Foundational Principles of Wealth-Building
Because we aim for above-average financial outcomes, we focus on some main tenets which are often counter to conventional, mediocre investment advice.
How did we get this way?
Read our Origin Story.
Do You Crave The Freedom To Choose How You Spend Your Time?
If so, then we know that our objective must be to facilitate and expedite your Financial Freedom.
Financial Freedom begets Time Freedom, which affords you the opportunity to do what you love without worrying about the bills.
We help you in part by checking a few key boxes when it comes to saving and investing.
Here are some of them:
- Investor Knowledge, Mindset, Beliefs, and Actions.
- Cash Flow First
- Liquidity, Control & Access to Capital
- Leverage, Arbitrage & Your BVM
- Flexibility, Agency & Optionality
- Assemble a Team
Investor Knowledge, Mindset, Beliefs, and Actions.
“Invest in what you know. Know what you’re investing in. The best hedge against loss is YOUR understanding. Once you know how stuff works, you’ll know what to do.”
-Aaron David
People will always try to convince you to invest your money in things you don’t fully understand.
We help you avoid these “investments,” or we’ll help you understand them.
By understanding your investments, you can increase returns even as you decrease risk.
In many cases, there is more risk in the investor than in the investment.
Usually, your self-education and your own business are the best investments you can make. We’re proud to be one of the few advisors that can help in these areas.
Cash Flow First
“Financial Freedom is measured in hours, not dollars.
Hours are earned back with each dollar you can get from your assets rather than your time”
-Aaron David
Why do we invest for positive cash flow before accumulation and appreciation? Simple. Because only spendable income from your assets will pay your bills for you and give you back your time. Asset appreciation can’t do the same.
You can never retire or buy groceries with your high net worth – unless your equity produces cash flow.
- We find ways to increase cash flow
- Positive cash flow = savings
- Savings are invested wisely
- Wise investments produce more positive cash flow (income)
- Investment income gives you back a corresponding amount of your time
- The cycle continues
Unfortunately, most professionals will advise you in the “Accumulation Model” which is often in their best interest due to the way they are compensated, but rarely in your best interest. Accumulation is de-emphasized in the Cash Flow Model because it comes later.
There are three big problems with prioritizing the accumulation approach.
- Cash flows away from you rather than to you. It’s expensive!
- You’ll often reduce liquidity and give up control of your capital for no tangible benefit. It’s masochistic!
- It encourages speculation over profit and financial products over winning processes. It’s reckless!
Liquidity, Control & Access to Capital
“Hand over control of your money, and you’ve handed over control of your time.”
-Aaron David
We help you maintain control of your own capital, gain access to other people’s capital, and wisely put it to work for your benefit.
Many advisors and commercial banks are incentivized to convince you to put your assets under their control.
- They arrange to have you give them as much of your money as possible – systematically, over the longest term possible. (eg. part of every paycheck for 30 or 40 years)
- They’ll hold onto it for as long as possible, and they will give you back as little as possible or make you jump through hoops to get at it. (eg. mortgages and retirement plans)
Bad deal! Just look at the way the average retirement plans or loans work with their rules and penalties.
Let’s say you were to pay an extra $10,000 towards your mortgage today. Would it reduce your monthly obligation? What if you saw a great investment, or had an emergency tomorrow which would cost $10,000. Would it be easy to take your money back out to make the investment or handle the emergency? Fat chance. It’s locked away from use. Have fun paying 20% interest to the credit card company, (it may possibly even be the same bank you have your mortgage with.)
On the other hand, when you maintain access to liquid capital, you can pounce on great opportunities quickly without incurring penalties, waiting for paperwork to clear, or undergoing a lengthy underwriting process to use your own equity.
Leverage, Arbitrage & Your BVM
“First you work only for money. Then you learn to work with money. Finally, money works for you… and so do its kids!”
-Aaron David
There are many classic banking practices seldom taught to the public. We teach you to cultivate the conditions where money works best, to maximize what each dollar can do on your behalf.
We can also help you determine your Baseline Value of Money (BVM) to avoid unnecessary money leaks and lost opportunities.
- Sometimes paying off a debt will give you your best return.
- But sometimes paying off a certain debt is a bad idea because by keeping the debt, you’re able to leverage other people’s money and profit from arbitrage.
You may have asked yourself: “Should I invest, or pay off debt?”
Once you determine your BVM, your next actions become clearer, and many financial decisions become a no-brainer.
Flexibility, Agency & Optionality
“Make ‘passive’ an option, not an obligation.”
-Aaron David
We help you ask yourself the right questions to maintain maximum optionality when it comes to your investments, limiting your downside risk and greatly increasing upside potential.
Some investments are more passive and some are more active. “Passive” sounds really good, and it definitely can be. But it’s often a requirement in many “off-the-shelf” investment products rather than an option.
For example, if the stock market were to crash, people might tell you that it “went on sale.” Now you can buy low in order to sell high later. Do you buy?
If you decide to buy, you’re now in a situation where you must passively wait for the discounted stock to increase in value. Could you actually do anything to add value and increase a stock price after buying it at a discount? No.
In this case, “passive” is another way of saying “completely out of your control.” The only options you have in this situation are to
- keep waiting or
- stop waiting and sell.
Now let’s look at a different situation. A situation where we maintain more optionality. If we bought an old house “on sale” while the market was down, couldn’t we actively do things to increase its value?
- rent it out
- repair, update, restore, renovate, remodel it
- advertise & remarket it
- landscape it
- hire property management
- change property management
- manage it ourself
- raise rents
- lower rents
- place tenants in vacant units
- get rid of problem tenants
- change access to the property
- subdivide and sell part
- subdivide and sell it all
- demolish the structure and build a bigger one
- refinance
- pay it off
- start an elder care facility
- sell with owner financing
- do vacation rentals
- smoke the “hope-ium,”, cross our fingers, and pray that market conditions cooperate and cause the asset to appreciate by itself with no involvement from us, etc.
We got options, baby! Options! Even if the value fell further still, we could still be making regular profits by renting the property!