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knowing your targets + learning how to get there

tl;dr

• Know your overarching life goals (short- and long-term), as these set the course for your wealth-creation plans.
• Sustainable habits achieve your goals.
• Focus on transitioning from active income to passive income.
• Understand your risk appetite - an inherent part of property buying and investing.
• Having a growth mindset is the healthiest way to achieve your goals.
• Strong financial foundations are critical to your success.

The best time to plant a tree was 20 years ago. The second-best time is now.

Chinese Proverb

Before you rush out there and start buying properties, you need to set your direction.

In this chapter, we're going to explore the foundations to your first-home buying and property investing success. I want to equip you to be smart, prepared, realistic and ready to buy well.

It all starts with goals

Having goals for your life overall is crucial to set your property compass. Goals are your target; property is the means to your target. These goals need to be authentic to you and realistic as to what you can handle. You need to understand what you value, set up goals and habits, and you're off.

But to do that, you need to answer a question I ask all my clients:

What does success look like to you?

Your answer to this will be unique. You need to consider your career; your family and friends; the lifestyle you want to live; any travelling you'd like to do; other investments, such as shares; your health, hobbies or activities you enjoy. What are the priorities in your life? What practical and financial things do you need to establish? Where does property fit on that landscape?

It's important to get these goals down on paper, because you're 42 per cent more likely to achieve them when you do.1 Very soon you're going to write down your goals, so be ready.

Habits get results

So, why haven't you already achieved your goals? One word: habits.

To give yourself the best chance of achieving your goals, you must create daily or weekly habits that relate to achieving your goal. For example, if you want cleaner teeth, then the obvious habit is to clean your teeth twice daily. The goal of gaining cleaner teeth will occur naturally. This takes the focus off the seemingly unachievable goal and focuses it on the steps you need to take to achieve the goal. If your habits are a) related to your goals and b) manageable (sustainable), your goals will be achieved.

Eli Goldratt's theory of constraints states that there are usually only a few factors or 'constraints' creating obstacles in the way of success.2 It's the same when it comes to property - usually we're held back only by a few constraints. Typically, these come down to a lack of certain skills, knowledge or qualities. Tackle those areas by getting educated or equipped and the floodgates open! Build your habits around not only the things you know you do well, but also the areas you need to improve to push through any obstacles.

I also believe the 80 / 20 rule applies: 80 per cent of the reasons that are holding you back from achieving your goal are inside yourself. Only 20 per cent of the reasons you are not achieving your goal are external to you. Always start with yourself.

What one skill or trait, if you developed and did it in an excellent fashion, would have the greatest positive impact on your life?

A major focus in my own life is health and fitness. I've always had a passion for AFL (I do property and finance coaching in that industry), and previously, I was a physical education teacher and personal trainer. I train every day and prioritise healthy eating. But how does that relate to property? Because by being healthy and strong physically, I make healthy and strong decisions. I'm able to remain strategy-centred, impartial and pace myself.

Having a health-centric approach to life has also taught me that great health isn't achieved overnight. A thousand individual decisions create great health (deciding to do that 30-minute run in the morning; choosing the healthier lunch; getting to sleep earlier), and they all compound over time to create an overall healthier lifestyle.

This same pattern applies to buying your own home or investing in property. Saving that little bit extra towards your deposit each week; sourcing that next great property professional for your team; researching that next property, one piece of data at a time - these compound to help you build wealth for your future.

Tips for creating goals

When considering your goals, ensure you use the following formula:

Be specific

Describe your goal in detail. What will it look like when you have it? What will you say to yourself? How will you be feeling?

Make it measurable

How will you know when you have it? What's the intended result?

Give it a deadline

Ensure you have a date for this goal to be achieved by.

Create habits

Each goal must have at least two habits that are daily or at least weekly. This whole exercise is just as much about habits as it is about goals.

Your wealth magnets: active and passive income

So why does wealth matter in your life? Having wealth at your disposal gives you the resources to live the lifestyle you want. Whether you're aiming to retire early, reduce working hours, or tap out and enjoy travel - it's up to you.

Wealth typically begins with some form of income, but it's important to understand the difference between active income and passive income. Active income requires action on your part; for example, an income from employment requires you to be at work to earn. Passive income is generated with little to no action required on your part, and this is some of the best wealth-creation income you can aim for.

What sources of income are adding to your overall wealth? For most people, the immediate answer is employment - your job! But this is an active income stream. What happens if you don't work? What happens if, as you age, you cannot work? You don't get paid and your wealth creation doesn't continue. So, you need to consider what other forms of wealth creation you have at your disposal, particularly passive income streams. That's where property can play an important role.

action steps

Wealth magnets

Which wealth magnets below do you currently have, and which do you want to explore more or develop? Mark them below.

Wealth magnet Progress Income from employment
(active)

• Currently have
• Want to increase my income through a payrise, promotion or upskilling
• Keen to explore my options

Superannuation
(active and passive)

• Currently have
• Keen to progress
• Want to learn more

Investment property
(passive)

• Currently have
• Keen to amp this up
• Want to explore this further

Own home
(active and passive)

• Currently have
• Keen to upgrade or change
• Want to explore this further

Shares
(passive)

• Currently have
• Keen to progress
• Want to learn more

Business
(active and passive)

• Currently have
• Keen to grow my current business
• Want to explore this

Anything else?

• Notes:

Replacing active income

Let's say your plan is to retire in ten years. If the average lifespan is around 80 years old, you'll need to replace your employment income once you retire. You need to use this time now to develop your wealth to a point where you have a target amount of wealth supporting you each year, potentially for 20, 30 or even 40 years. That's a decent amount of time!

If you're serious about building wealth, you'll be looking to replace your active income streams with passive income streams. Think about what your long-term wealth goal is. Personally, when I first began in property, my goal was to build a portfolio valued at $2 million. My rationale was that, if this portfolio was growing by 5 per cent per annum (realistic), then my wealth would be growing by $100 000 per annum. This figure has changed over time, but it's where I started. I want you to think about what that figure would be for you - you may not know the answer right now, but start thinking. Essentially, you'll reverse engineer the process and set up a plan that achieves this goal.

Think about how much per week you'd need to support yourself financially. Let's run an example using some round figures to keep it simple:

Weekly financial needs when active income stops:...