One of our favorite CPAs, Tom Wheelwright of ProVision Wealth, agreed to let us share the following article. Tom is author of Tax-Free Wealth and the founder of Wealth Strategy U, a membership site that answers tax and other wealth-related questions. Here’s Tom:
How To Add Leverage To Your Wealth Strategy
Leverage is simply doing more with less.
When I mentioned leverage in this context, money is what people think of most often. Loans, mortgages, other people’s money – all are forms of leverage based on money. While this type of leverage is important, it is equally important to use other forms of leverage in your wealth strategy.
Here are a few examples of other forms of leverage to use in a wealth strategy:
Leverage Strategy #1: Education
Education is my favorite form of leverage. As you increase your knowledge, you decrease your risk and increase your return.
Leveraging the knowledge of others through education can help you avoid mistakes and keep your wealth strategy on the right path.
This is the reason ProVision has an entire website dedicated to financial education – Wealth Strategy U. Education is a necessity in every wealth strategy.
[Like our friend Tom, this is also the reason why at Partners for Prosperity, we keep writing and publishing books and other resources! – Ed.]
Leverage Strategy #2: Systems
I think systems are one of the most important and powerful features of a wealth strategy.
Systems are the process or procedures to complete specific tasks. Systems provide the detail of the who, what, when, where and how something will be done.
Think about a franchise. One of the greatest values franchises offers is its systems. The systems provide all the details about how to market, sell, fulfill and everything else involved in operating that franchise. A franchisee simply has to follow the systems.
Let’s say you invest in rental real estate. You should have systems for:
- Identifying the property to buy
- Purchasing / financing the property
- Renting the property
- Maintaining the property
- Reviewing the performance of the property
Systems don’t have to be complicated. They just need to document what needs to be done in a clear manner. Systems can be as simple as a checklist.
When your systems are created, used and monitored properly, they will tell you when things are working and when they aren’t working. This allows you to focus your attention where it is most needed – this is a huge form of leverage in a wealth strategy.
Leverage Strategy #3: Your Wealth Team
Systems definitely take time to create. You don’t have to do it all yourself, though. This is where your wealth team comes into play.
One of the best examples of leverage in a wealth strategy, and also one of my favorites, is a wealth team.
A wealth team is a group of advisors, mentors, employees, vendors and other contacts who assist you in building your wealth.
With a wealth team, you can leverage your time by hiring advisors, mentors, employees, and/or vendors. But the leverage doesn’t stop there. This is just the beginning. You can also leverage your wealth team’s contacts, their resources, their knowledge – the list goes on and on.
Use your wealth team to help you create your systems. Leverage their resources and expertise to add value to your systems.
Once you’ve created your systems, share them with your team members so they can be part of the systems and contribute to the success of your wealth strategy.
[When you’re ready to expand your wealth team, we’re happy to help you find a tax professional, an estate planner, a credit restoration team, or whatever you need, just reach out to us at firstname.lastname@example.org if you need a referral. – Ed.]
Leverage Strategy #4: Software
Software is a wonderful form of leverage. Software allows us to do more with less every day.
Software can be an integral part of effective systems. When used properly, software can streamline many tasks while providing better information and results.
Software can be the driving force behind the systems. It can notify the who about the what, when, where and how. And, it can provide real-time reports about how the systems are working. These reports are what help you stay in control.
[At Partners for Prosperity, we’ve developed a spreadsheet called the Prosperity Profile that we use in The Prosperity Pathway, our fee-based financial advising process. It is invaluable to be able to track where you are, financially, on a single page! – Ed.]
Leverage your team’s knowledge – ask them what software you should be using. And, if you truly want to leverage your software with your systems, have a team member who is committed to integrating the two.
The Leverage in Your Wealth Strategy
Think about how you currently use these forms of leverage in your wealth strategy and identify ways that you can leverage them even more.
Focus on your wealth!
Our headline says FIVE ways to add leverage to your wealth strategy, but Tom only listed four, although he mentioned the first thing that most people think of when they think of leverage… leveraging your money. We thought we’d share a specific way to do that in our conclusion below. – Ed.
Leverage Strategy #5: Velocity
Stagnant water that’s been sitting still in a pool with no movement is not healthy. Stagnant blood in the body is a critical sign something is wrong. And stagnant dollars slow down your personal economy and decrease your cash flow.
The faster your money moves, the better. You want to increase the velocity of money by bringing your dollars “through” a financial vehicle rather than just “to” it.
The goal of much financial planning is, unfortunately, accumulation of dollars TO an asset, where your money will just sit. It’s literally trapped sometimes, held in place for decades until withdrawals begin, until you turn 59-1/2, or until you’re prepared to pay the taxes and penalties to free it.
With whole life insurance, dollars don’t just go “to” your insurance policy to sit. Your premium purchases a death benefit and builds cash value. Some of it comes back to you – or is added to your cash value – in the form of dividends. And your cash value can be leveraged by borrowing from the insurance company… while the dollars you’re borrowing against are still accumulating and growing.
In this way, money can move “through” life insurance, not just “to” it. When you see a worthy opportunity, you can put money in motion and leverage the dollars you already have.
We’ve seen policyholders move dollars to:
- private equity funds that generate ample cash flow to repay the life insurance loan with a healthy profit,
- investment real estate, which offers further opportunities to grow equity that could be leveraged, and
- education, mentorship, and other personal or professional development opportunities that help you better leverage your own value.
“Move” is the sixth of our 7 Principles of Prosperity ™, because you accelerate your wealth-building when you increase the velocity of dollars by moving and using them.
Leverage Our Resources!
Learn about all seven prosperity principles through P4P’s complimentary Prosperity Accelerator Pack. It’s fantastic information you can leverage to create more wealth!
And thanks again to Tom Wheelwright of ProVision for allowing us to leverage his good thoughts!