Leverage:
60% of a Watermelon or 100% of a Grape?
Inspired by: Naval Ravikant
Recap
In my last newsletter, I went on a rant on how possible it is to make more money by leveraging your time, money, work, and efforts.
Most of us are either lacking time or money sometimes both but there’s a way you can leverage what you have in either situation.
How to take advantage of the Mindstorming Exercise, a simple but challenging mental exercise that can awaken your creativity and critical thinking at the same time.
I go into more detail about how you can leverage:
time if you don’t have money
money if you don’t have time
simply being alive if you don’t have time or money.
Here are the best scenarios to use the Mindstorming exercise:
Improve your Business
Build Wealth
Enhance Relationships
Become a Better Parent
Become a Better Athlete
Lose Weight
Lastly, how to work with intention and long-term vision not just working for money.
I cover it here in my
Wealthy & Relaxed Newsletter that you can read here.
Table of Contents
Pull the Lever Kronk!
3 Forms of Leverage
Get The Most From Leveraging Labor
How I Leverage Labor
Time Management is BullSH*T
How Do I Make More Time?
Saving for a Down Payment
Abundance Mindset
Scarcity Mindset
Leverage is a form of DEBT
New Feature: Feel free to click on any topic and it’ll take you there!
Pull the Lever Kronk!
Emperor’s New Groove will forever be a classic!
I wanted to go deeper into leverage since it’s the key to all wealth and exponentialgrowth.
In this newsletter, I’m going to talk about how we can use leverage in our everyday lives to begin building our wealth.
In my definition
Leverage isusing money, behavior, talent, or any resource and advantage that you have to achieve a goal and make more money.
Leverage comes in many different forms and you can leverage anything to gain more.
Before I adopted the investor’s mindset, the definition of Leverage made me think about manipulation and exploitation, making everything a victim.
Rather than giving in to the cynical mindset ingrained in many of us, I looked into the difference between the two. I hope I didn’t strike a nerve there and if I did, it must have some truth that conflicts with what you believe.
Cognitive Dissonance can be a b*tch but it’s a step toward open-mindedness one of the many keys to success and a fulfilling life. Before I get too off-topic, back to ‘Manipulation vs Leverage’
I actually looked into the difference between ‘manipulation’ and ‘leverage’.
Manipulation:
Deception
Lack of Consent
Hidden Agenda
Exploitation
Negative Consequences if brought to the light.
If I deceive another person for any reason, I’m taking away their fair choice (lack of consent) to find what I need from them and use it (exploit) to achieve my own goals (hidden agenda).
That’s manipulation, I don’t and will never condone it.
Now, Here’s Leverage:
Transparency
Strategic
Mutually beneficial
Positive Consequences
If I start a business, I’m getting traction and my clientele begins to increase. I’ll look to hire an assistant. I’ll let the candidate know that I’m looking for an assistant and here are the job duties (transparency), and I’ll pay them 10% of earnings for each client, they bring to my business (strategic & mutually beneficial).
There’s a huge difference.
I felt the need to explain this because most people tend to have an unhealthy relationship with money and employment to a point where employment isn’t seen as an opportunity for both parties to benefit but exploitation.
3 Forms of Leverage
In business, there are 3 main forms of Leverage:
Labor, the oldest form of leverage
Capital, the most powerful form of leverage
Digital Leverage: Code, Media & Digital products, the newer form of leverage
The difference between these main forms of leverage is,
Labor and Capital are permissioned leverage.
Digital Leverage is permissionless leverage.
Labor Leverage:
you need someone to agree to work under you, you need their permission to employ them.
Capital Leverage:
even though you have your down payment for your real estate investment, you need the bank’s permission to pay the rest until you can pay them back.
Digital Leverage:
I didn’t need anyone’s permission to create this newsletter you’re reading.
Feel free to share with your friends, family, and colleagues by just hitting the share button below, thanks in advance.
Also, I didn’t need anyone’s permission to create my e-book on Wealth Building through Cryptocurrency.
That’s available here: https://lbriscoe.gumroad.com/l/SmFQm
Leverage is a force multiplier.
Leverage is like having a helping hand that makes your work easier and gets you better and more results in less time than doing it all by yourself.
The purpose of leverage is to use what currently you have, to gain more in less time.
Leverage allows to push past the limits of your health, wealth, relationships and happiness at scale.
How to Leverage Labor
There’s only so much you can do as 1 person,
you can only work x amount of hours a day
you can only take on x amount of clients at one time
This is stopping your business from growing so you leverage other people’s time and efforts by paying them a portion of what you’re making.
This will free up your time to scale your health, wealth, relationships, and most of all happiness.
Holding on to every dollar can be the very thing that’s holding you back.
Owning 60% of a watermelon is way better than owning 100% of a grape.
- Mark Cuban
Get the Most out of Leveraging Labor:
The purpose of leveraging labor is to give you more time to accomplish more and grow.
Time is of the essence when it comes to employing someone.
The moment you stop efficiently using your time to make more money and better your situation is the moment you begin to default.
I used the term “default” because you’re on borrowed time until you can pay it back in either the same form of currency or another form.
Here’s How I Leverage Labor:
Most of my time I spend:
creating content
creating investing blueprints to sell to others
studying stock charts to improve my trading
networking with high net worth individuals who give me advice and teach me how to scale my business
creating systems to make my decision-making on investments and life choices quicker and more efficient.
Working 9-5
The more time I invest in these skills, the more my business flourishes, my life becomes streamlines, and my skills improve, increasing my value across the board.
In turn, making me eligible for higher income opportunities
The goal is to dedicate as much time as possible to these skills, but I need to create more time, and that's where leveraging labor becomes crucial.
Time Management is BullSH*T
Time management is bullsh*t, it entails managing the little time you have but what if you can make more?
How Do I Make More Time?
Simple, I pay someone to do these time-consuming things.
Laundry:
It takes hours to wash, dry, and mainly fold laundry
Solution:
I downloaded the “Poplin” app, a pick-up & drop-off laundry service. They charge $45 for 3 bags (56 lbs) of laundry, which would’ve taken me 3 hours to wash, dry, and fold.
$45/ 3 hours = $15/hour.
If you’re spending your time investing in skills that pay more than $15/hour or a business with unlimited upside, it would be wise to just pay someone $45 to do your laundry.
Grocery Shopping:
it takes time to go to the store, go grocery shopping, load up the car, unload the car, put the food away, and cook the food.
Solution:
It doesn’t sound like a big deal to someone whose time isn’t valuable but if your hourly rate was $150/hour would you:
stop the clock to go grocery shopping
pay $60 for Instacart
$22 to get a meal doordashed to you.
Good way to think of right?
At $150/ hour you can probably pay someone to meal prep every week for you.
When it comes to leveraging labor, yes it gives you more time but you’re on borrowed time. If you don’t use that time wisely, it’ll cost you opportunities and that’s the biggest expense of all.
How to Leverage Capital
Leverage is the most important component in Real Estate.
How to Leverage Your Money to Build Wealth in Real Estate:
You have to know how much money you’ll need to buy your first property.
If this is your first home, you’re eligible for the FHA loan.
It’s a type of loan for first-time home buyers, depending on your credit score, you’ll be eligible for a 3.5% down payment.
Think of it like this, for every $3,500 you can save you can buy $100,000 worth of real estate.
This is the power of Leverage, getting more for less. You see how this can not only motivate you to start saving your money but also how powerful leverage can be the more money you have.
The next thing, that might come to mind is how do I get the money? The upfront cost is always the biggest challenge for people. The reason why there are more renters than homeowners, most don’t have enough for a down payment not because they don’t have the chance to get it but because it’s simply poor money management. They have theopportunity to save for it but they just can’t keep it.
When buying real estate you’ll have to prepare for 2 types of upfront costs and 3 types of recurring costs:
2 Types of Upfront Costs:
Down payment = 3.5% of the purchase price
Closing costs = 1-3% of the purchase price
Note:Closing costs can be added into the loan easily but I would be prepared for it just in case.
Example:
If you’re interested in buying an investment property with a purchase price of $200K.
3.5% of $200K = $7K for down payment
3% of $200K = $6K for closing cost (you may not have to pay)
total = you’ll need to save $13K to buy $200K worth of Real Estate that your tenants will pay off for you.
That’s a hell of a deal, just do your part and save the $13K
3 Types of Recurring Costs:
Monthly mortgage payment
Utilities
Home Owner’s Insurance
The upfront costs you can save up for and not worry about it anymore.
For recurring costs, save up for an emergency fund. Aim for at least 2 months' worth of expenses to cover vacancies.
To find out your mortgage payment, I typically use a mortgage calculator.
Click here for the calculator.
Here’s the mortgage on a $200K rental property with 3.5% down
Real Estate Tip:
Location & Curb Appeal will always keep tenants in your home.
Choose a home in a safe area, close to a thriving city for job opportunities.
Listen, I’m not going to make this sound remotely easy; you’ll need to earn
more money and minimize unnecessary bills for at least a year.
The best part about it is not only will you have a 6-figure asset in your name but you only need to come up with the down payment once, and then you can use it repeatedly to acquire more properties.
Your paycheck is determined by how valuable your skillset is not by how long or hard you work; the easier you are to replace the less you’ll get paid and competence only goes so far without niche certifications, rewards, and acknowledgments to back it.
Learn how to grow your value & income
Click here to read my Financial Breathing Room Newsletter
During this period of saving for a down payment, I will rarely promote downgrading your lifestyle like most people would.
There are a few things that are a bit excessive like eating out more than once a week or paying an expensive car payment. Otherwise, you can keep your Netflix subscription.
Saving for a Down Payment
If a $25/month subscription can dictate whether you’ll be successful or not, you probably were never going to be. Sorry.
- Lawrence Briscoe
Abundance Mindset
Making more money opens up an abundance mindset the thought of enjoying your current living situation and making more simultaneously.
I’m not saying don’t budget but when we want something innately, we go towards cutting bills instead of thinking “How can I make more?” and that’s the difference between the consumer mindset and The Investor’s mindset.
Desire abundance, seek to expand, and prosper. Embrace the notion that having more isn’t bad. Remember: You’ll embrace having more once you truly believe you’re worth it.
- Lawrence Briscoe
Scarcity Mindset
Cutting your basic living expenses as your first line of action when achieving a goal unconsciously contributes to a scarcity mindset and that’s not what we want.
If you continuously cut off what you have, to get more out of you’re current income.
That’s just a prescription, a temporary fix, a band-aid for the symptoms and not a solution to the root problem which is becoming more valuable.
- Lawrence Briscoe
Learn a high-income skill, hone the skills you currently have, turn your W-2 into a 1099, and sell your knowledge. Make everything you do available for other people to buy & enjoy! In turn, making more money.
How to make more money and create some breathing room.
Click Here to read: Financial Breathing Room Twitter thread
Click Here to read: 6 Ways to Make $1000 in a Month Twitter thread
How to Invest in Real Estate on a Budget.
Click Here to read: 2 properties, 1 tight budget Twitter thread
Leverage is a form of DEBT
Now that we discussed the upside to Leverage.
Let’s give that same attention to the ‘potential’ downside.
Leverage is directly related to debt.
When you leverage, you're borrowing resources like money or time until you can repay them with the same or different form of currency.
Inherently there are risks to using leverage but there are risks to everything in life, every decision we make is a risk even if it isn’t related to monetary gain. After all,
❝
Life Is Poker Not Chess
- Annie Duke
Avoiding risk probably makes you feel safe until you realize safety is an illusion.
I could hit you with the ol’ “no risk = no reward” which is true but it’s much deeper than that.
Every goal, aspiration, purpose, and fulfillment has a level of risk and uncertainty, it’s inherent.
The bigger the dream, the bigger the goal = the more risk will be involved.
Avoiding risk is avoiding purpose.
A life without purpose is just no way to live.
❝
I’d rather live 30 years full of adventure than 100 years sitting in the corner.
- Jim Rohn
Here’s something to note,
Digital Leverage isn’t directly related to debt.
That’s why tech is taking over but that’s a conversation for another day.
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You never know, who you might inspire.