Financial Certainty

TWS FF 7 | Financial Certainty

The Pursuit Of Financial Certainty And Happiness with Will Street – Part 2

March 1, 2019 Patrick Donohoe Podcast 00:26:18 Comments Off on The Pursuit Of Financial Certainty And Happiness with Will Street – Part 2

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TWS FF 7 | Financial Certainty

 

In this second part of Financial Friday, we are still with wealth strategist Will Street as we move on to talking about the pursuit of financial certainty and happiness. We examine a scintillating article published by the Business Insider, detailing a woman’s insight by studying 600 millionaires on the effects of where you choose to live to building wealth. We discuss the importance of putting one’s happiness and where they find meaning in life to the equation of wealth-building. Learn how to balance financial certainty and security with real life, taking into account friendships, family, and environment. Know that we don’t have to give up the enjoyment of right now to the mirage of the good life in the future.

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The Pursuit Of Financial Certainty And Happiness with Will Street – Part 2

Financial Friday

We are in part two. We started with part one last episode. We’re going to continue with a scintillating article. I’m here with my friend, Will Street. It’s an interesting article from Business Insider. It is the insight a woman had by studying 600 millionaires and she discovered where you choose to live has two effects on your ability to build wealth. First off, we’ll recap the last episode. What did you think of the last episode? How did you like that discussion?

To recap it a little bit, it was good because we talked quite a bit about building wealth in the right way and building it from the base up and talking about uncertainty. Where a lot of people go wrong is they thirst after this uncertainty, but they seek it out without having the proper foundation in place. Not every financial decision is going to pan out. If you’re out and about in search of success or financial freedom or whatever that means to you and when you come across one of those scenarios where it doesn’t pan out. If you don’t have the right foundation to fall back to, that’s when things become difficult for people. You shared a couple of examples of some of those failures, the Puerto Rican fish farm. You got to do the due diligence. Things aren’t always going to work out. In fact, often things don’t work out exactly according to plan. The best that you can do is put yourself in a position to weather the storm and to have the right type of foundation, the right base and to keep moving forward.

You should always try to live within the possibilities, not the limitations – Will Street Click To Tweet

The other point that you made that I thought was super compelling was this idea about tier two. We used as examples a couple of tier two assets, real estate investments, starting a business. The investment in ourselves and finding something that drives us. Finding something that gives us purpose and meaning and the value that it brings as we feel that sense of drive to get out of bed and make it happen. If that’s what is driving us, more often than not, we’re going to have a whole lot more in the tank to be able to push forward and be successful.

It’s the distinction between escaping. Most people are pursuing retirement, which is the escape of what they’re doing because they wouldn’t choose to spend all of their time working in what they’re doing. They’d rather spend their time somewhere else. They’re trying to escape from that. We advocate the discovery of doing meaningful things. I referenced some Tony Robbins material that says that the most fulfilling life comes from discovering that meaning and then spending 50% to 60% of your time doing that, not all of it. That’s where you look at people that retire and are miserable or people that achieve tremendous wealth and then decide to take their own life.

Where that true, that core meaning wasn’t discovered. Money or success or something else they thought was going to help them to discover it, where it’s the other way around where you can discover it without achieving wealth. This is something that’s not talked about when it comes to financial planning or financial advice or what you should do with your money and I think that it’s a tragedy. Most typical retirement planning solves for a specific end, which I don’t think is the end that people are seeking. Let’s get into some typical financial advice by a woman who studied 600 millionaires and she discovered where you choose to live has two effects on your ability to build wealth.

Here are a couple of her claims. She says the key to wealth building is to live in a home that one can easily afford. If you live in a pricey home and neighborhood, you will act and buy like your neighbors. The more affluent the neighborhood, the more the residents spend on almost every conceivable product and service. If you’re high income-producing, high-consuming neighbors roll up to the driveway in a BMW or a Mercedes-Benz, it’s likely you’ll feel the urge to do the same. The pressure to keep up with the Joneses can also be affected by lifestyle creep. The tendency to spend more whenever one earns more. First off, let’s take her perspective. What is she saying? What is she trying to allude to when it comes to a person’s ability to build wealth?

One of the natural tendencies we have as humans is we value community. Click To Tweet

The common expression that you hear is somebody who’s house-poor. She’s saying, “Don’t be house-poor. Don’t spend or don’t buy a house that uses up more than a certain percentage of your disposable income. That’s a term that is somewhat familiar is this idea being house-poor. That’s the first piece, the size of your mortgage relative to your income. The second is if you live in this neighborhood and you see the neighbor across the street rolled up in a new 7 Series BMW, my 3 Series is not adequate anymore. I need the 7 Series. I need the S-Class Mercedes. I can’t resist that urge. If I see that my neighbor has something that I don’t, I’ve got to keep up with him or her. We’ve got home automation, swimming pool in the backyard, we’ve got it all. Pickleball court is the latest. “My neighbor’s got the pickleball court. I need the ball court. I’m going to spend it, even if it means I’m spending now what I would otherwise save.”

One of the natural tendencies we have as humans is we value community. We value friendships. We value relationships. If you live in a certain neighborhood, you want to be a part of that. I don’t think there’s anything wrong with it. She categorized that the wrong neighborhood, then you are most likely going to spend more than you make and you’re going to get into financial trouble. That’s what she’s alluding to. You’re not going to save and then you’re going to affect your future or ruin it, or both. Consider billionaire investor Warren Buffett. He lives in a modest house worth 0.001% of his total wealth. This is a commonly held perspective. I understand the accumulation of wealth. If you spend less, you’re going to accumulate more. It’s hitting on the financial principle, not the lifestyle and the meaning behind where you live and the memories and the experiences. It approaches it from a purely economic standpoint.

TWS FF 7 | Financial Certainty

Financial Certainty: Your home is not an asset because it does not produce cashflow.

 

The thing with economics is it doesn’t take into consideration human behavior. She’s saying that human behavior, you’re going to spend less and you’re going to have more to accumulate. Is there anything that’s lost? This is where we’ll pivot to the other side of the coin when it comes to home ownership, the home that you live in. I’ve heard it as your home is not an asset. Robert Kiyosaki talks a lot about that because your home doesn’t produce cashflow. Someone else isn’t paying your mortgage, you are. You’re putting money into the maintenance and you’re putting money into upgrading this and upgrading that. You have to have Mercedes-Benz and BMWs. I look at the value of living in a nice neighborhood, the value of living in a nice home and what value that provides you when it comes to lifestyle, meaning, memories, family, etc. What do you think of the other side of the coin? How could you say, “I see what you’re saying, but here’s another opinion?”

I see what you’re saying is this idea. It’s the Dave Ramsey budgeting. Is budgeting generally a good idea? To tip our cap to her a little bit, it would be generally should you not spend every disposable dime that you have on a mortgage? The flip side of that coin is that also doesn’t mean that you should live in a studio apartment if you don’t have to. You don’t need to live in a trailer park if you don’t have to. There’s something to be said about a good safe neighborhood with good schools and a good community feel where it’s safe to walk on the sidewalks at night and spend time together as a family. The other flip side to this hyper-focus on budgeting and saving and as most people probably do, you probably have met people in the past who are hyper-focused on saving a nickel. They drive 30 miles to save a nickel on gas. The rational person would be like, “What did you do? Why did you do that?”

Your environment has more to do with your experience of life than you think. Click To Tweet

The flip side there is you can take it to the extreme, where generally, are there some good core principles there? The flip side to that is the happiness piece, the safety piece, the security, the peace of mind. Especially when you consider how much time you spend at home with your family and the experiences all of us want to have with our families. Your house is the key component of that. You can do all that without obsessing over the neighbor’s car and making sure that you put in the pickleball court that’s slightly bigger than your neighbors.

These are all good points. I’m going to continue on with this perspective, hitting on some different things. I understand this person’s point of view and she makes valid economical points. At the same time, if you look at what life is about according to me and it’s different for everybody. I’ve had lots of clients. There’s a period of time within a year that they had divorces, eight or nine people all got divorced and they were around the same age as me. One, in particular, hit home to me because he had made the statement, “All the work I’ve done, everything I’ve done has all been for my family and now they’re gone.” He built tremendous wealth. He worked all the time. I look at that and his intention was genuine. His actions didn’t necessarily correspond to that. You look at a home and where you live. It’s like, “That’s what gives life meaning is the memories and things you can do with your family.” I’d also say the friendships that you have.

TWS FF 7 | Financial Certainty

Financial Certainty: Your environment has a lot to do with the ideas that are in your mind, the expectations you have of yourself, and the questions you ask others.

 

If you look at living in an affluent neighborhood, it’s affluent for a reason. They may drive BMWs or Mercedes-Benz, but the conversations that I’ve had with people in my neighborhood, I would not have had in another neighborhood. I look at my neighbor next door. I’ve had some fascinating conversations with him. He runs a microfinance bank and he consults with countries. He does a lot of work in Myanmar, Asia and Africa. It’s fascinating to have these conversations with him. He’s a computer programmer by trade. Those are the conversations. Those are the things that you can learn and be inspired by people. I have a neighbor that lives across the street and he’s been a successful attorney. What he knows and the books that he’s read. I have incredible conversations with him and we’ve made other friendships as well. I look at what’s the price of those relationships? What’s the price of those friendships? What ideas have they given that would not have come by living in a neighborhood that was 0.001% of your income? I looked at that and there are many intangibles associated with it.

Getting to this person’s point, how can you have both? How can you be responsible? How can you have the experience of life right now, not waiting 30 years or 20 years down the road to retirement where you are able to have the permission slip to experience life? This comes down to your financial education. It’s understanding a financial statement, money in, money out. If you can’t afford the neighborhood, it isn’t, “We have to live in another neighborhood.” It’s asking the question, “How can I live in that neighborhood? How can I live in that home?” That starts to engage a part of your brain where you start to look for opportunities. You may not be able to live there at this point or this point, but at some point, you may be able to live there. It’s the pursuit of that because you figured out ways to make more money. I look at the home that we live in.

We’ve lived in the same neighborhood for many years. This is the third home in the neighborhood, but I lived on the outskirts for a number of years. We almost moved a few times, especially during the financial crisis but it’s because this neighborhood is somewhat affluent neighborhood and it’s because I had established relationships there. I had friendships there and I wanted to also have a nice house for my family and also a happy wife because happy wife equals happy life. It was one of those things where I could have taken the money that went into a house and invested it. I would have had more money, have more cashflow, at the same time, I wouldn’t have had the experiences with my family.

You look at what that does to your soul, what that does to your drive. It can affect many different things. That’s the conversation that’s not typically had with these types of articles. They give you this, “Step one is to make sure that your mortgage payment is less than 20% of your earned income,” which are always technical steps and there’s merit to some of those. It’s disempowering because it almost assumes that you’re at the income level you’re going to be for the rest of your life and you better deal with it. If you want to retire one day, you better scrimp and save and not enjoy life until you’re 65. I don’t think that’s the right mentality. They may not say that’s what they mean. That’s the feeling you get.

You're one idea away from a totally different life. Click To Tweet

That’s where the motivation comes from where in order to build wealth, you don’t figure out how to earn more and be more valuable, but you scrimp and save based on the money you are earning. That’s the only money you’re going to earn. That money there is going to somehow compound and grow and you have enough money to live for the rest of your life at 65. It’s a narrative that is disempowering. Looking at our perspective, it doesn’t mean that you need to go out and buy a beautiful home and BMWs and Mercedes, but you need to start asking different questions. There’s merit to her perspective. There’s also merit to the other perspective. Hopefully, you’re seeing that. You sit on the edge. It’s up to you to determine what’s right for you at this point.

I can resonate with a lot of what you said about the neighborhood that you live in. For us, we moved a few years ago. It wasn’t to try and get into some fancy neighborhood where we wanted to be surrounded by a bunch of gazillionaires or anything like that. For us, it was family. We live within about a mile or so of my wife’s two brothers. The result of that is we live in a neighborhood that we love, that we’re comfortable with, that’s a good neighborhood. The interaction with our kids among their cousins and holidays and things like that, it’s a completely different dynamic.

The thing that’s interesting is for me, I didn’t grow up like that. It’s one of those things where I would have been stuck in that old mentality. I would have imposed this artificial ceiling on myself that, “We can’t do that. We got to take where we are right now, assume that that’s our maximum and operate from that level and below. We can’t do that.” My wife helped me stretch a little bit and see opportunity, meaning and value. Now that we’re there, my kids are having a completely different experience as kids from what I had. The family is so much more critical, so much more part of their everyday lives than it was for me. I wouldn’t trade that for anything. It’s huge.

Your environment has more to do with your experience of life than you think. It’s the environment, whether it’s where you live, the culture of your office and the social networks that you’re in. Those are environments and that environment can make life miserable or it can totally empower you. It can also stretch you. I’m going to give you one example. This was a long time ago, but after my sophomore year of college, I went to a hockey camp in Minnesota. It was sponsored by the Anaheim Ducks. It was a humbling experience because I was in an environment of these Triple-A players. There are a couple of pros there, it was a camp where it was training but also spotlight. I remember getting out onto the ice the first time and the speed that they were warming up. For me, it’s the speed of a game where it was all out. What it did, it raised my level of play because I was in an environment that stretched me. I believe that anybody can be stretched. Anybody can make more of a difference tomorrow than they did now.

A lot of it depends on the environment that you’re in. Some of it depends on your internal drive and what you want for life, your vision, your mission. Your environment has a lot to do with the ideas that are in your mind, the expectations you have of yourself, the questions you ask yourself and the questions you ask others. You’re one idea away from a totally different life. You’re one decision away from a totally different life. Your environment influences a lot of that. That’s why I try to go to events. I try to participate in mastermind groups. I try to be around individuals who are inspiring, who are pushing the limits, that doesn’t settle for the status quo. That inspires me, it helps me stretch. If I didn’t have that, it would be more difficult for me to do that. What do you think of part two?

We dissected it pretty well. There’s always a second side or even a third.

Life needs to be valued and celebrated. Click To Tweet

It’s one of those things where I find it disheartening sometimes that people sacrifice the enjoyment of life right now for what I consider a mirage of the good life in the future. Sacrificing now, I don’t think you’re suddenly going to have an amazing life when you retire or you achieve success. Life needs to be valued and celebrated.

I think so much of those limitations are mental. I can remember as a kid growing up where I had some friends who were better off than we were financially. They came from amazing families. I got to see from the inside. I had friends whose families were awesome and who included me in a lot of what they did, vacations and stuff like that. I got to be able to see it from the inside. My parents were that limiting frame of mind. They would refer to my friend’s families. It was with some jealousy and with, “We could never afford to do that. It’s nice that they can do those types of things, but we can’t do any of those things.”

I was living in an environment where I was hearing all these limitations, but I was spending a significant amount of time within these other environments where I was seeing everything that was possible. It’s not like they were burning $100 bills for the fun of it because they had so much money. It wasn’t anything like that. They prioritized what was important to them and they lived within that framework. Early on in my teenage years, I consciously made the decision what I wanted. I wanted out of where I was, that mindset, those limitations. I wanted to gravitate toward what my friends’ families had. The number one reason why I went on to become an attorney was that my best friend’s dad was an attorney. I saw the family dynamic. I saw the lifestyle. I saw what they did together as a family and what I didn’t do. I bee-lined it straight for that.

The idea was nurtured over the course of time, but it may have come in one experience. Those ideas can come frequently if you’re in the right environment. That happened to be the circumstance at the time for you. You can intentionally be in certain environments that can inspire you, stretch you and push you beyond what you consider your limitations. Hopefully, this has been a valuable episode for you guys. It’s setting the stage for some future ones that we’re going to do when it comes to investment and also some other financial strategies. Thanks for joining us. Make sure you go and listen to our past episodes as well as our primary episodes. We’ve had some awesome ones, G. Edward Griffin, Lawrence Reed, it was fun interviewing those guys. The topic’s capitalism so learn about capitalism. We’ll see you on the next episode. Thanks.

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About Will Street

TWS FF 7 | Financial Certainty

Will earned his Bachelor of Arts degree from Brigham Young University in 2005. After graduating from BYU, Will attended the University of Iowa College of Law and received his Juris Doctor in May of 2008. Will began practicing law with the law firm of VanCott, Bagley, Cornwall & McCarthy the oldest and one of the most well-respected law firms in the State of Utah. Will’s practice focused primarily on consumer finance-related litigation, consumer finance transactions, sale and purchase agreements, NDA’s, RFP’s, teaming agreements, security agreements, creditor’s rights in bankruptcy, and estate planning. Working directly with clients to analyze a problem, develop a solution, and working to ensure a successful resolution are what Will enjoyed most about being an attorney. Will comes to Paradigm after nearly six years in the private practice of law.

After his exposure to the Infinite Banking concept and seeing that his legal training would be directly relevant to his role at Paradigm, Will made the decision to leave his practice. Paradigm allows Will to continue to do what he enjoys most – develop client relationships, dissect problems, create solutions and work collaboratively with the client towards a successful resolution. Originally from the Tri-Cities area of Eastern Washington, Will currently resides in Salt Lake City with his wife, Sunny, and their three children.

 

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TWSFF 06 | Financial Certainty

The Pursuit Of Financial Certainty And Happiness with Will Street – Part 1

February 22, 2019 Patrick Donohoe Podcast 00:27:20 Comments Off on The Pursuit Of Financial Certainty And Happiness with Will Street – Part 1

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TWSFF 06 | Financial Certainty

 

Everyone wants financial freedom, but not everyone is willing take responsibility to create one for themselves. Wealth strategist Will Street enlightens everyone on the importance of taking ownership of your finances. We can never be certain of the risk, but not taking the risk will not get you anywhere near financial certainty. Will shares stories of risks taken by investors and what we can learn from it. Failure is inevitable, but what makes a difference is rising up, learning from these failures, and having the will to continue the pursuit of financial certainty and happiness.

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The Pursuit Of Financial Certainty And Happiness with Will Street – Part 1

Financial Friday

I’m here with my good pal, Will Street. How are you doing, Will?

I’m good. It’s been a while since I’ve been on a podcast.

It’s going to be a fun one because we’re going to talk about the context of some of the guests we’ve had on so far for Financial Friday. We’re going to review an article probably as a part two that is going to help us prove or hits home some of these points. I look at finance and I look at it from probably a different perspective than most and I think you’re starting to grasp that. You had the legal background and practiced in the financial sector as an attorney, which gave you a perspective and then being here for a few years now. You’ve worked with a lot of individuals personally, but you’ve also heard things about the situations of people when it comes to finances. It’s helped you fine-tune perspective when it comes to what financial success is and what it isn’t. Talk to that briefly. What have you seen as the reasoning behind what creates success for people financially? What gets them into trouble, gets them to make bad investment decisions or financial decisions?

TWSFF 06 | Financial Certainty

Extreme Ownership: How US Navy SEALs Lead and Win

I finished reading the book, Extreme Ownership by Jocko Willink. I’ve read/listened to it. I had it and then I listened to the Audible version driving into work. The whole premise behind Extreme Ownership is you own everything. If there’s something within your sphere of influence, as a leader, he’s talking about it from the Navy SEALs perspective. You don’t cast blame on other people, you own it.

It’s your responsibility, your stewardship.

If something isn’t going right, don’t point fingers at somebody else. Look at what you could have done better to improve the outcome. To go back to your question, many people nowadays are passive when it comes to what they do financially. They assume that somebody else, whether it’s the government or Wall Street or businesses or whoever has their best interest at heart.

They’re competent to give them the advice that they should trust.

Things didn’t go well. Immediately, they look outward to try and cast blame on somebody else. My philosophy that has evolved over time is this idea that if I want to get somewhere financially or if a client wants to get somewhere financially, it’s got to start with us. It’s got to start with what we know, with what we understand, with what our objectives are and putting together a game plan to get there. It’s no one’s responsibility more than it is our own. That’s something that I didn’t understand the notion of Extreme Ownership in the beginning, but as people get into trouble it has to do with not taking an active role in what they do financially. Making assumptions that things will fall into place a certain way, that somebody else is looking out for their best interest and them not doing nearly what they need to do to take ownership of their own.

You’ve got to realize that all human beings, number one, we’re fallible. We all have opinion and we all have a perspective. Opinion and perspective can go hand-in-hand. Individuals tend to delegate responsibility to others, especially when it comes to things that they don’t understand. It’s easy. That’s the easy button. If they’re competent, they have experience and you don’t have to go through the trouble of learning everything, it makes common sense. That’s where most people get in trouble. What do you do? If you don’t have all the time in the world to study every single financial decision that you make, what’s the route that you take?

On this show, we’ve had individuals that represent a commodity type of investment. We’ve had Gene Guarino, who I’ve known for a long time. He has a new fund and investment in a cool niche part of the real estate industry. We’ve also had note investing guys in here. If you go to the Cash Flow Wealth Summit, the first presentation of Financial Fridays was my presentation at the Cash Flow Wealth Summit, which hits on a lot of this. We have the Hierarchy of Wealth, which helps to categorize where investments are. A lot of the categorization has to do with what you understand or the degree of certainty and control you have over whatever the financial decision is, whatever the asset is. In the Cash Flow Wealth Summit, we’ve had every type of real estate investing you can think of. We’ve had FlipNerd on and Mike Hambright on there. We’ve had Mobile Home. Andrew Lanoie was on as well for Financial Fridays.

These are all sorts of investment ideas, their perspectives, the little niches that people have and they’re presenting opportunities. You and I both know that there are a lot of opportunities out there that don’t end up the way that they were intended. That’s where I’ve tried to hit on this notion of instead of asking about the details or features and benefits of the actual underlying investment, it’s also to start to look into the business itself. The operations, the people involved because that’s where it starts to fall apart. There are some other things that you can do. That’s how I look at finances. I never try to discount anything.

When somebody claims or somebody says their perspective, I don’t say, “You’re right and I trust you,” I say, “That’s an interesting perspective and that’s valuable to me regardless of what the perspective is.” I start to ask some questions about it and verify if it’s a valid piece of advice if it’s a valid claim or not. That’s where we’ve used the three sides of the coin where you have heads, tails and the edge. Heads are one opinion, tails are the other opinion and then the edge is where you sit to make the most informed decision. As you’ve looked at investment opportunities and made financial decisions for yourself, what are some of the things that you do consistently that helps you make an informed decision?

You don't cast blame on other people, you own it. Click To Tweet

The image that I have in mind is the Cash Flow Wealth Summit is this financial buffet of all different options and different strategies, tools, experts, companies and things like that. What a lot of people tend to do when it comes to their finances is they’ve got their tray and they take a little scoop of this, they take a little scoop of that. Then they get back to their table and then start to dig into it, but there’s no rhyme or reason to it. There’s no forethought given to what they’re going to do and how these various elements might interact with each other. It goes back to your point about everyone has a perspective. Everyone has some background, some knowledge and some familiarity with something. Everybody has somewhere to start. What I try to do is recognize that, “I don’t know everything, but I do know something. I know what my risk tolerance is. I know where my interests are.

I know generally where my goals and objectives are. I can start to put together a strategy that will start to point me in that direction as opposed to taking a little bit of this, taking a little bit of that, throwing it against the wall and hoping that something sticks.” Instead of taking that buffet approach, doing some analysis of, “What do I know? What am I drawn to? What am I interested in? Do I have any prior knowledge or experience or expertise with certain assets or asset classes or companies and starting to build from there?” I love the hierarchy because it does give us our blueprint for how to build our financial game plan. If we don’t have tier one established, if we don’t have the foundation securely in place, we’ve got no business jumping to the tip-top of the hierarchy. You’ve got to start it and you’ve got to continue it in the proper sequence.

Here’s how I look at it. It’s made me think about the idea and principle of certainty. It’s like human beings have this drive toward both certainty and uncertainty. Uncertainty is variety. It’s doing new things. It’s experiencing going on a roller coaster. We have this internal drive to do that. Sometimes, choosing from the buffet of financial options, it appeals sometimes to that internal drive. That’s why we’ve developed the Hierarchy of Wealth is because the foundation is certainty. That’s where we have certain characteristics and criteria. We teach the wealth maximization account and we use that for the characteristics that it has. Above that is when the degree of uncertainty sets in. There are three tiers above that. There’s tier two, tier three and tier four. In each level up, the degree of uncertainty increases. The idea is once your foundation is set, now it can properly balance the pursuit of this uncertainty, there’s a variety of different things that you may do. Let’s talk about tier two and tier three and some of the characteristics there. I’m going to use some examples as far as some bad decisions that I’ve made and also some bad decisions that I know clients have made, actual experiences. How do you look at tier two?

If I’m walking through the hierarchy with clients, which I do. The way that I explain it is where each layer, each tier that we’re building on top of the previous, there’s a little bit more risk or a little bit less control or a little bit less certainty with the previous. We don’t have a license to take on a bunch of uncertainty and give up a bunch of control if we don’t have the most secure, the most control and the least amount of risk established. For me, that’s that bottom layer. As we’re stepping into tier two and maybe it’s a little bit less certain, a little bit riskier and a little bit less control, I’m going to look at assets like real estate. Real estate’s a broad category in and of itself. For me, what I define as a good solid tier two asset would be the good buy and hold, three-bed, two-bath rental property. Going back to my own experience and my own expertise, my wife would tell you I have basically zero construction knowledge, expertise and ability. I’ll mess up an Ikea piece of furniture. That’s how bad I am.

In other words, I’ve got no business in a flip because I have no idea what needs to be done. I don’t know if it’s being done correctly. No clue, no concept. That is outside of my area of expertise, I understand buying a property. I understand what metrics to look at when it comes to rent relative to purchase price and some of those things. A good solid tangible asset like a piece of real estate or rental property is a fantastic tier two asset for me, or for somebody else, it might be starting a business. It’s something that you have control over. It’s something that you can impact. You’re not surrendering control to somebody else. You’re not leaving it up to chance. When you wake up in the morning, you’re not looking at the ticker and finding that, “The market is in the toilet now,” and you had no control. That’s not a tier two asset. We’re looking at something that might be a little bit less control, a little bit less certain and a little bit more risk than that bottom layer. We want to be careful about how much additional risk we’re taking on or how much uncertainty we’re moving into. At least that’s my philosophy.

TWSFF 06 | Financial Certainty

Financial Certainty: A good solid tangible asset like a piece of real estate or rental property is a fantastic tier two asset. It’s something that you have control over.

 

I’m going to deviate. This comes to some stuff I’ve been thinking about. I don’t want to get into failures and some bad decisions that I’ve made and clients have made. I look at some of the events that occurred in the last couple of years. You had Robin Williams commit suicide. You had Kate Spade and Anthony Bourdain. There are others as well. The thoughts that I’ve had is here you have individuals, you have human beings who achieved what some people are after. People are after what they consider financial independence, financial freedom and to be at a certain level. To be successful here, to be successful there, to have a lot of money here and a lot of money there. I would argue that that’s financial freedom that might not be freedom. Tier two for me is a lot of investment in yourself. I look at where people are at and a lot of what they want to become independent from or free from. It’s something that they don’t like to do, but that doesn’t mean that you shouldn’t do.

I’ve joined an inner circle of Tony Robbins, which is called Platinum Partnership. I’ve been listening to a lot of his material. There’s something that hit me and he said, “For a fulfilling life, you have to spend between 50% and 60% doing meaningful things.” It’s the discovery that I don’t think most people ever venture to do. Meaningful things are something that drives you, something you’re inspired by, something that you know makes a difference and aligns with who you are, your talents, your abilities, your strengths. The discovery of that is part of tier two because one of the things is potentially starting a business. Retirement is an idea of escaping something. You stopped doing what you don’t like doing, but it doesn’t mean you shouldn’t do because a part of you dies when you’re not contributing. I look at the meaningful things that people do and what drives them and why they thrive. It’s not because they make a lot of money but because there’s another interest in it besides that.

Tier two is where you can take assessments. You can take StrengthsFinder 2.0. You can take Kolbe, DISC and Myers-Briggs. There are a number of them out there. The idea is to understand more about you. It’s also to dig deep and start to pay attention and put some glasses on where you can see the world and the things that you enjoy doing, the things that make a difference. It’s starting to pursue a business that revolves around that. If you look at tier two, some of the criteria are things that you have more control over, but still have an element of uncertainty. Real estate has that, but at the same time, there’s still a degree of control that you have especially with how you determine markets. How you determine rents and values. How you determine down payments. How you determine mortgage payments versus rents. It’s one of those things where it doesn’t take a rocket scientist to have a good piece of real estate. It’s somewhat passive.

You look at other investments to make. There’s an article that I wrote a few years ago and I mentioned the idea in the book, which is how to get a 10% raise for life. Most people get a 3% raise. If you look at a 30-year career, someone that makes $100,000 will earn shy of $5 million total earnings with a 3% increase yearly. If you make a 10% increase yearly, the earnings are almost $17 million. It’s a huge difference, a little over $11 million. What’s the difference between someone that gets a 3% raise and someone that gets a 10% raise? 3% raise is because of the cost of living. It’s standard. If you look at 10%, it’s because somebody has figured out a way to create more value in either that capacity or another capacity. They get a certification. They learn management. They learn leadership. They learn how to do marketing. They learn things that create more value for an employer or for customers. That’s the idea. That opportunity is available to everyone. It’s where you have the most control when it comes to taking risks or delving into the realm of uncertainty.

It’s one of those things where all of us can think about times where we’ve done something meaningful. Maybe it’s giving to a charitable organization or serving in some way. The feeling of invigoration that comes from that, it makes you fire on all cylinders. If you can start to make that a part of what you do as a matter of practice, how much more driven are you going to be to get out of bed in the morning to work harder, to be better, to produce more. Think about somebody who’s stuck in a job that they don’t enjoy and how deflating that is and demotivating and difficult life can be and unhappy. Flip that completely 180 degrees the opposite and you start to invest in yourself and to fuel what drives you. That’s huge.

Let’s talk about some failures. We’re hitting on things that we’ve hit on before. It’s going into the context of what’s the purpose of being financially successful? What’s the end result to escape or to support or help to buffer doing the most meaningful things according to what makes the biggest difference in your life and in other people’s lives? The failure side of things, I look at all the decisions you make. You want to have trustworthy people in your life, but at the same time you have to look back and say, “Everyone has fallibility.” They make mistakes. They make bad calls. Rarely is an investment opportunity going to tell you not to invest with them. You have to look at that and that essentially gives you the area in which you can ask questions. You can dig a little bit deeper. You can verify. You can check and use your financial education to make a decision. Oftentimes, that comes as the result of not doing it. You can say, “That guy sounds like a credible guy. I’ll write him a check.” These are mistakes that I made a number of years ago. This was probably 2004, 2005.

I remember I was invited to this person’s house. In Utah, there are two things that happen at people’s houses. The first thing is it’s like MLM or network marketing company. They try to have you sell the vitamins or the juices or whatever, or it’s some investment or business. I’ve been to both. I didn’t grow up here, but I learned whenever you get that call, “I have this business I did. You’re a business guy. I think you should come and attend.” It’s one of those two things. This was an investment one. The investment opportunity was a fish farm and they had this proprietary way to breed fish. It sounded cool and the name of the company that did it was Winsome. That should have been a sign. It was a $20,000 investment and I never saw anything from it. It was a group of people that was in Sandy. It was about 30 minutes away. It’s an investment that went bad. The actual fish farm existed, it’s just that they had nobody to sell the fish to.

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What was cool was this guy went to prison. This was a few years after this occurred. It was right during the time where I had tons of different failure business-wise. I was called into an FBI office. There’s a building here in Salt Lake and in the building, there are three floors of FBI. I went in there and there were no signs or whatever. I go into a huge boardroom and there are people everywhere, plus there were people on conference calls. There’s this horseshoe thing and I come in. They asked me questions like, “How did you hear about this guy? What happened? How much did you invest? What type of communication did you receive from him?” It was an interesting experience. I learned more about what this guy did. It wasn’t just people in Utah. There were a bunch of other states.

It’s one of those things where every single person that gave this guy money and it was millions of dollars. It was done by trusting that he knew what he was doing. Nobody asked questions about, “Who are your customers? Do you have contracts? Can I see those contracts? Let me see the business plan. Who else is on your team? Who’s doing the marketing? Who’s doing the operations? You’re in Texas so who’s running the thing in Puerto Rico?” It’s one of those things where nobody was asking those questions. All the questions were, “What’s the rate of return? When am I going to get my money? Do I get it monthly? Do I get it quarterly? How much is it? Could I get more?” All had to do with the financial details, not the principles, the values and the operations. That was one of the more crazy investments that I heard of.

I’ll give one that will make everybody laugh. This was in 2018. We started getting lots of people who were interested in cryptocurrency. You’re talking to them and explaining the Hierarchy of Wealth and how to position assets. People started to tell us that they were refinancing their homes and cashing out everything and putting their money in Bitcoin. This was when Bitcoin was probably $18,000, $19,000. They were convinced that Bitcoin was going to $100,000 and that was going to be the key to their retirement. This is an example that sounds ridiculous, but it was happening a lot. It was a number of instances. There’s another one too, which is the Iraqi Dinar. This was probably a few years ago when we started to get these types of calls where people were like, “I’m coming into this large sum of money, which is to the tune of potentially $500 million. I need a place to put that.” I’m not going to get into the details of that, there’s plenty of information online. Individuals, the uncertainty that they’re in pursuit of is natural. It’s not like people wake up one morning and like, “I’m going to go pursue uncertainty.” It’s one of those natural drives that compel us to want variety. We realize that, but at the same time once you realize it you have to position things so that you don’t let that get in the way for making good decisions.

TWSFF 06 | Financial Certainty

Financial Certainty: You want to have trustworthy people in your life, but at the same time you have to look back and say, “Everyone has fallibility.”

 

I would say there are a number of people I talked to that have lost money, lost investments and they value what we do a lot more than those that haven’t lost money, but at the same time, I look at that as a powerful tuition. It’s an investment and it’s an investment in your future. I got off the phone with a guy. He was a dentist. He was successful and made bad decisions. It costs him $500,000. He was like, “I want to make up for lost time.” I was like, “You didn’t lose time.” You gained time if you think about it because you learned some valuable lessons that are going to be essential as you expand your practice and as you raise your family and as you determine what your future looks like. You’re going to have so many financial decisions throughout your life, whether it’s purchase decisions, whether it’s investment decisions or whether it’s what you do with your career.

We advocate that having a foundation of certainty, which consists of financial education as well as certain assets and structure that allows you to buffer the uncertain decisions that you make. That’s where you start. It’s also to understand the values and the principles that underlie all of these decisions. Sometimes that’s the discovery of your strengths, your purpose, your mission, your calling and the pursuit of that meaningful work. We are going to be reviewing an article of a woman who studied 600 millionaires and she discovered where you choose to live has two effects on your ability to build wealth. We’re going to talk about that. We’re going to take the contrarian. Her opinion’s heads, this is tails. Stick with us until the next episode for the second segment of Financial Friday with Will Street. Thanks. We’ll see you in the next episode.

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About Will Street

TWSFF 06 | Financial Certainty

Will earned his Bachelor of Arts degree from Brigham Young University in 2005. After graduating from BYU, Will attended the University of Iowa College of Law and received his Juris Doctor in May of 2008. Will began practicing law with the law firm of VanCott, Bagley, Cornwall & McCarthy the oldest and one of the most well-respected law firms in the State of Utah. Will’s practice focused primarily on consumer finance-related litigation, consumer finance transactions, sale and purchase agreements, NDA’s, RFP’s, teaming agreements, security agreements, creditor’s rights in bankruptcy, and estate planning. Working directly with clients to analyze a problem, develop a solution, and working to ensure a successful resolution are what Will enjoyed most about being an attorney. Will comes to Paradigm after nearly six years in the private practice of law.

After his exposure to the Infinite Banking concept and seeing that his legal training would be directly relevant to his role at Paradigm, Will made the decision to leave his practice. Paradigm allows Will to continue to do what he enjoys most – develop client relationships, dissect problems, create solutions and work collaboratively with the client towards a successful resolution. Originally from the Tri-Cities area of Eastern Washington, Will currently resides in Salt Lake City with his wife, Sunny, and their three children.

 

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About the host

Patrick Donohoe

Patrick Donohoe

CEO Paradigm Life

Patrick is the President and CEO and started Paradigm Life in 2007 after learning from his mentor Kim Butler about financial strategies outside of Wall Street.

With a background in economics and marketing, Patrick immediately realized the opportunity to teach investors, business owners, professionals and families on a large scale using modern digital media and communication technology. Since 2007 Paradigm Life has worked with thousands of individuals in all 50 states.