Deck 2 Flashcards
What is THE FINANCIAL FANATICISM PRINCIPLE?
Lifestyle Freedom: You can live freely in your desired lifestyle without needing a regular income from a job or a business.
Budget Freedom: The word “budget” isn’t in your vocabulary for daily existence —trips to the store, filling up the gas tank, nights on the town.
Experiential Freedom: You don’t need to “downsize” your lifestyle and sell things that you enjoy, the motorcycle, the saxophone, or the Corvette.
Mobile Freedom: You can travel for months and not have it impact your financial situation.
Economic Freedom: Your lifestyle wouldn’t change in a stock market crash and an ensuing three-, five-, or ten-year economic recession.
What is THE 1/5/10 STRATEGY?
The 1/5/10 Planasy envisions your optimum life in ten years, reverse engineered in five-year, one-year, and one-month increments.
Your 1/5/10 Planasy is a living document and will change as you change.
The 1/5/10 Planasy acts as a decision framework for your life.
What is THE OFFENSE/DEFENSE PRINCIPLE?
Financial freedom is won on offense (income/asset), not defense (expense/debt reduction).
“Live within your means” with the intent to expand your means.
You can live a luxurious life and still live within your means.
A poor defense can destroy a strong offense, as in the case of famous athletes, lottery winners, and celebrities who go bankrupt.
What is THE MONEY-SYSTEM STRATEGY?
Old money, or savings, gives birth to new money, often completely passive.
A money-system is the business of renting capital, a considerable cash sum invested in income-producing assets (dividends, bonds, real estate trusts) that produce regular monthly or quarterly income.
For compound interest to be effective, you need to start with a large sum.
A boring four percent return on $5,000,000 is more than $16,000 monthly, without touching the principal.
Your money-system should only represent a small portion of your net worth.
Your business is for creating wealth; the capital markets are for renting your wealth which pays you passively.
What is THE ESCAPE NUMBER STRATEGY?
Basic existence expenses are terribly expensive, even in a minimalistic living situation.
Expect a life of unrestricted freedom and relative affluence to cost millions.
The Escape Number is the sum of the pre-tax earnings needed to purchase the assets specified at your ten-year vision, plus the pre-tax investment sum which funds the carry-cost for your dream lifestyle, plus additional pre-tax funds for economic immunity.
When calculated on a pre-tax basis, the Escape Number can seem incredibly large.
What is THE PROFIT LOCUS STRATEGY?
Awareness, or your reticular activating system, gives you sight to things that normally would remain hidden.
Your locus of money is how you tackle money problems.
A wage-locus sees money as a function of unskilled labor earned by an hourly wage.
A salary-locus sees money as a function of specialized-skills earned by yearly salary.
A profit-locus sees money as a function of profit from units of net perceived-value and unlocks the door to a rat race escape.
Your locus determines focus.
What is THE BAD MATH PRINCIPLE?
There are three anchors to bad math: 1) Income is correlated to time, 2) Time (hours/years) cannot be scaled, and 3) Rat race economics (wages/salary) cannot be scaled.
Even in respectable, good paying professions, saving $5 million dollars at a 10% savings rate would take centuries.
Celebrities and athletes are not subject to ULL, or bad math.
Financial gurus or universities do not teach Uncontrollable Limited Leverage.
What is THE SPECIALIZED-UNIT STRATEGY?
There are two types of specialized-units which can help you 10X your return on time: first- and second-order.
A second-order specialized-unit transforms your specialized-skill into a finished product or service, like a website, a copywriting service, or a freelance project.
A second-order specialized-unit is usually subordinated by time.
A first-order specialized-unit is a product or service severed from your time and can theoretically be sold in massive quantities, and often repeatedly.
What is THE BUSINESS SYSTEM STRATEGY?
A business system is an all-encompassing system from sales channels to marketing initiatives and is responsible for getting your specialized-unit into the hands of the right audience.
A specialized-unit combined with a business system gives you power over time and limited leverage.
A specialized-unit and a business system are both needed to break the three rat race anchors.
What is THE KNOWLEDGE GAP STRATEGY?
What works today doesn’t work tomorrow.
The knowledge gap is the ever-growing space between what you don’t know and what you need to know, caused by shifts in tastes, technology, and human behavior.
Only persistent learning can shrink a knowledge-gap, preceded by acknowledging its existence.
And old education rarely fits a new opportunity.
