survived bankruptcy and got up and started again.
You may not find the idea of bankruptcy very appealing, but
their tenacity is!
They do the hard stuff
They understand the priorities that have to be addressed and

they do them. We have already spoken of clients who sold the
family home because they had no capital for wealth creation. We
have also seen clients do difficult things, like taking on an extra
job for a period, forgoing family holidays when that was normal
and expected, changing family practices about treats, pocket
money and holiday jobs. All these kinds of changes are very
difficultteenagers do not readily relish such new regimes, but
the focused people did what was needed, despite the temporary
disruptions.
They invest in themselves
Successful people know that whatever enterprise they have chosen

for wealth creation, the enterprise wont outperform them. So
they are committed to learning whatever it is that they need to
know. They network, read and study everything they can about
their wealth-creating business.
212
They run their Wealth-Creating Assets like a business
Whether they are in a business in the strict sense or have a

property portfolio or invest in the sharemarket they treat the
wealth-creating enterprise like a business: they have a plan and
a budget, they keep accounts, they monitor progress, they make
businesslike decisions.
They are well connected
This does not mean that they move in the right set or go to the
right bars and cafes. These things may be helpful for some
people in some business areas, but they are not critical. Rather
it means that they have a good network of contacts in whatever
field that they are in: top property people know the best real
estate agents and valuers; top business people are active in their
trade associations; top sharemarket investors know and talk to
several different brokers.
Above all, the two things that set successful people apart are
hard work and homework.
Becoming financially free is a gamea great game. There is no
reason why you cannot play it and win. To get rich and stay rich
you have to love what you do. Know your dream and love your
dream. It is that vision of the future that will set you apart from
the herd, let you do things differently and become financially
free and have the life that you want.
Business masters:
start with a clear vision of what they want to build or achieve;
translate the vision into a clear plan of action that sustains
them when the going gets tough or the vision gets fuzzy;
213
share the vision with others such as partners or key employees

who need to be motivated;
set milestones so that there are measures of success along the
way; and
celebrate achievement of the milestones.
214
40 The last menu item:

Chapter
Frogs!
If there is something that must be done and you fail to do it,
the consequences for your dreams and goals can be disastrous.
This is the stuff that makes the difference between the successful
and the restidentifying what needs to be done and doing it,
however unattractive that may be.
In Get Rich, Stay Rich we talked about a technique, which
originally came from Mark Twain, to help do the hard stuff . We
all want to put off things that are difficult or unpleasantits
a natural human response. However, there are some hard things
that you simply have to do if you are going to achieve your
goals. Mark Twains thoughts on stopping procrastination went
like this:
Imagine that you have to (yes, absolutely have to) eat a live,
large, slimy green frog. You have no choiceyou have to
do it.
When are you going to do it? Are you going to leave it sitting
on your desk (or kitchen table), watching you while you con-
template every disgusting mouthful? Are you going to leave
it there for a few days or weeks while you think about it?
Or are you going to get on with it, eat it now and get the
unpleasantness over with?
The answer is to get on with it: there is no point in waiting
you are going to have to do it. Surely it is better to eat it now
and stop the thing looking at you like that. It will not taste
any more pleasant in a few days. (Conceivably quite a lot
worse!) Doing it now, you still have the same nasty experi-
ence as doing it later, but what you do not have is the worry
and stress of thinking about doing it. Once you have eaten
215
the frog it no longer sits there staring at you revoltingly. Once

you have done it, you have done itits over. Once you have
eaten a frog in the morning everything else is easy!
Twain thought that if you do the hard stuff early in the day, the
rest of what you have to do is a breeze.
Procrastinators are all talk, all about tomorrow. Eating your
frogs is about today. It is immediate. It is about taking action
NOW, not deferring things until it is too late to get the results
you want.
People fail not because they dont do enough but rather
because they do far too much of the wrong things. Success is all
about identifying what needs to be donethe prioritiesand
taking action on those vital few things. We said earlier that
doing what you love isnt enough for wealth or successbut if
you can discipline yourself to do the stuff you dont love you will
be in rare company. If there is stuff that must be done and you
do not do it then you will fail in your quest for the life of your
dreams. The consequences are disastrous and may affect the
whole of your life.
Frogs are another version of the 80/20 ruleyou get 80 per cent
of your results from 20 per cent of your decisions and actions.
The trick is to find the right 20 per cent and put your time and
energy into those. By implication, 80 per cent of our time and
activity is largely useless as it only produces 20 per cent of the
results. We need to reduce these activities and the time spent on
them or, best of all, quit doing them at all.
Each and every thing that you do is either taking you towards
your life of wealth and freedom or further away from it. Your
task is to identify which actions need to be taken and what
noise needs to be ignored. If that action is something that is
likely to be hard and unpleasant, you need to close your eyes and
block your nose and eat the frog anyway, knowing as you do it
that each gulp is another step towards the life you want.
216
THE LAST MENU ITEM: FROGS!
Exercise 47
Make a list of the things that you have been putting off.
Identify and define your frogs, look them straight in the
eyeand eat them!
Exercise 48: WOF (warrant of fitness) checklist:

Are you ready?
Have you got a dream?
Do you have a Freedom Figure?
Have you set the long-term goals?
Do you understand the values that are driving you?
Do you know what your Net Worth is?
Do you know what it should be?
Have you agreed to a time period?
Have you chosen a Wealth-Creating Asset?
How much income will you have?
What amount will you consume?
What rate of return are you seeking?
Have you got strategies in place for driving your
Wealth-Creating Asset?
Is there a plan for Security?
Is your partner fully on board?
Have you built a network?
Have you selected professionals?
Is there a learning program?
Who will help and support you?
217

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Coach Yourself to Wealth 22/4/05 1:24 PM Page i

First published in 2005

Copyright Martin Hawes and Joan Baker 2005

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

Allen & Unwin

National Library of Australia

Hawes, Martin, 1952.

ISBN 1 74114 365 9.

1. Finance, Personal. 2. savings and investment. I. Baker,

Typeset in 12/14 pt Adobe Garamond by Midland Typesetters, Maryborough

Preface: A better life v

Part II Current position: Where are you starting from? 31

Part VII Where can you find help? 183

Preface: A better life

to fit the pieces together to make the best whole.

Joan Baker, Martin Hawes;

1 Your current position

The most important thing here is to get a very clear sense of

2 Your desired position

In many ways this is the most exciting part of creating wealth.

3 Your freedom figure

Using your dream lifestyle as a guide, we then focus on helping

4 Strategies for wealth

HOW THIS BOOK WORKS

Knowledge might include a new vocabulary or concepts

attitudeand at times to change it so that you have a more

We point out these learning points, chapter by chapter, and

Financially Free = Having Time and Money

Lot Low Income/Lot of Time High Income/Lot of Time

Low Income/Little Time High Income/Little Time

Financial freedom is not simply being rich. Many people

Lot Low Income/Lot of Time High Income/Lot of Time

Low Income/Little Time High Income/Little Time

Copy the blank diagram into your workbook or folder and

From a wealth-coaching perspective one of the most interesting

investments you will never be free to live your dreams or pursue

People who own a business, even a quite big and very

Certainly these people may be wealthyif they do a Net Worth

progressively shifting it into assets that are much more secure

for wealth and freedom

In our model we keep each of these separate. To understand the

Wealth-Creating Assets are the things that will make you

You do not get high returns from just anything in these

Some of this will be spent in order to live (consumption).

Security Assets are also investments, but their primary

on, most of your capital should be in Wealth-Creating Assets,

down your journey, it is a very positive step towards financial

Some of you, especially those who are quite advanced in their

Now, write in the name of any Wealth-Creating Assets you

reinvested into either Wealth-Creating Assets or Security

Exercise 3: Keys to wealth quiz

2. Surplus Irrespective of how little or how much income

4. borrowing is for appreciating assets (family home,

shares. So, depending on your chosen WealthCreating

who need to be committed and supportive of wealth

think that this is an unrewarding path that they do not wish to

Whatever you are doing or have been doing is a perfect recipe to

in all of your financial details on the WealthCoaches Model, so

I dont know what I want

I dont know how to do it

I have poor habits

I have a bad attitude

I dont really want to