In this weeks episode Hazel concludes a mini-series on financial calculations by focusing on the concept of return on equity (ROE). Unlike return on investment (ROI), which measures the profitability of a specific investment at the time of purchase, ROE assesses how effectively an asset generates profit over time based on the equity held.

KEY TAKEAWAYS

• Understanding Return on Equity (ROE): Unlike Return on Investment (ROI), which measures the profitability of a specific investment at the time of purchase, Return on Equity assesses how effectively an asset generates profit over time based on the equity held in it.
• Evaluating Personal Assets: It's important to assess the equity in personal assets, such as property or savings accounts, to understand how well they are performing. This includes considering cash flow from rental properties or interest from savings.
• Home Equity Considerations: While many view their home as an asset, it typically does not generate income unless utilised in specific ways (e.g., renting out a room). Therefore, the return on equity from a primary residence is often zero.
• Regular Portfolio Assessment: Regularly reviewing the performance of your investments and equity is crucial. For example, a property that once had a high return on equity may underperform over time, necessitating a reevaluation of whether to keep or sell it.

BEST MOMENTS
"It's really important to understand the numbers and to understand the maths around how your money's working for you quite frankly."

"Most people don't own... any sort of level of return on that equity in their own home. It's a big fat zero when it comes to a return on equity from your own home equity."

"You have to be really careful... if you're going to consider releasing any equity from your own home, because this is obviously going to cost you more money."

"The question really is what level of return would you like or want to see from your equity if you were to work with it differently?"

VALUABLE RESOURCES

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ABOUT THE HOST

Having started her career as a professional, classical musician, Hazel de Kloe also had a personal quest to become financially free.

She and her husband built a successful, multi-million-pound property business, next to their own careers, but soon realised that true freedom doesn’t JUST come from being financially independent…

Having meant so much to her family, it has been her passion ever since, to inspire, educate and empower others on their journeys towards this 'Holy Grail'.

During one particular property mentoring session back in 2009, she had a powerful recognition of exactly how to facilitate this. Nicknamed now, The Wealth Whisperer, she has a unique way of getting to the crux of what is needed to help fulfil this quest.

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