Leverage – How To Fast-Track Your Financial Goals
If You Aren’t Using Leverage Then You’re Working Harder Than You Should, To Earn Less Than You Could.
Key Ideas
- Discover why leverage is the best tool to achieve financial independence sooner than later, and with less effort.
- Reveals why paper asset investing is sold by the financial industry as the best investment choice, and why you shouldn't fall for it.
- Four pieces of conventional financial wisdom that are dangerously deceptive.
- Why you're already a master of leverage, but didn't know it.
How can you lift a 7000-pound car without anyone to help you?
The answer is the same as how you can achieve financial independence well before your retirement age.
It’s the same solution that will get more done in a day, with less effort.
And it’s the answer to breaking free of almost any limitation you think you have – whether it’s time, money, skills, connections, or anything else.
Leverage is the strategic tool that expands your resources beyond your present limitations to produce greater results than you could generate on your own.
Leverage gives you access to more capital, more technology, larger networks, greater knowledge, and smarter systems than you personally possess.
Mastering leverage can:
- Accelerate your financial results
- Multiply your wealth
- Improve your quality of life by freeing up your time from mundane tasks
- Allow you to focus your attention on what you enjoy and are good at.
Mastering leverage analysis is how I retired at age 35, just 12 years after graduating from college with thousands of dollars in student loan debt and zero assets.
Leverage is how 20-something millionaires achieve more financially in a few short years than most people achieve in a lifetime.
Leverage is the tool you’ll use to break through whatever limitations hold you back so you can produce greater results.
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The Deceptive Half-Truths That Hold You Back
Unfortunately, most people misunderstand leverage.
For example, when you hear the term “leverage,” do you think of financial leverage, such as mortgages in real estate or debt financing?
Sure, that’s one type of leverage, but it’s only one of six! It’s also the riskiest.
The other five types of leverage multiply reward without increasing risk. Even better, when you master certain types of leverage, it’s entirely possible to increase your reward while reducing your risk at the same time!
Another common myth about leverage is that it’s exploitative or manipulative.
Maybe you’ve seen the depraved villain on a daytime soap “use” people through leverage in some shocking and morally bankrupt way. You think: “I would never do a thing like that!”
But leverage is not about “using” people. It’s about making smart business decisions that benefit all participants; and it’s about responsibly applying other people’s resources to overcome obstacles that limit your success so you can achieve greater results with less personal effort.
Leverage done right creates jobs, grows wealth, and serves people.
The 4 Pieces of Conventional Wisdom I Don’t Endorse
There’s plenty of success advice out there. Unfortunately, many of the ideas taught are really just conditional half-truths masquerading as universal facts.
The problem is: these half-truths frequently work well, and are repeated so often that it’s easy to accept them as fact.
But that’s where the danger begins, because any idea taken as fact – when it actually isn’t – will limit your ability to see better alternatives. You won’t recognize the exceptions that prove the rule.
The good news is that when you learn the pros and cons of the multiple leverage strategies you can use, you’ll see how much of the conventional “wisdom” is really just low-leverage half-truths.
For example:
- Retirement planning is NOT just about saving and investing until age 65 (Spoiler alert: You can become financially independent at any age! You don’t have to wait until age 65; leverage will show you how to enjoy financial freedom earlier).
- Asset allocation across a diversified portfolio of stocks, bonds, and mutual funds is NOT the only way to invest for retirement (Spoiler alert: Higher leverage asset classes and investment models exist that can accelerate your wealth while reducing your risk).
- Making more money is NOT about getting a promotion, or a raise, or working longer hours (Spoiler alert: trading time for money caps your income because there’s a limit to how many hours you can work. You must learn how to separate your income from hours worked so you can make more while working less).
- It does NOT take money to make money (Spoiler alert: you can separate your wealth growth from your return on equity equation by leveraging other assets).
Don’t worry if you have subscribed to any of these conventional beliefs about investing and wealth. It’s not your fault. They’re repeated so often by mainstream media that it’s easy for your mind to accept them as true without questioning their validity.
Leverage principles will open your mind to different strategies for achieving success and breaking through the roadblocks that hold you back.
This isn’t get-rich-quick hype. It’s a provable fact based on financial science, rooted in research, and grounded in mathematics (but don’t worry – it’s just high school algebra).
The point is that it’s real, and I’ll show you exactly how it works.
Not only that; it’s common sense. You already know it’s true because the evidence is all around you.
For example, when you hear in the news how someone went from zero to multi-millionaire by age 20 or 30, what was the mechanism? How did they do it?
With the rare exception of extreme frugality at an early age, every one of those stories involves either business or real estate success. That’s because these two asset classes offer multiple opportunities for leverage, so wealth can be created much quicker than investing through conventional asset allocation.
In fact, the research on how the rich get that way proves that the vast majority of wealth is created through business entrepreneurship and real estate.
Conventional paper asset investing through stocks, bonds, and mutual funds takes a distant third place, and even then, it’s usually after an entire lifetime of saving and compounding.
So if conventional paper asset investing is the slowest strategy for wealth building, why do financial experts promote it?
Because it’s a one-size-fits-all solution that’s easy to sell and it has the backing of academic research proving its validity.
It’s a good business model for the investment firms because it’s simple to communicate and implement; because it’s generic and doesn’t require them to develop a plan that accounts for your personal strengths; and because it doesn’t require any special adaptation to your timeline or personal goals.
It’s an efficient business model for them, but it’s not the most effective alternative for you. It’s not wrong, but there are faster, more efficient ways to grow your wealth that may match your life situation and goals much better.
If you want financial independence while you’re still young enough to enjoy it, and without being dependent on extreme frugality to make the numbers work; or if you would like to use alternative asset classes like business or real estate in your wealth plan, then you’ll want to broaden your thinking by trying strategies that are different from the generic financial advice you get everywhere else.
How Leverage Accelerates Your Wealth
Accumulating wealth comes from the compound growth of personal capital and financial capital over time. The advantage of using leverage is it doesn’t have to be your personal capital or financial capital. That’s a game-changing difference.
Leverage allows you to separate your wealth growth from your return on equity equation, and it allows you to break the connection between your income and hours worked.
Breaking these connections opens the possibility for entirely different financial strategies that can radically increase your income and grow your wealth while actually working less.
Leverage releases you from the limitations of conventional financial planning by opening up accelerated strategies using other people’s resources so that your wealth growth isn’t limited by your own time, money, skills, and abilities.
These added resources are what frees your wealth growth from the return on equity limitations and your income growth from time-for-money limitations.
But it gets even better because leverage is also the tool you’ll use to overcome the obstacles that hold you back from greater success. Nearly every roadblock that stands in your way is overcome by one of the six types of leverage.
In other words, leverage is both a tool for accelerating your wealth growth, and it’s a tool for breaking through the constraints that limit your success.
Best of all, it doesn’t have to be risky because only financial leverage both increases risk and return. The other forms of leverage can accelerate your results while reducing risk at the same time, giving you the best of both worlds.
In short, you either learn to master leverage or you’ll work far harder than necessary to produce far fewer results than you’re capable of.
Leverage principles will completely shift your thinking about financial strategy. It will give you the essential tools that you need to work smarter – not harder – in order to achieve accelerated results in your financial life.
You’re Already a Master of Leverage
Best of all, you’re already a master of leverage because you use it every day. It’s not technical or complex.
In fact, it’s so common that you don’t even realize you’re using it, and that’s why you haven’t yet consciously put it to work to grow your wealth and improve your life.
For example, every day you’re already leveraging:
- All the employees who manufacture the cars you drive (but that you didn’t build).
- The workers who created the clothes you wear, from the seamstress who sewed the item, to the textile company that created the fabric, to the farmer who grew the raw material.
- Your smartphone, which you use to accomplish many tasks – and that leverage extends beyond the functionality built into the phone to include the electricity you use to charge it and the engineering talent that designed it.
The fact is you’re already leveraging other people’s skills and resources almost every minute of your life. Leverage is an automatic part of your day. The difference is it’s just not conscious; that is, it’s not conscious until something breaks.
A few years ago, I was skiing when a massive storm knocked down a major power line, cutting off all power to the town and surrounding area. There was no electricity, so almost nothing worked; the cell phone towers went out, and the airport only functioned because of backup generators.
Just imagine being stuck in a freezing house in a massive storm with no electricity, no heat, no lights, no cooking, and no phone or data connectivity – and you’ll begin to understand how leverage-dependent our lives have become.
Then imagine no running water as well, because, in this case, they had to drain the system to protect the pipes from freezing. That meant no toilets, no showers, and no drinking water.
None of these resources belonged to me. On this trip, I was leveraging all of them for my own use – until they stopped working.
It was a wake-up call, because the reality is that nearly every aspect of our lives is touched by leverage in some form in order to increase quality and efficiency. Leverage generally operates so smoothly that we scarcely even notice it’s happening.
But there is a big difference in how the people who become wealthy use leverage.
They’re intentional and strategic in how they apply it. They use it to accelerate results in their wealth plans.
With The Leverage Equation, you too will learn how to take your casual, everyday use of leverage and repurpose it into a deliberate, strategic, wealth-building strategy.
You’ll become a master of using – in uncommon ways– what is all around you every day, in order to produce much greater results with much less effort.
Applying Leverage in Your Life
Always remember that nobody gets rich without leverage.
If you aren’t employing leverage in your business and wealth plans, it means you’re compromising the speed, time, and work effort necessary to reach each level of success.
Leverage isn’t difficult to master; it’s something you can implement right away and then reap the benefits for years to come.
It’s time for you to stop working harder than you should to earn less than you could.
Leverage analysis will show you how to break the cycle of living paycheck to paycheck, so you can start building your financial future.
A life of financial freedom is absolutely possible, and the simple steps and strategies in this book (and the full Expectancy Wealth Planning course that the book is excerpted from) will set you on your way to freedom.
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I do believe in leverage. I have used it in different ways, from having a high FICO score, to a High paydex score, which allows you to purchase an asset with little or no money down and gives you a favorable interest rate. Having money in the Bank which you can leverage. In this instance the Bank charges you about 3% above what they are paying you. In this instance you have an account which is compounding daily and the Bank charges you simple interest on the money they lend you. Then Banks normally lends you 90% of the money you have on deposit. So, you are making compound interest on 100% of the money on deposit, and paying back simple interest on the 90% you borrow.
On $1,000,000.00 at 2% compounded daily you will earn about $105,157.89 in interest over a five year period. On a $900,000.00 loan, at 5% you would paid back about $119,046.60, so in reality, the loan only cost you about $13,888.71 in interest.
This in one form of leverage that I have used in the past, so I do believe int the power of leveraging.
I find the material very interesting. Thanks for the information
Thanks for sharing, but I’m concerned you might be making a common mistake by only thinking in terms of financial leverage. It’s the only type of leverage that cuts both ways, both increasing risk and reward proportionately. There are five other types of leverage and it’s the compound effect of all combined that produce powerful results. Hope that helps.
So i don’t get it , i’m dumb.
Borrow a Mil and make roughly half the interest payments back as interest , using your own money as collateral.
What have you gained ?
Are you buying time?
Please don’t say you invested the money in something , that would be terrifying .