Turn risk and reward upside-down using these lesser-known types of leverage…
- 4 steps to make more by working less
- 8 systems to grow your business on autopilot
- How to develop relationships that deliver breakthrough ideas
- How to solve the problems that hold you back from greater success
When you think of leverage, what comes to mind?
If you’re like most people, it’s some form of financial leverage – mortgage financing or debt financing – using other people’s money.
You probably also think leverage is risky.
But the truth is financial leverage is only one of six different types of leverage. Worse yet, it’s the most dangerous leverage strategy because it increases risk as much as reward.
The other five types of leverage can both decrease risk and increase reward… at the same time!
So let’s pull these five other categories of leverage out of the shadows so you know how to multiply your wealth by taking less risk.
The Right Leverage Strategy for the Right Job
Imagine trying to build a house with only a screwdriver and a hammer.
That’s what building wealth with only financial leverage is like.
Sure, you need tools to build a house, just as you must have leverage to build wealth. But to build a house you actually want to live in, you also need saws, tape measures, chisels and levels, so you can use the right tool in every situation. Each tool has a specific function, and it must be applied correctly.
Building wealth with leverage is the same way. You’ll need all the different leverage strategies to overcome the constraints you’ll encounter on your journey toward financial freedom – because each tool unlocks a specific limitation that holds you back from greater success.
This article will explain the other five types of leverage you’ll want to apply in your wealth plan.
- Time Leverage
- Technology & Systems Leverage
- Communications & Marketing Leverage
- Network & Relationships Leverage
- Experience & Knowledge Leverage
Each of these leverage strategies delivers a specific solution to a specific type of constraint in your business, career, and financial plans, and many of these strategies can be used in conjunction with each other. That’s why it’s important to become familiar with all of these tools so you can get the most out of leverage in your wealth plan.
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Time Leverage – How To Employ Other People’s Time So You’re Not Limited To 24 Hours In A Day
Time is limited. You can’t make more of it. You can’t save it. You spend it every minute you’re alive, and you never get to know how much of it you have left.
The only question is: What do you spend your precious time on?
Everyone gets the same 24 hours in a day, and we all have the same final destination when time ends. The countdown to that destination never stops, until it does.
There’s no question time is your most precious resource; yet, isn’t it amazing how most of us treat time as if we’re blessed with an unlimited supply?
How will you maximize the value of your time given that it’s scarce?
Let’s dive into how you can leverage time to grow your wealth and reduce risk.
What’s Your Time Worth?
Knowing the value of your time is important because it affects what you spend it on. Your hourly rate shows you which activities you should personally complete and which activities should be eliminated or leveraged away through outsourcing because their value is below your hourly rate.
The reason you’re not making as much money as you’d like is because you haven’t increased the value of your time to the level you need in order to make that much money.
How you think about your time and how you value it will largely determine the financial results you produce with that time, because if you don’t value your time, nobody else will either.
If you’re not sure how your salary converts to an hourly value then use this free calculator to find the answer. Also, The Leverage Equation has a bonus exercise that walks you through the process of valuing your time according to your income goal.
How Productive is Your Productive Time?
Typically, 80 to 90 percent of your time is used just to get by in life, leaving only 10 to 20 percent to produce something truly extraordinary with the little time remaining. That’s why success is created using marginal time more effectively.
In other words, the daily requirements of life, like sleeping, bathing, eating, preparing meals and running errands, chew up much of your time. Talking on the phone, attending meetings, clearing email, organizing your desk, and creating social media updates are all maintenance activities that distract you from what I’ll call “productive time.” The truth is, most of your day is spent on maintenance activity, leaving little productive time to move your life forward.
I’m not saying these maintenance activities should be eliminated entirely because they’re an essential part of a full and healthy life. Instead, I’m simply creating a clear distinction about what productive time is and how relatively few hours actually get dedicated to real productivity.
The only time you’re “productive” is when you do the work that directly leads to your goals, or you leverage someone else’s time to do the same.
Finding productive time requires focus, otherwise maintenance activities will expand to fill all your available time.
You must prioritize productive time or you won’t have any. It doesn’t happen on its own.
This problem is illustrated by studies of Fortune 500 CEO’s showing that the total productive time in their day is something close to 30 minutes, depending on the actual research study.
This leads to two startling conclusions that can change your life and change what you’re able to produce with your scarce time resources.
The first principle is that success is created at the margin.
For example, one of my rules from coaching clients to achieve financial independence is: if you want to know how long it will take for someone to achieve any goal, just look at how much of their time they dedicate to that goal. Notice how similar that is to our definition of productive time.
The unfortunate truth is you likely have very few productive hours in each day to dedicate to achieving your goals. That’s why recapturing a wasted hour here and there by redirecting it to productive use is so valuable. You’re not just adding one hour to an already long 10-hour day for a 10% incremental improvement. Instead, adding one productive hour could literally double your productive time, because your long day only has one other productive hour in it.
That’s why success exists at the margin of time. Doubling your productive time by one hour might 2X or 4X your results, which could be life changing. Not only that, it reduces your risk.
The second key principle about productive time is how business systems, and developing standard operating procedures for employees as a business system, can be the most productive time of all because that’s how time literally multiplies itself.
Systems Automation: The Ultimate Time Leverage Strategy
Setting up automated business processes can deliver the greatest time leverage of all. For example, I developed an automated opt-in procedure for this website that builds relationships by delivering value to new visitors. The automation provides huge time leverage by converting visitors to subscribers and later to customers without me personally sending a single email… and the risk is zero.
This system does the work of many employees at a fraction of the cost by running 24/7 with unlimited scalability. You can surf this site and notice all the different ways you are incentivized to subscribe. There are free courses, books, calculators, PDF downloads (even in this article), resource guides, and other incentives – all operating 100% on autopilot to give value by building trust and relationship with new subscribers. It’s an entire business system that accelerates growth while reducing risk.
Compare that to producing a presentation that I might deliver one time to a single group of people. They both qualify as leverage, but the sales presentation is a project that gives a linear return on my time because it must be repeated over and over, with each instance consuming more time to produce only linear value. Both sell products and both are productive time, but the project is limited while the process is highly leveraged.
Time Leverage – Summary
The goal of time leverage is to release your income growth from the boundaries of time, and to get more stuff done without using any of your time. The Leverage Equation provides much more detail with action steps and exercises showing you how to achieve those two goals. As a quick overview:
- The first step is to increase the proportion of truly productive time in your day. You want to recover those marginal hours that will literally double and triple your total productivity.
- The next step is to delegate projects so you can multiply the amount of time you spend working toward your goals, thus accelerating your progress.
- Next, increase your time leverage from linear project leverage to the more valuable process. Identify all repeating functions in your business, investing, and career that don’t need your active involvement so you can delegate them.
- Finally, you can further increase leverage by replacing human time from the production equation with scalable business system automation using technology and systems leverage.
The goal is to get more work done at a lower cost so you can create more profit while working less. This reduces your risk while accelerating your success.
Technology and Systems Leverage – How to Set Up a Scalable Model Once So the Systems Can Do the Work Thousands Of Times
Your goal with systems leverage is to convert all activities required to run your business into standardized processes so they automatically deliver your business’s value proposition without any input from you.
The result is a scalable, efficient, profitable business that also gives you time freedom.
Systems leverage is interconnected with time leverage because you pay the price of time upfront to create the system, but the system does the work down the road without requiring your time.
I define a system as a set of standard operating procedures that produces consistent results for the business regardless of the contractor, employee, or technology using it. Think of it like the recipe you’d use to bake a cake, describing the exact steps to follow and the exact ingredients to use for each step in the process.
There are two primary benefits to systematizing:
- Systems take the unknowns out of the business process, thus reducing risk by standardizing everything into a work flow that produces a reliable output. For example, you may not be a fan of McDonald’s restaurant food, but their success is legendary partially because the customer always knows exactly what they’ll get anywhere in the world as a result of the business systems that standardize every detail.
- Systems leverage your knowledge into a scalable, efficient process that reduces cost and, most importantly, gives you time freedom.
Making Technology Work For You
The starting point for developing systems is to map out the standard operating procedure that defines the system. The next step in systems leverage is to add technology leverage so that tasks are completed by machines instead of humans.
Technology has a long, proven history of delivering speed and efficiency improvements. For example, technology has evolved transportation over the years from walking and riding horses to bicycles, then cars and boats, and more recently bullet trains and supersonic airplanes. Each generation of technology improves the speed and efficiency of transportation.
You can see a similar trend in communication. It began with person-to-person conversation, then advanced to telephone and radio, which then developed into television, and has now progressed to email, texting, webinars, podcasts, live chat, and YouTube.
Personal computers, smart phones, and the internet have combined with SaaS (or Software as a Service) vendors to provide affordable technology tools you can leverage as a small entrepreneur. A home-based business can now compete on equal footing with a Fortune 500 company because both the software and hardware are so powerful and affordable.
Take the publishing industry as an example. New York publishing houses can’t compete against the flood of quality books from self-published authors operating with little risk or cost using nothing more than a laptop, an internet connection, and access to direct-to-consumer marketing channels like Amazon.
Technology has flattened the playing field by eliminating barriers to entry for the little guy. Software and hardware companies are producing off-the-shelf business systems that allow the home entrepreneur to compete at any level. Direct to consumer marketing channels give equal access for sales. The result is that bigger is no longer better, and smaller is less risky.
However, all of this access to technology tools has a downside risk as well. As you learned in time leverage, you shouldn’t do everything yourself, even if you have affordable access to all the technology tools required to complete the job.
You have to be careful not to get buried in technology by balancing time leverage principles with technology leverage possibilities. In the end, your ultimate limit is time, and all technology requires time to learn, set up, and maintain.
The 3 Stages of Systems Leverage That Every Business Must Go Through
You should expect to progress through three stages of increasing sophistication as you implement systems leverage:
- Process map repetitive tasks into standard operating procedures so that reliable, high-quality, efficient results are produced every time with a minimum of mistakes.
- Integrate technology leverage so that you start replacing human labor with machine labor, further reducing costs and improving results.
- Design audit controls with checks and balances into your systems so they’re self-correcting, thus reducing risk.
Examples of the types of systems you’ll use to better manage your business and real estate assets include:
- A marketing system that delivers a continuous flow of qualified prospects.
- A lead generation system that builds a database of prospects for your business.
- A conversion system that nurtures all prospect relationships until they’re ready to buy.
- A sales system that converts prospects into customers by collecting payment.
- An onboarding system that welcomes each new customer.
- A product delivery system that delivers the value to the customer.
- A training system for employees and contractors.
- An accountability system that monitors all the other systems and shows you when any system breaks down, similar to how a warning light on your car dashboard tells you to repair minor failures.
In short, you want to create a system for every repetitive activity in your business and investing, which just happens to include most of the activities in your business and investing.
Systems and Technology Leverage Summary
This was just a brief overview of systems leverage as fully explained in The Leverage Equation.
If your goal is to own your business (rather than letting it own you), then you need to remove yourself from the production process. Convert all activities required to run your business into scalable, efficient systems that aren’t dependent on any individual.
Sure, it costs time and money to get systems leverage working for you, but those resources are well spent because the result is greater wealth, less risk, and more freedom. And that’s a goal well worth pursuing.
Communications and Marketing Leverage – How to Communicate With Millions For The Same Effort As One
The 1954 Masters purse was $5,000. Fast forward to 2003 and it was 200 times larger at $1.08 million.
The average NBA salary was $8,000 in 1954. By 2003 it had climbed to $4.5 million.
What drove the dramatic increases in sports celebrity income?
If you answered “inflation” you’d be wrong. Surprisingly, it played a relatively small role compared to the real cause.
The main reason for the astonishing growth in sports celebrity earnings was communications leverage.
And the big change that caused huge growth in communications leverage between 1954 and 2003 was television entering the mass consumer market. Television made professional sports accessible to millions around the globe; whereas before television, viewership was limited to just a few thousand local fans.
Communications leverage expanded the audience size, making the product of sports entertainment more valuable. The result was increased advertising revenue, which translated into higher salaries for those sports celebrities who could attract the most eyeballs.
Without media, how would those athletes make those huge sums of money? Who would pay them? Communications leverage is what converted sports icons into millionaires.
Now let’s contrast sports stars with teachers…
A teacher creates more value for society than a sports star; and yet, who commands the higher salary? Teachers’ salaries remain low because they lack communications leverage. Today they teach to a roomful of pupils just as they did in 1954, so the salary they command has grown little net of inflation.
If teachers want to increase their income, they need to increase their leverage. They could get on the lecture circuit, attract media attention to their ideas, write books, produce educational videos for the mass market, develop a content marketing website around their ideas, and promote related educational products.
The point of these two examples is to illustrate how communications leverage is the bridge that creates marketing value out of networks. Stated another way, marketers use communications leverage with networks to grow their business and multiply income, while reducing risk.
Why Communications Leverage Matters
Communications leverage affects every business and impacts your daily life as a consumer.
Anytime you feel harried with information overload, look no further than the increased reach and reduced costs of communication technology. What started as stamps, a telegraph, and a telegram, was replaced by telephones, telex, fax, and conference calls, which then morphed into smart phones, the internet, videoconferencing, YouTube, podcasting, email, and instant messaging.
Each stage of this process increased access and lowered costs to communicate information, thus lowering risk and increasing profits. The result is tremendous communications leverage for your business, but information overload for consumers.
We’re already seeing limits to how much information humans can effectively process without devolving into distraction. The instantaneous response expectations of today’s zero latency, always-turned-on communications tools have introduced a new level of worker stress.
In fact, some research shows we’ve already exceeded the point of diminishing marginal returns on communications leverage – at least in terms of quality of life, if not business efficiency as well. Today’s always-connected, over-communicated worker is maxed out, constantly distracted, and (often) burned out.
That doesn’t mean you shouldn’t use communications leverage in your business. It just means you’ll want to carefully choose only those tools that deliver the highest leverage for your time while producing the least damaging side effects.
Marketing Leverage: Increase Your Profits
It’s hard to get your message noticed. People have shorter attention spans, there’s more information in front of your customer all the time, and your message is just one of millions that is trying to get through. You have to figure out how to cut through the noise with something meaningful, or it will be too costly to connect with your target market.
The good news is that there are many individual tactics to increase marketing leverage, and they can be simplified into two strategic principles for application: find new customers and increase the lifetime value of your existing customers.
In fact, all marketing and communications leverage strategies for business boil down to just those two goals.
For brevity, here are a few ideas you can use to accomplish each of these goals that reduce risk and increase profits.
Finding new customers:
- Use technology to nurture your sales funnel
- Track and segment website traffic and subscribers according to interest
- Use content marketing to attract people with interests that align with your product or service
- Create an email list and send relevant, valuable content to your subscribers
Increasing the lifetime value of existing customers:
- Cross-sell, upsell, and back-end sell (create interrelated products at different price tiers)
- Repackage and re-purpose existing products
- Sell customers on repeat purchase programs
Summary for Communications and Marketing Leverage
Again, space limitations force this already too long article to only give an overview of all the information and exercises about marketing leverage provided in The Leverage Equation book.
Below are some key points to remember:
- Communications and marketing leverage deliver a low marginal cost for each touch point because it’s generally priced as a fixed expense, allowing you to cost-effectively increase the frequency and breadth of communication.
- It builds brand loyalty and trust by using technology to cost effectively deliver value through articles, courses, videos, and other educational resources.
- It gives immediate data feedback so you can test offers in minutes for minimal cost, then correct and adjust messaging until conversion rate proves cost-effectiveness, thus reducing risk and increasing profits.
There are many tactics to increase communications leverage (upsell, cross-sell, referral systems, joint ventures, automated sales funnels, continuity sales programs, media outreach), but they all boil down to two principles:
- Find new customers.
- Increase the lifetime value of existing customers.
The key to success in communications leverage is knowing how to cut through all the information noise with a meaningful message that serves your customers. Give them something valuable so you’re not just adding to all the noise that already clutters their lives.
Network & Relationship Leverage: How To Employ Other People’s Resources and Connections So You’re Not Limited To Your Own
Imagine you want to travel from Los Angeles to New York.
You don’t need to own the highway or an airline. You don’t need to own a car, rent a car, pay for gas, or even buy an airline ticket.
All you need to do is find someone who wants a car delivered from L.A. to New York or has shipping needs that require an airline ticket for the baggage that you could accompany on the plane. You could provide the delivery service and accomplish your travel goal at the same time – without paying a dime.
In other words, the only thing standing between you and the trip you desire is not money, cars, airline tickets, or gas. You don’t need any of those resources. You just need the network and relationships to connect your goal with someone else’s.
Network and relationship leverage is about shifting your mindset from buying and renting resources to the purposeful cultivation of relationships that exchange value.
That’s a key point so I’ll repeat it – network leverage is based on relationships that exchange value instead of money. It might be contacts, resources, strategies, experiences, referrals, support, or any other form of value that costs the giver nothing but makes a big difference for the receiver. Giving value is how both parties support each other.
It’s an effective leverage tool because at the root of all business is a human relationship. No aspect of business exists outside of relationship, whether it’s customer, supplier, employee, partner, shareholder, contractor, or professional adviser relationships.
All business is human relationship. When you know how to leverage those relationships ethically, you’ll create more business, faster, and with less of your own resources.
But I Don’t Want to “Use” My Friends
Unfortunately, despite the huge potential value of network leverage, many people remain uncomfortable with the whole idea.
- It might feel disingenuous, like you’re analyzing relationships based on their resources and usefulness, rather than based on friendship alone.
- Or it might feel dangerously close to exploiting your friends for profit.
- Some people feel it’s insincere or manipulative—an elegant way of using people.
- Task-oriented workers may feel that connecting with people is little more than a distraction from their “real work” of getting the job done.
All of these criticisms are valid, but only if you approach network leverage the wrong way.
There’s a sincere, non-exploiting, highly productive way to build your network based on giving first that feels natural and appropriate to both parties.
Here are four simple steps you can take to make sure network leverage is done right so you feel great about the business relationships you build:
- Decide who you want in your network.
- Connect with those people.
- Build the relationship over time by giving and paying it forward – never using. Be the first to offer up your contacts and resources before making any demands on the relationship. Play the long game.
- Finally, when the time is right, you can ask for an appropriate level of help.
The best way to go about building these sorts of networks is to commit your time and energy to groups and missions where you share a personal interest. You must be genuinely interested in the networks in which you are investing your time and energy. For example:
- Volunteer or organize volunteers for a community program you believe in.
- Enroll your community in your cause.
- For example, my kid’s school enrolls parents to donate their time in the classrooms, for fundraisers, and for community events to support their children’s education.
- Join (or create) a mastermind group. Leverage and add to the knowledge, experience, contacts and resources of others, plus gain accountability.
- Attend classes and programs that interest you. Meet and mix with the attendees and presenters.
- Teach a program that adds value to your audience and make yourself the hub of that community.
Whatever way you choose to build your network and relationships, make sure that you are adding as much value as you are receiving. That is the key to building genuine connections.
Network and Relationships Leverage Summary
No business exists within a vacuum; all business is done through relationship, which is why relationship leverage is so valuable.
Building a network is worth the effort because strategic alliances with the right people can either make or break your wealth plan. The value of a solid piece of advice at just the right time, or getting the chance to work with someone who has deep experience in your industry, can be game-changing. You lower your risk by expanding your network, and the potential reward can be huge.
Be creative and opportunistic in how you meet people, and build the relationship by focusing your efforts on giving and paying it forward. Play the long game.
Building a strong professional network of strategic contacts is something that can take years. Like investing for retirement or college, what you get out in the end has a lot to do with what you put into it. It takes effort, but the compound return on that effort can make or break your results.
With the right relationships you can accomplish nearly anything. The key is who you know, what you know, and how you ethically apply those resources.
Knowledge & Experience Leverage – How To Employ Other People’s Expertise So You’re Not Limited To Your Own
Knowledge is the foundation of all wealth-generating processes.
Without knowledge, natural resources would just be dormant in the ground. Knowledge is what converts resources into something with economic value.
Similarly, most of the value of manufactured goods is in the knowledge behind the manufacturing processes that create them.
In other words, physical capital owes most of its value to intellectual capital, but the connection ends there because physical and intellectual capital each have very different characteristics.
Intellectual capital is different because it’s created out of thin air, retained, and distributed without any limits. It’s limitless because it’s an infinite resource (unlike land, buildings, machinery). Physical capital is limited to the resources in your control.
In addition, intellectual capital is different from physical capital because each time you transfer knowledge, the recipient is enriched, but nothing physically leaves the creator. Both can possess the same knowledge, thus creating greater abundance.
Physical capital is different because it leaves you when you give it away, making you poorer. Only one person can possess it, thus creating scarcity.
Intellectual capital grows when used and depreciates when not used. Physical capital does the opposite because it gets consumed through use and depreciates in value.
These differences are important to growing your business. Knowledge shared between two people effectively doubles the amount of knowledge capital within your business, and there’s no price to pay for that growth. That makes knowledge leverage a key tool in your wealth building arsenal.
But surprisingly, it’s an asset that’s rarely valued properly, thus opening up opportunity for competitive advantage.
One of the reasons many people misunderstand knowledge as an asset is because physical capital’s inherent limitations have conditioned us to think in terms of scarcity, but knowledge is different because you can give it freely and it can still give back to you. It operates under a different set of economics.
For example, the more I give away my knowledge freely on this website, the more the business grows. The key to lowering risk and increasing reward is to find cost-efficient forms of communication to deliver that knowledge using technology and systems leverage that create more value than they cost. Email newsletters, video, and podcasts are all examples.
The Two Types of Knowledge Capital
Leveraging intellectual capital is important because the essence of business competition is relentless innovation to develop a competitive advantage. The source of that innovation is knowledge.
The idea is to always work smarter, not harder. You hire people smarter than yourself and innovate for greater efficiency. You don’t have to reinvent the wheel to improve. Everything you need to know already exists if you can just find the correct source of knowledge to leverage.
But before we can leverage knowledge, it’s helpful to organize it in two different ways:
- Tacit or Unrecorded – knowledge that only exists in someone’s head, making it hard to leverage through sharing.
- Explicit or Recorded – knowledge that has been documented in some way so it’s easy to share and leverage.
Notice how knowledge and systems leverage connect. A system is where you convert tacit knowledge into explicit knowledge through a business system.
When tacit knowledge is made explicit through documentation or recording, it lowers the cost of distribution. That’s a key point.
That’s why knowledge leverage is also connected to technology leverage, because technology has created an unprecedented growth in cost efficient ways to make tacit knowledge explicit and then distribute that knowledge so it can compound.
Similarly, information sharing is multiplied through network leverage using wireless communications, high speed internet, and multi-media communications.
That’s why knowledge leverage is also related to time leverage. You don’t have enough time to do everything, so you surround yourself with a specialized team of advisors, coaches, mentors, employees, and vendors that deliver the expertise you lack so you can grow your wealth and achieve your financial goals.
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Applying Knowledge Leverage
As mentioned above, you can apply knowledge leverage by hiring an expert. But you can also become the expert by mastering a subject so deeply that you become a high-demand expert in the field. This is an appropriate strategy when your goal is to increase your hourly earning capacity.
The key idea is: you become the expert who knows what others wished they knew, so they gladly pay to leverage your knowledge. It’s the mirror image of the previous “hire the expert” strategy where you become the expert that others hire, increasing your income as a result.
Supply and demand dictates that money follows that which is in rare supply by forcing higher prices. There’s no shortage of ignorance, but genuine expertise that solves high value problems is rare.
That means a proven low-risk path to increasing your income is to compound the growth of your intellectual capital first, and then sell that knowledge so others can leverage it.
The third way to leverage knowledge is to better manage the knowledge already inside your organization. Value that knowledge as a resource that must be managed and leveraged so that you don’t miss any opportunities to improve business processes or profitability through innovative ideas of staff. It costs little, and the rewards can be immense.
Knowledge and Experience Leverage Summarized
Personal knowledge and learning are limited by the time you have available and your ability to comprehend and internalize information. There’s always more to learn than time to learn it. That’s why hiring an expert who lives and breathes the knowledge you require can be such an effective leverage strategy to save you time and accelerate your wealth.
Alternatively, if your goal is to increase your hourly earning capacity, it might make sense to gather the knowledge yourself so as to become the go-to expert that others leverage.
Regardless of which path you choose, knowledge leverage is a strategic way to reduce risk and increase return to accelerate your wealth growth.
In summary, this entire article was a high-level overview of the five “other” types of leverage strategies (besides financial) that are poorly understood. The surprising characteristic of all five lesser-known types of leverage is how they can be used to both reduce risk and multiply return… at the same time!
The full book The Leverage Equation: How To Work Less, Make More, And Cut 30 Years Off Your Retirement Plan covers these topics in much greater detail and includes specific strategies you can immediately put to use in your wealth plan.
Knowing how to apply leverage is critically important because it’s an important part of the “make more-lose less” wealth building framework taught in my Expectancy Wealth Planning course here. This “make more-lose less” framework is contrasted with the conventional financial planning strategy to “spend less-save more”.
The problem with the conventional “spend less – save more” framework for building wealth (that you’ve probably adopted) is it lacks leverage. That makes it extremely limiting because you can end up working as hard at saving money to keep expenses down as you would just making the money in the first place.
It’s a low-leverage strategy that’s totally acceptable if your values align with a belief structure that finds minimalism satisfying, or you love your work so much that you want to spend your lifetime doing it.
But for everyone else who would like financial freedom sooner, an equally valid financial planning alternative is the Advanced Planning Framework based on making more through leverage and losing less through risk management: the “make more, lose less” framework.
There is no right/wrong judgment claiming one framework is superior because they’re both perfectly valid paths to attaining financial freedom.
In fact, most of the wealth plans from my course students include elements of both frameworks because they’re complimentary, not mutually exclusive.
The key point is to expand your awareness of the trade-offs inherent in each path so you can decide what best fits your values and life goals as you design your wealth plan. One approach is low leverage and limiting; the other approach is high leverage and unlimited.
The goal of this education is to help you make a conscious choice that fits your individual needs. Either path can deliver financial freedom, but the process and the outcomes will be radically different.
The good news is if you find the “make more – lose less” framework intriguing, then you now have a high-level overview of the five types of leverage that reduce risk while simultaneously accelerating wealth growth.
Anyone can begin implementing leverage right now, regardless of your current skill level. In fact, you’re already using leverage every day, but may not realize it.
The difference with successful people is they’re consciously prioritizing leveraged strategies at every level of their business, career, and investing to:
- Break through the constraints that limit their success.
- Reduce risk and increase reward.
- Separate their wealth growth from their return on equity equation so that they’re not limited to their own personal capital.
- Break the connection between income growth and hours worked.
The bottom line is if you aren’t making maximum use of leverage in your wealth plan using the make more-lose less framework, then you’re working harder than you should to produce less than you could.
The choice is yours…