Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 14 August 2015

Take a Financial Leap!

"Take a Financial Leap"

The first copies of my third book Take a Financial Leap are back from the printing presses.

Look out for it hitting the bookstores in the next couple of weeks.

You can read more about the subject matter covered on my publisher's website here. You can also buy the book online there now too.

By the way, you can also buy my new book on Kindle via Amazon, or on Apple i-Books etc.

As implied by the sub-title, my third book takes a look at the three golden rules for financial and life success, these being:

-understanding the pleasure-pain principle;

-mastering the 80/20 rule or "Pareto's Law"; and

-using the awesome power of compounding growth to achieve your life and financial goals.

As you can see, it's quite a chunky book, but isn't a particularly technical piece.

Rather I look at some easy-to-understand concepts using real life examples to explain how personal finance and investment success can be a relatively simple prospect, provided that we adhere to some basic rules and take a reasonably long term outlook.

1 - Pleasure and pain

The pleasure-pain principle holds that as humans we will often do more to avoid short term pain than we will to secure longer term pleasure. 

As we likely all know from experience, it's not too hard to get into the habit of directing credit card statements directly into the waste paper basket rather than facing the pain of reading them in detail!

Delayed gratification and spending less than you earn is naturally a key facet of personal finance and investing success.

But there is also another less obvious aspect to this principle, and that is that if we enjoy what we do for a living are truly passionate about it, then surely we will do a better job and in turn be more successful at it.

For this reason, I spend plenty of time in early part of the book discussing goal setting and designing exactly what your ideal day would look like.

How would you spend it? With whom? Where? And doing what?

To experience true life success, why not consider ways in which you can turn your "vacation into your vocation" through building a career or business around your life's passion?

I dedicate a significant chunk of the book towards discussing how you can achieve what many today seem to believe is impossible - replacing a salary income with investment income and small business income.

I know how difficult this might seem to some readers.

Impossible, perhaps.

Without a doubt, it certainly seemed impossible to me when I was in my 20s and working in professional practice as a Chartered Accountant.

I was addicted to the monthly pay cheque, and in fact I couldn't see any feasible manner in which my life could ever be otherwise.

But through using the third principle outlined in the book - compounding growth - to build and snowball your investment portfolio, slowly but surely you can build your net worth towards a position where you no longer become so reliant upon a monthly pay cheque.

It's not a quick fix or a get rich quick plan. It does take time and it definitely requires a level of sacrifice.

But through delayed gratification and persistence it absolutely can be achieved over time.

In particular, the third section of the book is dedicated specifically to a practical discussion of how you might be able to set up a small business in the field of your passion from scratch and without a huge initial investment of capital. 

2 - The 80/20 Rule

Many readers will be familiar with the concept of the 80/20 Rule. 

That is, that most of life's results (or outputs) are derived from a handful or small number of the decisions and actions (inputs).

This doesn't mean that we should just casually do a few important things and forget about everything else.

The 80/20 Rule can and should be a far more empowering principle that that!

Instead, we should find the few key strategies and actions that are working for us and are delivering results...and resolve to do even more of the same by doubling down on them.

This is very much true in investment, and indeed, it is true in life itself.

In small business instead of trying to be all things to all people, consider who your best customers are and resolve to find more like them.

Around 80 per cent of your revenue and profits will probably be derived from 20 per cent of your customers or 20 per cent of your products.

On the flip side, you will almost certainly find that 80 per cent of your complaints and problems will be derived from 20 per cent of your customers or products (and they won't be the same ones).

Instead of forever trying to think of new ideas and products to bring to the market, why not ascertain which is your most profitable product and promote it more widely?

If unsure about how best to build your business sucessfully and profitably, find someone who has already achieved what you want to and learn from them.

This concept has a name - it's called "modelling". The concept can be used right across a business. 

In the share markets I discuss how it can pay to find low-cost, diversified products - such as low-cost index funds and Listed Investment Companies (LICs) - where fund managers are not sucking up a sizeable chunk of your returns in fees, and contribute regularly to them.

It's such a very simple strategy, but one which should form the core of any investment portfolio.

In property investment due to the leverage involved we naturally tend to make fewer decisions but much bigger ones - the 80/20 Rule in action once again - and so I discuss in some detail how you can go about making sure the decisions you do take are also the right ones. 

3 - Compounding growth or "snowballing"

The third golden rule is an understanding of compounding growth - growth upon growth.

It's the most important concept there is for investors, who must understand how to build upon past successes in order to snowball their wealth.

The same is true in small business and other areas of our life too.

For investors I'm a strong advocate of acquiring quality assets in both the share markets and capital city property markets which can be held on to for as long as you live, continuing to deliver income and capital growth in perpetuity.

Indeed, this related to yet another concept I introduce in the book.

Instead of trying to build a retirement portfolio which will hopefully last just about as long as you live, why not instead consider implemeting a plan which aims to build wealth throughout your lifetime...or even beyond your own lifetime so that you can leave a legacy?

This is another mindset shift which I introduce and explore in Take a Financial Leap.

Gosh I'd better wrap it up there as I seem to be in danger of churning out a blog post which is half as long as the book'll have to buy the book to find out more.


Take a Financial Leap