The six spokes of the wheel are as follows:

Debt: Outstanding loans, mortgages, credit card balances or any other money you owe.
Work Income: Income you earn from your normal job.
Emergency Savings: Easily-accessible money you have put aside for a “rainy day.”
Retirement Fund: Income or savings you will draw on when you finish work.
Property: Your main home and holiday home if you want one.
Passive Income: Income you earn without having to do any additional work e.g. royalties, rent or investment income.

Using a scale of 1 to 10, the Wealth Wheel works using your assessment of your current situation for each element of the wheel. This will demonstrate how well equipped you currently are for the road to wealth. Your ratings will show how smooth a journey you are having and what your progress is likely to be if you continue on the same path.

To use the Wealth Wheel, look at each spoke of the wheel and rate yourself according to how you feel about your current situation in relation to that element. The scale for the ratings is as follows:

10 (the outside edge of the wheel) is the best possible situation you could be in or where you want to be.

5(the mid-point of the wheel) is the halfway house—you are not quite there but well on your way.

1(the centre of the wheel) is the rating you would give if you are nowhere near or haven’t even started.

You can choose a rating anywhere between 1 and 10 but I have provided definitions for 1, 5 and 10 as a guide. I’ll now explain in a bit more detail what each of these ratings means.

1. Debts

This covers any debts such as loans, credit cards, home improvement loans, store cards, hire purchase agreements, and mortgages.

10 is debt free.

5is if you are spending less than 50% of your net income on debt repayment (including your mortgage).

1is where your monthly outgoings exceed your regular monthly income.

2. Work Income

This reflects whether your current work income allows you to live the lifestyle you desire—for example, whether it enables you to live in the house you want, eat in the restaurants you like, go on holiday where and when you choose and drive the car you want.

10 is where you only spend 80% of what you earn and you can af- ford whatever you want from your work income.

5 is where you can afford most things but you still check the menu and choose based on the price. You spend almost all of your earnings each month.

1 is where your money usually runs out before the end of the month and you can’t afford to buy any of the things you really want.

3. Emergency Savings

This is your buffer zone to help you in emergencies, to cover you in times of ill-health or unexpected bills.

10 is where you have easily-accessible savings that would cover your normal monthly living expenses for six to twelve months.

5is where you could cover your normal monthly living expenses for three to six months.

1is where you have no savings whatsoever.

4.Property

Are you living in your ideal house, and if you want a holiday home, do you have that too?

10 is where you are living in your ideal home and also have a holi- day home (if you want one).

5is where you are getting there.

1is where you haven’t even started on the property ladder yet.

5. Retirement Fund

This is about the retirement fund you have built up that will give you a regular income whenever you choose to retire.

10 is where you already have a retirement fund that will produce the same income as you are on now. So, if you earn £30,000 a year, at a return of 5% you will need twenty times that sum (£600,000) to provide an annual income of £30,000.

5is where you have a fund that will give you 50% of your total annual income.

1is where you have made no provision whatsoever.

6. Passive Income

This is where you make an investment or do a job once and then get paid for it over and over again without having to do any more work trading your time for money.

Examples could be royalties on a book you have written or rental income on a property you own.

10 is where your passive income is already greater than all your monthly expenses, including food, loan costs, etc.

5is where you have 50% of your normal monthly expenses covered by passive income and you are continuing to build it.

1is where you have no passive income at all.

While the whole picture of your finances is a little more complicated, the Wealth Wheel reflects the main areas most people need to cover to become financially free and wealthy.

Now that you know how the Wealth Wheel works, I recommend that you take a few minutes to complete your own Wealth Wheel based on your current assessment of your situation.

So how does your Wealth Wheel look?

It is a nice round wheel of perfect 10s?

Or is it a mixed picture that presents challenges?

If your wheel is very uneven—or if many of your numbers are much lower than 10—don’t worry. The rest of this book is about fixing your Wealth Wheel and making it as big as possible.

This will help you cover more ground faster and have an easier route to financial freedom!

WEALTH WORKOUT 2: YOUR WEALTH WHEEL LESSONS

Now write out some notes about what you have learned from your own Wealth Wheel.

What’s good about it, what isn’t, which areas do you need to work on?

13. Introducing The Wealth Wheel