Are you comfortable talking about wealth?

John Liston
Director | Adviser
April 30, 2019

Financial freedom shouldn’t be a far-off dream or based on winning the lottery one day.

One of the key conversations we have with clients is the concept of ‘Getting Free’.  Get Free is the third step in our unique methodology ‘Get Set,Get Moving, Get Free’.  By getting free, we mean financial freedom – building up enough wealth to give you the ability to choose if you work, and how often you work. Interestingly, this is often a difficult and uncomfortable conversation to have, and many people will noticeably wince when this discussion arises during one of our meetings. 

Usually for one of two reasons. 

1.    They have given it absolutely no thought anddon’t have an idea of what financial freedom means to them.

2.    They have lofty goals, but the fear of beingseen as a tall poppy makes them uncomfortable to disclose their real dreams. 

Financial freedom shouldn’t be a far-off dream or based on winning the lottery one day.  It can, and it should be a very real game plan in your life. 

So how exactly do you start planning to Get Free? 

For sound financial advice, the legendary investor Warren Buffet is a great place to look.  We are firm believers in his quote “Never depend on a single income.  Make investment to create a second source”.  In short, to be finally free - you need to be able to free your dependence on one single income.  You need to create a second source of income, what we would define as a second business – a wealth business.

Are you comfortable with wealth?  

The conversations we have with clients is not about building wealth for wealth’s sake – or to accumulate as much as possible. Building your ‘wealth business’ is about building your financial freedom, taking control and giving yourself choice.  The amount of freedom you want to have and the types of choices you want to make will define the level of wealth you need. 

This means answering questions around: 

·       Where do I want to live in 5 years? 

·       Where will my kids/grandkids go to school?

·       Will I travel each year? Where will Igo? 

·       How often do I want to work?   

We believe that if you look at wealth creation from this lens, the discussions are no longer uncomfortable, they become livelyand inspiring.

It’s not about retirement!

Getting free is not about retirement or only enjoying your hard work after the age of 65.  For business owners, the joy and challenge of operating a business means that retirement is not the objective,flexibility and choice is.  

Increasingly, the conversations we are having are around building variety over a working life.  It could be a business owner buying and selling multiple business in their lifetimes and taking on a variety ofprojects - projects for passion, for profit or for both.  Or it can be an ambitious individual working in a job for part of their career, then launching a business later in life.

This means that the plans around financial freedom are not straight forward and are not 'set and forget' 15-year retirement plans.  A practical plan for financial freedom needs to be responsive to changing circumstances and agile enough to incorporate both short term and longer-term goals.       

Where does it go wrong?

The resistance we encounter around actually making investments in order to build a second income is usually due to previous investments that went bad. 

You may view listed shares as a gamble because a few years ago, you were given a tip on a mining stock in Western Australian and it went to $0 instead of the $5.00 you were promised.  In that case, you’re right, it was a gamble because you knew nothing about the company.  But you are wrong to view all shares the same way. 

Or you invested in property because a friend at a BBQ told you it was a good idea, so you purchased ‘off the plan’ and it hasn’t moved in value since the day it settled.  Or you view superannuation as a waste of time because it went down in the GFC. The list goes on.   

The key to getting on the right path is to view theset hings for what they are. 

Investments – be they property, shares, businesses, or superannuation are just tools to get you to where you want to go – they are not the end goal in themselves.  They are powerful tools when used right, but when used wrong they can be disastrous.  Think of a razor-sharp power saw in the hands of an apprentice.  Is this tool likely to help build a beautiful home or cause serious damage?        

When you view investments in a similar way, is it any wonder the stock tips from your friend or the advice at the BBQ went wrong?   How can you choose the right investments to get you free, when you don’t know the $ value of your own personal financial freedom?  

Where to start?

The most powerful and effective tool for starting adiscussion on ‘getting free’ is to model financial projections on your current situation.  Put simply, calculating your current financial situation (your assets, liabilities, income and expenses) and projecting what your level of wealth (freedom) will be in the next 5, 10 and 15 years.  This gives you a base case for what’s ahead of you and can really open your eyes to the power of decisions made today. 

If today's projections don't match the lifestyle you have planned for tomorrow, you can begin to experiment with various investment tools to alter the direction you're heading down.

Some of your best decisions can come to light when running a variety of ‘what if’ scenarios about your future. 

·       What if you decide to rent where you live and buy an investment property?

·       What if you sell your unprofitable investment property?

·       What if you contribute more to super?

·       What if you can generate more profits from your business to build a share portfolio? 

·       What if you sell your business, how much can you get for it? 

This starting point can then un-earth a set of questions that leads you towards a real plan for your future.  For example, if your current cash flow doesn’t allow for investments – how can this change? Does your business need to be more profitable?  Do you have the right tax structure? Is your super invested in the right asset classes?  

Want to start?

Talk to us about running a modeling session on your financial situation and get your personalised projections for where you are headed.