Category Archives: Financial Fitness

The Top 10 Mistakes People Make With Their Finances

The Life Wealth Habits subscription was created to supplement the information taught in the Financial Fitness Program. It provides monthly, on-going training sessions to help people develop the long-term habits of the wealthy, and equips students with the knowledge needed to thrive in any economy.

wealth

In a recent Wealth Habits talk, Chris Brady shared some of the financial lessons he has learned over the years and formulated a list of the top 10 mistakes people make with their finances.

Here they are, in no particular order:

  1. People don’t understand what money is actually for.
    • Many people think that money is something that you earn and then you’re suppose to spend it on something that you want.
    • In America, we use something called credit in order to amplify our buying power in order to live a life bigger than what we’ve actually earned.
    • Money is actually security!
      • Money can buy you safety. It can bring you prosperity for the future. You can actually make money that goes out and gets you MORE money. You can have money be your slave instead of you being a slave to money.
    • Money is a stewardship.
      • Money is a tremendous gift and it can do great things in people’s lives. We should be generous with our money in order to help others.
    • Money is the fuel that helps you live your life’s purpose.
      • Money is an enabler of your God-given purpose, and if you waste it, you won’t be able to do the things you are destined to accomplish in life.
  2. People GET IN and STAY IN consumer debt.
    • People fall for short-term gratification.
    • People fall for materialism and status (everyone around them is doing it).
    • People buy-in to the middle class mania that says debt is not only acceptable, but it’s actually necessary.
      1. For example: mortgages, student loans, credit cards…
    • When you get sucked into consumer debt, you become somebody else’s asset.
  3. They listen to the wrong people.
    • Be careful who you listen to. They might be broke.
    • Your income and lifestyle will be an average of the 5 people you hang out with the most.
      • You don’t want to adopt broke thinking.
    • Even worse, sometimes we can get caught into listening to people who are incentivized to give us advice that isn’t in our best interest. Their agenda may not match our agenda.

      “Be careful who you listen to. They might be broke!” – Chris Brady

  4. People spend where they should economize, and they economize where they should spend.
    • They don’t invest in themselves.
      • More often than not, people aren’t doing anything to invest in themselves. They aren’t growing personally, they’re not involved in increasing their skills and ability to do better in life.
    • People let things fall through the cracks.
      • For example: Some people don’t have the proper insurance in their life. They have children but they don’t have life insurance. They’re driving around without auto insurance. BUT, they have the latest iPad.
      • People skip or go delinquent on their taxes.
      • People don’t set money aside to try to generate more cash flow.
      • People will sometimes skimp (tighten up) on little purchases and then binge on a big purchase.
        1. For example: They’ll put their wife on a $5/wk allowance and then go splurge on a Corvette.
  5. They don’t respect and cultivate cash flow.
    • Cash flow is much more important than capital gain and it’s more steady and reliable.
    • You should always look at the ways money can generate more cash flow. Get money working for you.
  6. They don’t save enough and they don’t have an emergency fund.
    • Some statistics:
      1. According to a Federal Reserve Report, nearly half of Americans couldn’t cover a $400 emergency expense without borrowing the money or selling something.
      2. More than half of households have less than one month’s worth of income in a readily available savings account.
      3. Many people have no savings account at all. In fact, almost 30% report having a $0 balance. 62% of people have less than $1,000 in savings. An additional 21% (1 out of 5 people) report having no savings account at all.
      4. More than 25% of people between the ages of 50 and 64 have not even begun saving for retirement.
      5. An estimated 38 million households in the United States live hand to mouth. Meaning they spend every penny of their paycheck.
  7. They don’t save the RIGHT way.
    • They don’t diversify their savings. They have a 401K plat at work and that’s all they have.
    • People hand their money to someone who doesn’t have the same agenda that they do.
      1. They save and put money away but then they pay too much in fees and expenses. They buy into the pop literature of the latest mutual fund and they end up paying huge front-end dollars. Or, they hand their money to some slick guy in a suit who promises to manage their money for them but in the fine print it ends up costing them a lot of money.
  8. They get fleeced by “experts.”
    • They put their money in the hands of someone who has more control over it than they do (because it may be in an area they don’t have any expertise in).
      1. NO ONE will ever care as much about your money as you do!
      2. Don’t ever turn your back on your own money- no one will ever watch it like you’ll watch it.
  9. They don’t stay with an investment plan long-term.
    • The power of compounding gets amazing over time. You want to give it “that time” for it to work. But, for most people, short-term thinking creeps in and people take their money out, move it around, or change strategies.
  10. They don’t start saving early enough, go in hard enough, or stick with it over time.
    • For the older generation, you may think it’s too late to start saving…but it’s never too late.
    • “The single most important thing you can do to achieve financial security is to begin a regular savings program and start it as early as possible. It’s critically important to start saving now! Trust in time, rather than timing.” – Burton Makiel
    • You can only get poor quickly. To get rich (by investing or saving money), it will go slowly, and you have to start now. Slow and steady wins the race.
    • Maximize how much you invest or put in. There is power in putting in as much as possible, as soon as possible, because the power of compounding takes off even more.
      1. For example: One person puts in $20/month for 40 years into an investment and another person puts in $100/month for 40 years- both with a 9% return. The person who put in $20/month will have $94,330 at the end of 40 years. However, the person who invested $100/month for 40 years has $471,650!

We’ve all probably messed up in one of these, but every one of these is under our control. If you can gain control of all 10 of these, you will not only beat the Financial Matrix, you can beat the investment matrix and you can live the life you’ve always wanted.

(Posted by Kristen Seidl, on behalf of Chris Brady)

The information presented on this blog and in any of its videos is for general educational purposes only, and provides information the authors believe to be accurate on the subject matter covered.  It is presented here with the understanding that neither the authors nor the publisher are providing advice for any particular portfolio or for any individual’s particular situation, or rendering investment advice or other professional services such as legal or accounting advice.  If expert advice in areas that include investment, legal, and accounting are needed, please seek a competent professional’s services.

This publication may make reference to performance data collected over various periods of time.  Remember that past results do not guarantee future performance.  Performance data, as well as laws and regulations, change over time, which could affect the applicability of the information presented on this blog and its videos.  Any data presented herein is used merely to illustrate the underlying principles.

This blog and its videos are not to serve as the basis for any financial decision or as a recommendation of any specific investment.

No warranty is made with respect to the accuracy or completeness of the information contained herein, and both the authors and the publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog and its videos.

Life Leadership’s “You, Inc.” Financial Hierarchy or Pyramid

Proper Financial Fitness begins with mastering the Defense, Offense, and Playing Field of money.  For the many satisfied customers (click here and scroll down for textual, audio, and video testimonials) of Life’s Financial Fitness suite of products and services, this is exactly what they have discovered and put to good use.

But there IS more.

Just what do you do with the money once you stop being scammed as a victim of debt and start to instead enjoy the thrill ride of having extra money at the end of the month?  Where do you put it? How do you go about determining which investments might be right for you?

In this quick video shot several months ago in the hot Florida sun, I try to give a quick fly-by of how we present the answers to these questions in our new addition to the series: the Beyond Financial Fitness program.  It covers the concept of the “You, Inc. Hierarchy” or Pyramid of priority for your money.

I hope you enjoy the video, and more importantly, that you find the information useful!

God bless!

Chris Brady

The information presented on this blog and in any of its videos is for general educational purposes only, and provides information the authors believe to be accurate on the subject matter covered.  It is presented here with the understanding that neither the authors nor the publisher are providing advice for any particular portfolio or for any individual’s particular situation, or rendering investment advice or other professional services such as legal or accounting advice.  If expert advice in areas that include investment, legal, and accounting are needed, please seek a competent professional’s services.

This publication may make reference to performance data collected over various periods of time.  Remember that past results do not guarantee future performance.  Performance data, as well as laws and regulations, change over time, which could affect the applicability of the information presented on this blog and its videos.  Any data presented herein is used merely to illustrate the underlying principles.

This blog and its videos are not to serve as the basis for any financial decision or as a recommendation of any specific investment.

No warranty is made with respect to the accuracy or completeness of the information contained herein, and both the authors and the publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog and its videos.

Pick Your Curve – Life Leadership and Power Curve Success

I have often taught that we don’t know what we don’t know. But sometimes, we don’t know what we think we know. And this second condition can lead to erroneous conclusions and frustrated efforts.

When I was a child in elementary school, one of my teachers had the nerve to teach me something I didn’t want to learn. She shared with us how the colorful objects we see really aren’t that color, but rather, the range of light waves of the color spectrum that are reflected by the surface of the item make it appear to be that color.

Woah.

And then my Dad taught me about the “birds and the bees.”

Double woah.

Here I was, cruising along on my BMX bike, wearing tube socks and thinking I had the whole world figured out. And then in an instant I discover that the way I thought everything worked was entirely wrong – twice!

Unfortunately, this condition isn’t confined to childhood. As adults, we are susceptible to the same “knowledge bias.” We think we know how something works when we actually don’t. And usually, we are very cock-sure in our incorrectness. It’s a condition I like to refer to as passionate ignorance. We are wrong, but we are certain we are right.

At Life Leadership, we are in the business of setting people free. For the vast majority of people who are in debt and struggle with their finances, we offer debt freedom through our Financial Fitness product suite. For committed, hard-working high-achievers, we provide a compensation program that authorizes people to sell our products and build teams of people who do the same thing. This is a shot at financial freedom. And, perhaps most importantly, for the few who are disenfranchised, disabled, or victims of disaster, we offer functional freedom through our Life on Life Initiative. We developed this terminology about “setting people free” and the three categories of freedom to explain our fundamental mission and how we strive to offer something for the whole spectrum of people and their particular situations.

But there is more to the story.

Most of us, without even realizing it, think of the world like the old “bell curve” we remember being graded upon in high school. We automatically think people and their performance fall into a normal distribution, or what is officially known as a “Gaussian” curve of distribution. I am sure you are familiar with what it looks like, but here it is nonetheless.

BellCurve

And in the case of the population of people in the markets in which Life Leadership operates, as described above, this bell curve of normal distribution describes very well what we see. A few at the high-end choose to take advantage of our pay plan and actually build the business. Most people are in the middle, merely using our Financial Fitness products to whittle down their debt (these people may or may not be “signed up” in our business). And a few are at the “bottom” of the curve in dire need of our help, because they truly can’t help themselves.

Freedombellcurve

But when it comes to describing the actual performance (read: results) of those who attempt to achieve high-level success, those who embrace our pay plan and determine that they want to use it to make money, things don’t follow the Gaussian bell curve, or normal distribution at all.  For this case, we must dig into the reality of how success actually “works.” You see, when it comes to success, and especially high-level success, what we think we know just isn’t so.

To demonstrate what I mean, let’s consider an endeavor totally outside of Life Leadership, such as being a professional actor/actress instead. The stage, the screen, the lights, the money, and the fame all have a strong appeal on those with such talents. We hear of high paychecks and we see outlandish lifestyles. We see the glitz and the glitter and the glossy gossip magazines. But we all know that only a few are fortunate enough to make it to this high level, and, thinking the bell or Gaussian curve describes the situation, we assume there must be a lot of people, in fact, most actors and actresses, who are somewhere in the middle, with a few terrible ones down at the lower tail of the curve. We all know this intrinsically, and yet we have it wrong!

According to leader of Google’s “People Operations”, Laszlo Bock, in his book Work Rules!, Screen Actors Guild data published in 2008 show that the financial results of actors does not follow a Gaussian curve at all, but rather what is called a “Power Curve” (or perhaps also a decaying exponential).

Power Curve

According to Bock, “Very roughly, the bottom third of active SAG members made no money from acting in 2007, and the next third earned less than $1,000. The next group, between the 68th and 95th percentiles, were paid between $1,000 and $100,000. The 95th to the 99th percentile actors earned between $100,000 and $250,000. And the top 1 percent earned over $250,000. The top 1 percent of the top 1 percent earned even more: Will Smith was the highest-paid actor, with over $80 million in earnings, followed by Johnny Depp ($72 million), Eddie Murphy and Mike Myers ($55 million each), and Leonardo DiCaprio ($45 million).” [italics added]

So for professional actors/actresses, the curve of distribution, roughly plotted, looks like the following:

Actorpowercurve

Notice that it is not the normal Gaussian bell curve at all, as we all would assume it would be, but rather a power curve. Notice also that the super high achievers at the extreme top end pull the average income way above the median. This means that most people are not average, but actually – wait for it – most people are below average! Stop and think about that for a minute. Most people are below average! (Oh! They’re not going to want to hear that!) Notice that fully 1/3 of the actors/actresses made no money! And the next third only $1,000! That’s two thirds of all the actors and actresses making next-to-nothing!

All of this goes against what we think we know. But if you really study this and understand it, you’ll quickly see that this curve for actors and actresses is exactly how success works in all categories where a government or artificial imposition is not placed upon results. Plot the financial results of people in professional sports, country singers, those who launch tech company start-ups, and even authors of books, and the results are similar – following a power curve and not a Gaussian bell curve.

Enter Life Leadership. In November of 2011 we proudly launched our company with world-class personal, professional, and financial development information and service products. We authorized distributors to sell those products for an immediate sales margin of 25% (a higher margin than many professional salespeople are paid), and then added a compensation plan on top of that sales margin to reward them for also building teams of people who did the same thing (merchandise our products and build teams to do the same). We worked really hard to minimize costs to run the enterprise and formulated a pay plan that paid very generously to the people making the sales.

Next, people joined, worked hard, sold our products, and built teams. Some people prospered and made enough money to live on, making the building of our business their professional career. A handful achieved really high levels of income, while many others only made a little. Many signed up and never did anything, riding off into the night after buying our starter kit never to be heard from again.

Each year, we publish a comprehensive “Income Disclosure Statement” designed to show the exact results of everyone who joins, whether they ever worked the business hard or not, or just signed up and rode into the night. And inevitably, someone looks at this data and says something like, “Only the people at the top make any significant money,” or, “most of those people aren’t making any money.” This criticism didn’t make any sense to us, from our angle, because we simply put a compensation plan out there that pays extremely well, and fairly at various levels all the way along the path of progress. It doesn’t discriminate in any way based upon race, creed, color, age, gender, or anything you can name. It is strictly pay-for-performance. So we have tried to explain it in different ways. But still, there will always be someone out there who says, “only a small percentage make the money.”

In a way, we can see their point. Why shouldn’t more people make more money? Why shouldn’t there be a bunch of people making a medium amount, for instance? How come there isn’t a larger percentage of people “in the middle” making the money our pay plan delivers for those levels? We’ve got a pay scale that rewards effort along the entire journey! And the 25% sales bonus is paid to everyone at every level no matter how long they’ve been with the company or how big their business is. What gives?

What gives is that our population of Life Members is not properly described by the Gaussian bell curve we all carry around in our heads, but rather by the Power Curve that depicts the results of all true performance-only systems (such as professional acting described above). Leave people free to achieve and perform in any endeavor, and you’ll get a power curve. Life Leadership and its compensation plan are no different.

This is very important to understand, and it applies to all areas of life, not just participation in Life Leadership’s compensation plan. High achievers are way ahead of the rest of the pack, and their results skew the scale and pull the average way above the median. What this means is not that one should avoid undertaking a performance-based endeavor, but rather that one should not falsely impose an erroneous bell curve in order to “analyze” the “odds of success.” With power curve situations averages are misleading because they are pulled upward by the lofty achievement of the top performers. And in true performance-only situations, there is no comfortable middle where a large percentage of the participants can hang out and do “pretty good.” Ultimately, one either makes it within the upper 1 or 2 or 5th percentile, or one doesn’t see much reward (at least financially speaking). As we said before, just apply this reality to professional sports, the arts, business start-ups, direct sales, and the like, and you will see that it is true again and again. Our false application of the bell curve simply won’t properly describe these “free to perform” situations. Such a map, in essence, doesn’t match the territory.

This is simply how the world works. In fact, the only alternative is to create a system wherein outside forces eliminate the upper possibilities based upon performance so that everybody instead gets a decent result but nothing big is available for high achievement. This, in fact, is exactly what most jobs provide. In such scenarios you will never hit it big (it’s not even available), but you can count on a steady flow of at least something for the fat middle of the pack. Some will get a little bit more, others will hang out at the bottom, but most people will be kept clumped together in the comfortable middle.

And this brings us full circle to the exact reason we launched our company in the first place. We wanted a legitimate alternative to a closed system of enforced mediocrity. We wanted to provide a legitimate shot upwards, without restriction, that would be available to anyone who chose to work that hard, learn that much, and stay at it that long. As cofounder Orrin Woodward often states, “We don’t promise easy. We just promise worth it.”

So ultimately, we have two choices in life. Find a closed system with outside forces that artificially impose a safe and “comfortable” bell curve, a situation with no chance of high highs but very little worry about low lows. Or, conversely, enter into a power curve situation where there is not much reward unless you perform mightily. It is one or the other.

It is ultimately up to each individual to choose which is right for him/her, and what God has designed and called him/her to accomplish. Just don’t apply bell curve analysis to a power curve situation and call it “unfair,” or a “scheme” or a “pyramid.” And then likewise, those who live in the power curves of life shouldn’t denigrate bell curve situations for being stifling and without upward mobility. Each is for whom it’s for.

Just make sure you choose wisely. Bell curve people are miserable in power curves, and power curve people are miserable in bell curves.

Pick your curve and live it with verve!

Sincerely,

Chris Brady

Smile - Version 2

The information presented on this blog and in any of its videos is for general educational purposes only, and provides information the authors believe to be accurate on the subject matter covered.  It is presented here with the understanding that neither the authors nor the publisher are providing advice for any particular portfolio or for any individual’s particular situation, or rendering investment advice or other professional services such as legal or accounting advice.  If expert advice in areas that include investment, legal, and accounting are needed, please seek a competent professional’s services.

This publication may make reference to performance data collected over various periods of time.  Remember that past results do not guarantee future performance.  Performance data, as well as laws and regulations, change over time, which could affect the applicability of the information presented on this blog and its videos.  Any data presented herein is used merely to illustrate the underlying principles.

This blog and its videos are not to serve as the basis for any financial decision or as a recommendation of any specific investment.

No warranty is made with respect to the accuracy or completeness of the information contained herein, and both the authors and the publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog and its videos.

Financial Fitness from Life Leadership

Are You Ready to Get Financially Fit?

Sincerely,

Chris Brady

The information presented on this blog and in any of its videos is for general educational purposes only, and provides information the authors believe to be accurate on the subject matter covered.  It is presented here with the understanding that neither the authors nor the publisher are providing advice for any particular portfolio or for any individual’s particular situation, or rendering investment advice or other professional services such as legal or accounting advice.  If expert advice in areas that include investment, legal, and accounting are needed, please seek a competent professional’s services.

This publication may make reference to performance data collected over various periods of time.  Remember that past results do not guarantee future performance.  Performance data, as well as laws and regulations, change over time, which could affect the applicability of the information presented on this blog and its videos.  Any data presented herein is used merely to illustrate the underlying principles.

This blog and its videos are not to serve as the basis for any financial decision or as a recommendation of any specific investment.

No warranty is made with respect to the accuracy or completeness of the information contained herein, and both the authors and the publisher specifically disclaim any responsibility for any liability, loss, or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog and its videos.