James: James Schramko here, SuperFastBusiness.com, I’m chatting with Salena Kulkarni from InkosiWealth.com. Welcome.
Salena: Thanks, James.
James: You’ve been helping business owners get wealthier by taking their business income, redirecting it into other things like alternative investments, and growing their income, not just their capital value, but their income so that it can eventually replace their business income, which is very exciting. But one of the things that must come up as a wealth coach, which is what you’ve been helping people with, is how they measure their success. Because I imagine a lot of people, certainly as a coach, a lot of people come to me and they measure their success as a business owner, is whether they’re making $10 million a year or not. And often, to get that $10 million a year, they probably only keep one or two of it. And then they just have $8 million a year worth of headaches and nightmares and stress and complexity and difficulty. And they’re paying a heavy toll for that 10 million, when in fact, they may have had a better business at two or $3 million, where they still get to keep two or three, but then have a million dollars’ worth of costs and headaches and stress, which is obviously eight times less. Now when it comes to wealth, I imagine people just thinking about their net wealth as being the scorecard, but maybe that’s not true.
Salena: Absolutely, yeah, I think that’s a great starting point. I would actually say that your net worth is definitely one metric for measuring success around wealth building. But I think there’s a number of others, the one that I think is, should be, you know, maybe even elevated above net worth, is a measure of your passive income as a percentage of how much you need to feel financially free. Because if you want to talk about life-altering wealth, really, it’s that capacity to choose. And you can’t really choose how to spend your time, you can’t get off the hamster wheel, unless you’ve got a source of income coming in, which is at least equal to or greater than the cost of your lifestyle. So while I do think net worth is a great goal, I know far too many high net worth individuals who are cash-starved, who maybe even have to put money on the table to support those investments before they even eat. So yes, net worth is a great goal to have, but I think investors make a mistake when they set that as the goal. They say, well, I need to be worth $10 million. That’s my net worth that I need. And my question or my comment to that is well, Why? Is that because you can only squeeze out 1 percent cash return out of that?
So I think it’s really important to kind of framework your goals around wealth, almost like a formula. I like to talk to my guys about, it’s an A plus B plus C. Come up with three conditions. Because if you ask someone, what does financial freedom mean to you, they’ll say it’s things like, Oh well, if I could play golf on a Monday and, you know, play with my kids on a Thursday, and you know, it’s kind of like this loosey-goosey thing and you’ve got to like, put a stake in the sand and say, well, when I’m mortgage-free, when I’ve got a quarter of a million coming in in passive income or whatever that number is, and you know, my kids have finished university and debt-free like that, that might be an example of it. But it’s a simple formula. And so high net worth, by itself, is very much a one-dimensional metric. So it’s really great to broaden that out and think more widely.
James: I think about only one person I’ve coached over the years, has actually said to me, this is how much I want to build my business to sell it, because that’s how much invested at certain percentage I’m going to need for my ongoing living costs. And this is a young person. I thought that’s pretty advanced. So it could be as simple as saying, well, I need, let’s say, 20 grand a month for my living costs. So I need to build my passive income to reach $20,000 a month, whether I work or not. And that would be then I’m actually successful in my wealth goals.
Salena: Yeah. So, you know, obviously gross that up for tax. So you might add another 30% for tax. But I think if you can at least put a stake in the sand and work that number out, you know, I call that part of your freedom formula, and when you know your freedom formula, it’s super simple to reverse-engineer. You’ll know exactly how much you need in capital, you’ll know what kinds of investments to take, and then you don’t suffer from chasing after shiny objects, which is a, you know, a great problem for a lot of investors.
James: They’re not quite sure what my next move should be. You know, should it be blockchain? Should it be shares? Should it be property? And so knowing your freedom formula kind of eliminates the noise. Well, in the bro-marketing world, it’s definitely blockchain. I don’t hold great hopes for their longevity, because it’s always fad marketing. Now you studied accounting, you work for a big investment firm, you’ve built up this Rolodex of contacts that for years… I imagine your success in this sort of field has come to a large part because of your mad passion and interest in it and a strong head for numbers. What are the chances that someone’s going to discover the same methodology or be able to do what you do all by themselves? Like, how long will that take them, if they were able to do that?
Salena: That’s a great question. I am, what I would say is, I have had plenty of cuts and bruises along the way. So my perspective with this stuff is, you can absolutely do it yourself. It’s probably taken me 12 to 15 years, and I’ve invested hundreds of thousands of dollars and lost hundreds of thousands of dollars. I’ve also invested hundreds of hours. So by all means, like, if that’s the pathway that some people like to do it for themselves, and there’s nothing wrong with that, I do think that lone wolf model is the hardest of all the models. But if you’re someone who values time, and you want a GPS to get you where you want to go, you know, I’m certainly a fan of standing on the shoulders of other giants to fast-track things. So yeah, I think that’s a good approach. If you’ve actually got places to go and things to do and you want to reclaim your time sooner, I think it’s definitely worth standing on the coattails of someone who’s done it before.
James: There you go. Thank you, Salena. [email protected], if you’ve got a question about wealth creation then I suggest you have a chat to her. She’s a wealth coach, and clearly knows what she’s talking about. Thank you.
Salena: Thanks, James.
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