In the movie Waterboy, Adam Sandler’s character finds himself on a football team that once dominated due to a coach’s ingenious playbook of trick plays. The advantage was lost when a rival stole the playbook, highlighting how pivotal these strategies were.
This narrative offers a compelling analogy for the financial world, illustrating how the wealthy maintain and grow their wealth while the middle class remains stagnant. The rich leverage legitimate strategies – legal, within the rules, and perfectly acceptable – that the middle class often aren’t privy to.
The Playbook of the Rich
Imagine you’re preparing for retirement. Conventional wisdom, the playbook of the middle class, advises maximizing your 401(k), paying off your mortgage quickly, avoiding debt, and saving cash. While these strategies aim to provide a comfortable retirement, they often fall short of delivering the wealth and security many desire.
David J. Bradford, CEO of More With David and host of the PIX11 TV Show “Renegade Money”, argues that the key to breaking free from the financial struggles of the middle class lies in adopting the playbook of the wealthy.
“Rich people aren’t breaking the rules,” says Bradford. “They’re not capitalizing on loopholes. They are not keeping large amounts of cash unreported to the IRS. They are not devious and greedy. They just simply have a playbook that wins.”
A Personal Journey
Bradford’s story is one of resilience and faith. Leaving a six-figure sales job to join a financial agency was a leap into the unknown, driven by a deep conviction that this was his calling. His previous role as a pastor had ended abruptly, leading to a tumultuous period in his life, including a divorce and a custody battle for his children. At 40, Bradford found himself back in his hometown, struggling to make ends meet while providing for his family.
Three years into his new venture, things were bleak. Facing foreclosure and unable to afford Christmas presents for his children, Bradford hit rock bottom. Yet, this low point became a turning point. A friend’s generous gift helped him through the holiday season, and soon after, the agency began to flourish. Bradford’s success story underscores a critical point: the middle-class playbook is broken, and adopting the strategies of the wealthy is crucial for financial success.
Learning from the Best
Tony Robbins, a renowned author and speaker, often emphasizes that success leaves clues. If you want to achieve a goal, find someone who has already done it and emulate their path. The same principle applies to wealth-building. The wealthy don’t break rules or exploit loopholes; they follow a winning playbook. They understand that wealth preservation is as important as wealth creation. “According to Warren Buffett,” says Bradford, “the first rule of building wealth is ‘don’t lose money’, and the second rule is ‘refer to rule number one’.”
Building a Wealth Wall
To preserve wealth, Bradford advises thinking of your finances as a medieval city, protected by a strong, impenetrable wall. This “wealth wall” must be bulletproof against five key wealth destroyers: inflation, taxation, market fluctuation, litigation, and devastation.
Inflation
Inflation erodes the value of money over time. On average, inflation reduces the purchasing power of money by about 3% per year, meaning the value of your savings could be halved in 20 years. “Money that isn’t growing is actually shrinking in value,” says Bradford. “Wealthy individuals invest in assets that outpace inflation, ensuring their money grows rather than diminishes.”
Taxation
Taxes can consume a significant portion of your income. The wealthy use strategies to minimize their tax burden legally. “If you do not have a way to be bulletproof from taxation,” says Bradford, “you are going to stay stuck in the middle class. I remember the debate between Hillary Clinton and Donald Trump years ago, where she shook her finger at him and said in a debate, I know for a fact that you didn’t pay any money in income tax last year. And his response was simple. That’s because I’m smart. By the way, it’s not because he’s illegal. It’s not because he has loopholes. It’s that he has strategies.”
Market Fluctuation
Market volatility can erode wealth if not managed properly. “The wealthy protect themselves from market downturns by diversifying their investments and opting for vehicles that offer contractual returns, such as real estate. They aim to minimize losses while maximizing gains, ensuring steady growth in their portfolios,” says Bradford.
Litigation
Lawsuits can devastate financial stability. To protect their assets, the wealthy avoid owning valuable assets in their names. Instead, they use legal structures such as trusts and limited liability companies (LLCs) to shield their wealth from potential legal claims. “This way, their assets remain secure, even in the face of litigation,” he adds.
Devastation
Unexpected events, such as medical emergencies or the death of a primary breadwinner, can cripple a family’s finances. The wealthy prepare for such events with comprehensive insurance plans and estate planning. This ensures that their families remain financially secure, regardless of unforeseen circumstances.
Opportunity Cost: The Silent Wealth Destroyer
Bradford introduces the concept of opportunity cost as the biggest expense that most people overlook. Opportunity cost refers to the potential gains lost when choosing one investment over another. For instance, paying off a mortgage may eliminate interest payments, but it also ties up capital that could be earning higher returns elsewhere. The wealthy understand that every financial decision carries an opportunity cost and strive to allocate their resources where they will yield the highest returns.
Changing Your Financial Playbook
Bradford emphasizes that building wealth requires a shift in mindset and strategy. The middle-class playbook focuses on frugality and long-term savings, often leading to a “comfortable” retirement. In contrast, the wealthy prioritize cash flow, multiple income streams, and investments that generate high returns. They don’t settle for a comfortable retirement; they aim for a wealthy retirement, living a lifestyle they enjoy now and in the future.
Wealth Preservation: A Professional’s Priority
For financial professionals serving the wealthy, the primary goal is to identify and mitigate any areas where their clients are losing money or opportunities unknowingly or unnecessarily. This involves a thorough assessment of their financial strategies and implementing measures to fortify their wealth wall. By addressing gaps and weaknesses in their financial plans, these professionals help their clients achieve long-term financial security.
A New Financial Path
Bradford’s journey from financial despair to success is a testament to the power of adopting a new playbook. The strategies of the wealthy – focused on wealth preservation, minimizing taxes, protecting against market fluctuations, and understanding opportunity cost – are accessible to anyone willing to learn and implement them. By changing your mindset and adopting these strategies, you can break free from the limitations of the middle-class playbook and achieve true financial independence.
In a world where the rich keep getting richer, Bradford’s insights offer a beacon of hope for those willing to embrace a new approach to wealth-building. By following the playbook of the wealthy, you can build a secure financial future and live a life of abundance. All it takes is a willingness to learn, adapt, and execute the strategies that have proven successful for the world’s wealthiest individuals.