The L.I.F.E. Framework for Wealth.

Leverage is what gets you off the ground. It’s using borrowed funds (usually a mortgage or business lending) to control bigger assets earlier. 

The reality of building wealth is you need assets (things that pay you money), and to buy or control these assets, you’ll probably need to borrow money or provide some form of ‘promise to pay’ for the future. 

• Property investments
• Business equity (part or full ownership)
• Structured lending strategies (arbitrage, which I will explain later)

Used wisely, leverage is a force multiplier. It allows you to build momentum, grow faster, and enter markets earlier. Qualifying to borrow money from banks, investors, and even friends or family will mean you need to show them you’re a safe pair of hands to lend money to. 

Leverage can expand and accelerate the retains on your invested money, but it can also increase your risk and losses, this is why you need to prepare wisely and have safety nets in place if your investment strategies stall or fall victim to market forces. 

Investing involves risk. Rewards come to those who take some calculated risks. Without risk taking, the rewards are small and infrequent. 

But leverage comes with responsibility. The higher you go, the more exposure you take on. That’s why you need…

As your journey of wealth building progresses, so does your risk. In the early stages of wealth building, your biggest asset is usually your ability to earn income from your own business or working for others. 

You now have a lot to lose without realising it.

Insurance is about protecting your income and your position so a health event, accident, or sudden change doesn’t undo years of progress. 

Things outside of your control can impact your life without warning. Redundancy, changes in the market, cancelled contracts, cancer, medical events, these are all likely to impact us in some form eventually. 

We can protect our financial freedom journeys by using a smart investment in the form of insurance. Big pay outs come to those who are prepared and don’t try to time their protection… Insurance cover is as much for your family as it is for you.  

• Life and trauma insurance

• Income and mortgage protection

• Health and business continuity coverage

As your leverage increases, so does the importance of insurance. They rise together. If leverage is your accelerator, insurance is your airbag. Remember the goal is Financial Freedom Faster which means we can’t afford major interuptions to the wealth building. 

Without the right insurance, you’ll risk stunting the growth of your wealth by millions of dollars and delaying your freedom by years with an unexpected event that puts you out of work 6-12 months (you or your loved ones). 

Don’t look at the cost as an expense, this is the price of investing and striving for financial freedom, we don’t take the risk of not being covered because that costs more. Insurance is an investment, one you hope you’ll never use, but something you should have if you’re serious about achieving your dreams.

Funds are the engine that powers everything long-term. They are your diversification and liquidity. This means you are spreading your risk and giving yourself some wiggle room if your investments don’t cash flow as planned. 

• Emergency reserves; which can be used to offset leverage costs.

• KiwiSaver and retirement funds

• Investments in shares, managed funds, or businesses

Funds give you resilience and optionality. When you’re building towards financial freedom faster, the under appreciated factor is often having options. This means you can have spare money to spend on what is needed in the moment. 

Choosing the right bank products, like offsets, term deposits and credit cards, give you the most return on your money whilst still giving you options if and when you need them. 

So many Kiwis have a default KiwiSaver provider and have never taken the time to assess which provider and fund type makes the most sense for their risk tolerance and goals in life. 

Funds grow over time and help you stay in the game. You have to sacrifice some luxuries in the beginning to build up your funds but this unlocks new opportunities (like deposits for property or buffers in business). 

Making your lunch at home, buying second hand clothes, and shopping at cheaper stores, these small moments of discipline allow you the privilege of buying more assets you build your financial freedom faster. 

When funds are neglected, leverage becomes dangerous and end goals become wishful thinking.

Your End Game is your North Star. It’s what all the activity is building toward. By mapping out your progress starting with the end in mind, we can see how investment decisions and the speed of them will impact how financial freedom can be achieved faster. 

• How much (passive) income do you want to live on?

• What age do you want to be work-optional?

• What legacy do you want to leave?

Without a clear End Game, you’ll drift, you’ll delay, you’ll defer. 

You might build a strong portfolio but lack purpose. Or you might overexpose yourself trying to reach a vague goal. Financial Freedom Faster doesn’t magically happen by accident. This is your hero’s journey and mapping out the milestones and end goal with a series of advisers will help you understand what to do next and stay accountable to the plan. 

The End Game provides context. It shapes your strategy.

• More ambitious goals? You’ll need more leverage, more insurance, and more funds.

• Want a simple life? You can dial back risk and focus on consistency.

Having an End Game highlights the weak points in your current plan allowing you to see where you need to level up your knowledge and activity. Most people just do not realise how big they need to create their asset base to generate the income flow required to attain financial freedom. 

You can achieve Financial Freedom, and Faster, with 5 major investment decisions over 20 years. There will be small interlocking decisions that help you progress on the journey, some of them will be tedious and admin based, some will be nerve-racking like bidding for properties at auction. 

See the End Game for what it is, a North Star shining bright in the future, something to look forward to and build up for. This is why your idea of the legacy you want to leave is important, to help you push through the challenging times without delaying. Think about what you can do for your family, your community, your partner, when you have regular income pouring into your accounts and financial freedom is a reality not a dream.