Well! Hi everyone, this is Dan Thompson with wise money tools. Welcome to this video. Today we're gonna talk about the most critical and least understood basic money principles. Now, listen closely here for just a second. Okay, I'm gonna be putting out these next five to six videos pretty quickly. As you know, I typically put one out about once a week. But this next five or six are gonna come a little bit quicker because I want these in your hands just as fast as I can get them done. Because they're the most important videos to your financial success. Okay? These are very important and I want you to miss a single one. So if you're not subscribed, click Subscribe now. Okay. Sorry, don't mean to be so dramatic, but I assume you tune in to my videos because you want to get something out of them.


And I can promise you as we go through these next few videos, it's gonna hit you it like as gross as in despicable me, light bulb. Right. So the light bulb is gonna come on. And it's gonna be pretty exciting, and I can't wait to share this with you. So what we're gonna talk about, like I told you in our last video, we're gonna talk about the elements of financial success. And certainly you've heard of them before, but maybe not all packaged together. And if you want to seriously take your financial wealth to another level. You've got to know and implement what we're gonna call the five elements of financial success. And what I want to do is break down each element into a separate video or this one's gonna get too long. And I can't take the risk that you're gonna tune out.


We're gonna try to keep them short, sweet to the point. So for each of these videos, take your time. Maybe watch them a couple of times, if necessary. You got it understand this so you can again, take control, grow your wealth. I'm also gonna put this video series if you will, into a mini course. And then I'm gonna put a free link to access this anytime, so that you can refer back to them without looking through my hundred plus videos searching forum. And of course, you can always share that link with your friends and family. This is stuff I wish I would have known and practice back in my 20s. This is the stuff I wish they would have taught me when I first became a financial advisor. So this course again, it's gonna be called the five elements to wealth.


So watch for that link as we get going in these videos. Alright, so let's get after. Let me introduce you to this again, even though you've likely again, like I said, heard of these elements. They have to fit and balance with each other. And that's what's gonna make this film a little bit new. So we all know the world is made up of four elements, earth, air, water, fire, right? These four elements are believed to be the essential elements to life, take any one of those elements away. And the theory is life would cease to exist, and maybe even the world as we know it. Each element plays a specific role. And we needed to sustain our life. What just like these four elements are critical to our living and to our world. In the world of money investing and finance, there are five elements that have to be present, working together, him balance to build wealth, and here they are.


The first one is income. This can be also called cash or in short, what we might call capital. Then there's debt. There's both smart debt and dumb debt. And we've got to figure out which is the best for you and how to get out of dumb debt. The next one is safety. This is the protection of your money that so many of us want when it comes to investing. But then there's growth. And for the most part, this is what we do. This is why we save and invest, because we want our money to grow. And finally, the fifth element is leverage. This can be used in many ways, most ways. What it does is it adds to your risk. But we're gonna talk about how there are ways or won't add to your risk. So again, this can be kind of fun. If we ignore or overemphasize one of these elements, we potentially eliminate our long term chances of a successful financial outcome.


But here's what's interesting those, if you were to talk to several different money managers, financial planners, financial advisors, radio talk show host. You're gonna find that each one puts a major emphasis on one element over another. As an example, you'll find that your traditional or typical financial advisor uses the lure of growth. If you will, to encourage you to invest hoping that you're gonna build your wealth through risk and using them. They say you know, buy mutual funds, dollar cost, average, diversify, take risk, and that's what you need to grow your wealth. Then on the other extreme, you have the get out of debt guys. I often call these the Dave Ramsey, who are all about eating rice and beans and put every penny towards paying off your debt and your house and then pay cash for everything else the rest your life.


Well, out of balance, what's happening is they're missing some critical elements of wealth. And just getting out of debt isn't going to build your wealth. Now I know after you're out of debt, Dave wants you to put your money into mutual funds. But now you add the risk element and you've lost time to the equation. And time is an important part of this equation. Well, we're gonna get to that as we go along, then the next group of advisors, if you will, these are the better do nothing than to lose. So they keep cash around, see these bank accounts, honey markets, they don't trust the stock market, they don't even buy, they may even buy gold and silver because the world's coming to an end, right? Basically, they don't trust anything but maybe their local bank and some little pieces of metal.


Then you have the safe money guys who use investments like annuities to make sure that you never lose money and to have income during retirement. Then you got the life insurance guys who are all who also like safety, but they also want liquidity. They want to be able to take advantage of opportunities as they come along. And then finally have the risk takers and these are the leverage guys. These are the guys who build businesses and investments and they use leverage, or what we call other people's money, OPM, that formula to lever up their capital and build and grow their wealth faster. Well, on the surface, you could make an argument that each of them have some good points. So when we look at those five elements and how each one plays a role in the financial world, we've got to figure out how they balance together.


Now depending on your status, your experience, your current wealth, your risk tolerance, you may lean more towards one particular flavor than another. That's why each of these different advisor types I'll stay in business. Because there are enough people who believe in their particular model again or flavor, and they jump in with them. Now, I have to admit over the years, I've been pretty much in all of these categories, depending on my age, my wealth, the economy at the time. When I first started out in 1986, I found myself in a world where you sold mutual funds diversified money, dollar cost average, you never asked any questions. This is just how you did it. You didn't ask questions like, does this really work? And is all this really necessary?


Unfortunately, it took me about 13 years to realize that it's not a very good way to go. Unless you're pretty much okay, staying broke through your retirement years. I've also risked a lot of money, personal money, trading and investing. It sure is fun when it's going up. And that's so much on the way down. Well, that drove me to being a little more ultra conservative and simply protect your money, have it grow slowly, but over time, if you don't lose, what the theory is you're gonna turn out fairly well. Then you've got the leverage guy or what I can called the entrepreneur guy. And again, that's he's part of me as well. So I like to build things into grow things. And so we even started a building company several years ago, and now we develop and build homes.


And it's been really good and it appears right now to be looking good for the next few years. But you have to be cautious at the same time and try to put away some profit elsewhere, as you go along and slow down, if you can kind of see what's happening before it gets too ugly. Well, the truth is balancing and understanding how all five elements work together is the only way to wealth predictably and as safely as possible so you can sleep at night, one of the very basic kids keys toward wealth, and it fits well within our element. And that is compounding. Einstein gave us one of the best quotes when It comes to money that's ever been said. He said, compounding interest is the eighth wonder of the world. Then he went on to say he that understands it earns it. He that doesn't pays it, he produced this simple formula of compounding interest.


Well, simple, I guess is a relative term. Here's the formula, y=a(1+r)x

. This quote by Einstein is often quoted by financial advisors, which is fine. It's just words to many of them because they don't really understand. See, compounding is huge. And when we balance all the elements, if we look at the equation, and each one of those five elements, each one of them is a very important part. So why is the wealth we build? This is the end result. This is what we're after. This is the answer, so to speak. "a" Is the cash or the income. This is the first step, we've got to have some money. So we've got to learn to pay ourselves and put some cash in a place where we can start working with it. One is debt or being debt free.


However, out of balance, this is gonna be really interesting when we get there, if we're putting too much emphasis on the debt side. Now, the "+" this could be a plus, or it could be a minus sign too, because this is the safety. This is protecting your money from losses. If we have a minus sign, we've got losses. So we want to keep that in the plus sign and make sure that we're in a situation where we have safety and protecting our money. Our is rate of return it's the growth this is where compounding comes in. And then finally "x", x is leverage and the potential for exponential growth if we use it properly. And if we don't use it properly if we use it like so many entrepreneurs and startups, it can get really kind of ugly fast.


So here's the problem with financial advisors who talk about and emphasize just one or maybe two of the financial elements and leave the rest out and miss out on the total equation. As you know, from your math classes in school, if you take any part of this equation, or maybe turn a plus sign into a minus sign, the whole equation breaks down and it doesn't work. The only way the equation works is this, each part of the equation is there and managed properly. Now let me make a confession here. So I've been at this stuff, 33-34 years, some like that. I've seen just about everything out there that financial advisor sell. I've read tons of books and articles from many successful investors. They're certainly success stories in those books. And some call it Looks, I didn't call it diligence, some call it brains, whatever.


They found a way to build their wealth. Some kept it. Some didn't. There are lots of businesses that have washed up and are, you know, literally down the drain. You know, 30% of new businesses fail in the first two years have been open 50% during the first five years, and a wow 66% during the first 10 years. So just because you're a business owner isn't a surefire way to wealth. What I found is that not everyone is cut out to be a Warren Buffett, Bezos OR gates, right. In fact, the vast majority of Americans simply work at a job, make a good living, have a career and hopefully have some sort of retirement at the end of that something they're left out of this, you know, dream of wealth because they don't have the time or possibly the talent or the ambition or the drive.


You know, a lot of people don't want to put everything on the table and go open a business and work like crazy to make it successful. But what if in every walk of life, you could experience true wealth by combining these elements and keeping them in balance? What if it wasn't as hard as you thought? What if you didn't have to build a company or take a bunch of risk or get lucky and investments. But you could simply take advantage of the five elements, and wealth would almost grow by natural economic forces. Everyone plays a role in our economy. What I want to do is show you that no matter how you fit in there, you can be as wealthy and financially free as you can dream. I don't want to take away from you, those of you who want to be creative and be innovators, and you're driven to make the world better.


That's what built America, then that's a huge part of all of this. As entrepreneurs build their businesses. They create cash flow. And they too can use the five elements if they take advantage of cash flow and setting up this side. Rather than putting it all back into their business and potentially losing that business. Again, just the statistics of what happens to businesses tells you probably ought to be protecting some of that future capital. So both the entrepreneur and hard worker can win once you know the five elements and how they work together. Okay, so now you know the five elements. Let's review really quickly the type of person that each element represents and the good and bad of each, we'll call the first one the cash club.


They love to save money in an account. They do a great job of paying themselves first, but they don't grow. They don't leverage and we've got the debt free club. Now these guys get really committed. They're all in starting right now. And again, I call them the beans and rice guys. They'll sacrifice enjoyment now to live a debt free life later. They're really committed but never pay themselves first, because they're always paying someone else, a guy who they owe money to right? They miss out on both growth and leverage, which are integral to the whole equation working well. Then we've got the guarantee or the safe club. They love safety and guarantees and they're drawn to typically life products that give that guarantee and investment security. No other investment in the world focuses on security. As much as insurance companies do. They are really secure. And typically the trade off for that security is a little lower or slower growth.


Then we've got the high growth of the home run club, they love to put to bed on the potential big win. And these guys are rolling the dice in the stock market or maybe crypto maybe other aggressive investments. They offer potentially high growth, but they lack the security and the leverage and it can become very risky. And then finally, we got the leverage guys. These are entrepreneurs they love to build their empire using leverage to accelerate their growth. Their priority is to use all available resources to grow that extreme focus of the business. And unfortunately, by doing that, it also brings on risk. Their confidence in themselves translates to them working for money, instead of money working for them. Okay, so that gives you a bird's eye view of each element. Which one right now fits you the most.


Maybe it's a cross between one or two of them. You know, john Bogle, he's the founder of Vanguard. He's credited for saying, never bear too much or too little risk. Taking a balanced view of being neither too risky or new to conservative. So there you go. That's a great start. Probably a lot to take in. This is gonna be really excited. I can't wait to share more with you. So again, make sure you subscribe, be ready for the next video. It's most likely gonna be sooner than next week, so be on the lookout for it. If you have any questions, make sure you send your questions at wise money tools.com. I'll answer just as quick as I can. Again, subscribe. Here where to spend a few minutes talking about your situation, click on the time trade link below to schedule a time. Well, that's about it. Thanks for joining me. Now you understand the five elements to Wealth, I'll talk to you next time. Take care.