Kim Klein, Director of Wealth 4 Life Australia, joins us again in this interview to talk about Wealth 4 Life, financial planning, and also to discuss their tagline, “Enjoy the Journey.”
Wealth 4 Life works closely with clients on their cashflow to ensure that they have the money to pay the bills, for fun, investment and for emergencies.
Wayne Bucklar: Today, I’m joined by Kim Klein of Wealth 4 Life Australia. Kim has joined us a few times and she’s here to talk to us about financial planning. Kim, I’ve been looking at your website and I noticed the tagline ‘Enjoy the Journey’, where did that come from?
Kim Klein: Well a lot of people think that financial planners are just going to put you on a budget, and put all your money in Super and you won’t have any life until you retire. And granted some may actually do that but not Wealth 4 Life. Wealth 4 Life is exactly as the name suggests ‘Wealth for Your Entire Life,’ not just retirement. So the tagline ‘Enjoy the Journey’ is to let people know that we are not just financial planning for your future but also for your here and now. You’ve got to have fun along the way. I actually spend a lot of time with people on their cash flow – which is the foundation of financial planning – to make sure that they can find the right balance of spending money today and spending money for tomorrow. So that they can enjoy the journey, and that’s where the tagline comes from.
Wayne: It’s a very wise tagline to have I think because I agree with the philosophy completely. Kim, one of the questions that always pops up for me is how much is enough? How much is enough to achieve financial freedom?
Kim: That’s a very tough question and my normal response is how long is a piece of string? But today, I’m going to be nice. So let me start by defining what ‘Financial Freedom’ means to me.
My definition of financial freedom is enough money to choose if, where and how much you work.
Now every person’s number is going to be different because it will depend on how much money you want to live on and for how long you’re going to live which is a very big unknown. So for today, I’m just going to put a few assumptions out there just so I can give you an idea.
So my first assumption is that you’re going to get absolutely nothing from Centrelink which for most people aged under 50, that’s probably going to be the truth.
The second assumption I’m going to make is that you will live forever as I don’t know how long you’re going to live, let’s just make sure we’ve got enough so that doesn’t become an issue.
We’ll also assume that you don’t like your job and you only plan on doing unpaid work. We’ll also say you’re part of a couple.
And the biggest variable of all – because it depends if you’ve got kids, mortgage, champagne taste is your actual ongoing yearly budget. But to keep math simple, I’m going to make it $100,000 a year to pay for all your expenses.
So in order to take home a $100,000, you need to earn more than that to cover the tax man because he always wants his share. So based on a couple, now we’re targeting $125,000 per year to pay the tax man and leave you with a $100,000 to pay your bills.
So I will put a couple more assumptions into my little calculator for returns on your investment. And all of a sudden, your financial freedom figure is just under $3.6 million for a couple.
Now that’s a lot of money. I don’t know many people who have that just sitting around doing investment. So the first thing people will say is ‘Well, yeah that is a lot. Is there anything we can do?’
Yes the number can be lowered. Okay, one of the things we can do to lower that number is by entering in a date of death. Entering in the date your debts are repaid and kids move out (assume say about age 40 these days?) It’s pretty hard, they seem to keep coming back.
Now we’re getting into some pretty technical calculations here and that requires some very impressive software. Like the financial planning software we use here at Wealth 4 Life, we use it all the time to track clients’ files.
But that’s how we can get a bit more accurate than this big $3.6 million.
So I guess the whole point of this exercise is really just to get people to realize that financial planning is not something you do once you’ve have a million dollars, it’s something you do once you start earning your first income because the sooner you start, the better your chances are of achieving financial freedom.
Wayne: And Kim, you mentioned cash flow before and I’ve heard you say cashflow is the foundation of your financial house. Tell me more about the significance of cashflow in how this all fits together.
Kim: Well when I talk to people about finances, I like to refer to their financial house and so I just find it so much easier to explain when you can compare to something that everyone uses on a regular basis. Now the first step in building a house is to have a solid foundation. Without a solid foundation, it doesn’t matter how fancy the house is, it will just fall down or will crack.
Wayne: That’s true.
Kim: And the same is true in finances, a lot of people get excited about buying shares and investment property but if they don’t put their cashflow in place, they can lose everything.
So cashflow, it’s really just a nicer word for a budget or a pretty picture of what money is coming in and what money is going out. And it’s really important that what is going in is more than what is going out.
Now I think we all know that, but how many people can say that they are doing that year in and year out and not worrying or stressing about that exact issue?
Now this principle applies if you’re earning $40,000 per year or $400,000 per year because what I’ve seen time and time again is the more we earn, the more we spend, it’s just human nature. So it doesn’t matter the level of income, your cash flow still needs to be looked at.
One of the things we do here is we work really closely with clients on their cashflow to ensure that they’ve got the money for their bills, money for life that’s once again really important, spending money, holidays, etc. and surplus for investing and emergencies.
One of the targets that I like to give to people is 25%.
That is 25% of the money that’s going out i.e. your expenses, your savings plans, your investments – you want to be able to stop 25% of the going out so that if you’re sick or injured and cannot work for an extended period of time, you’ve got that 25% of expenses which can be reduced and the other 75% of your income can be covered by good income protection policy. So target 25 is also another important little tip in the cashflow world just to give people that extra bit of protection.
Wayne: It does seem Kim an issue that professional advice is just essential.
Kim: Absolutely. And like I’ve said time and time again, don’t wait till you have a million dollars, do it as soon as you start earning an income. Starting with your cashflow, building up to doing insurance as soon as you’re relying on your income, you need insurance to protect it. And then from there, you can start looking at savings and investment plans.
Wayne: Now Kim, for those people who have heard us today and for whom it makes sense to take care of themselves, how do they get in touch with you?
Kim: So the best way is to go to our website which is w4la.com.au and on there, there’s a Contact Us page, you can book a quick appointment for a 15-minute chat. Or if you just like a few more tips, you can go to our Facebook page and like us there.
Wayne: And if you Google Kim Klein at Wealth 4 Life, you’ll pop up.
Wayne: Kim, it’s been a pleasure talking to you. Thank you for your time.
Kim: Thanks once again Wayne.
For more information about Wealth 4 Life Australia, visit www.w4la.com.au
You can also listen to Kim Klein’s previous interviews. See links below: