In simplest terms, leverage means to use something to maximum advantage or for gain.
The wealthy are wealthy because they have learned to use all of the resources at their disposal to maximum advantage and gain. Everything they do is for a purpose, and that purpose is to advance their financial position to achieve maximum wealth.
Some of the wealthiest investors in the world didn’t start wealthy. Many weren’t born into wealth or privilege, but they learned early on to maximize every single resource available to them to scratch and claw their way to the top.
I read an interesting story recently about Eddie Van Halen – who many consider being one of the greatest rock guitarists to have ever lived – and how he didn’t let poverty stop him from achieving his goals.
In the early days of his band, the story goes that he couldn’t afford all the expensive equipment that young guitarists who came from more well-off families could afford. Eddie’s father was a custodian and his mom, a housekeeper. The whole family had immigrated from the Netherlands to California when Eddie was 10.
Without the money to buy expensive amps and pedals, Eddie created his guitar from second-hand parts from both a Fender and a Gibson guitar. The other spare parts that would allow him to create the sounds and effects of more expensive equipment came from only his fingers and playing technique.
This guitar, famously dubbed the Frankenstrat, with Eddie at the helm would revolutionize rock guitar playing forever with hundreds of imitators popping up in the ’80s mimicking Eddie’s sounds.
Without money, Eddie Van Halen leveraged everything at his disposal to become one of the greatest and wealthiest rock musicians ever.
How can you use leverage to get wealthy?
Learn from the wealthy. Use everything at your disposal. It doesn’t matter where you start; it’s where you end up. Learn from the wealthy.
Here are some powerful ideas for leverage:
Focus on your key skills, passion, and career to earn money. Everyone has to start somewhere. Whether you’re a professional or work with your hands, it all starts with maximizing your investment capital by reducing your expenses and maximizing your income and earning potential.
- The 1st allocation of any income should be a self-directed retirement account. The wealthy leverage tax laws for maximum gain. They take full advantage of self-directed retirement accounts and maximize their contributions to generate tax-deferred and even tax-free gains. Reduced taxes means more capital for reinvestment.
- The 2nd allocation should be to an investment account. Put your hard-earned money to work. Idle cash will be depleted by inflation, so better to put that money to work.
Direct your investment capital towards income-bearing investments. Let that money work for you through income-generating passive investments that make money while you sleep.
The wealthy prefer investments backed by tangible assets where their investment can never be reduced to zero, like on Wall Street.
Who do you know that’s a deal maker or founder? Stay connected with the movers and shakers you come across. They can often be the ticket to the right opportunities.
Meet more of the right people. Be proactive and reach out to connect with new people in business, travel, startups, and more.
Ask your CPA, your lawyer and other professionals who you come in contact with about any deal makers they’ve come in contact with. Throwing mud at a wall to see what sticks is an age-old approach to find those diamonds in the rough opportunities.
Give back and help others who are starting and should be connected. The connections they create could come back to you full circle.
Get involved and get on the board of nonprofits. The wealthy and connected are all about giving back, and many serve as board members of nonprofits. Getting involved can connect you to these movers and shakers.
Partner with experts in their field and in their geographic locations to invest. Rely on those who have spent countless hours and dollars developing particular expertise in particular industries and in particular locations, which nobody else can duplicate.
And nobody can duplicate these same personal connections and the advantages they’ve developed over the years in a specific industry and particular locations from having boots on the ground.
You may not be able to duplicate any of this experience or expertise, but you may damn well leverage this expertise by partnering with these experts.
Offer to be on the board of local companies. Offer your expertise by offering to advise and help. In turn, you’ll be able to leverage the expertise and learn from others to advance your own wealth-building goals.
Bring in experts in their field to help you get your company to the next level. For entrepreneurs, don’t be afraid to bring on experts who can enhance your business or operations. Put them on the board, give them responsibilities, offer them equity to participate in the growth of your company.
Leveraging others with specific skill sets can only benefit your company and your financial outlook.
Debt is not a dirty word if used correctly. Use debt as a tool for maximizing profits. Remember that debt is only useful if deployed to create additional streams of income.
Debt can be used to generate exponential growth. Debt allows for the use of investment capital to acquire multiple income-generating assets instead of just one without the use of debt.
Let’s use commercial real estate as an example. In a simple example, assuming a down payment requirement of 25% by most lenders, $1,000,000 can be used to acquire just one property free and clear or four $1,000,000 properties using leverage to create four income streams instead of only one in the first scenario.
Even when factoring in debt service expenses, an investor should more than double their income stream using leverage.
LEVERAGE RETIREMENT ACCOUNTS
Remember the Roth Option. The wealthy love self-directed Roth IRA’s and Roth Solo 401k’s because they’re allowed to grow their gains tax-free.
They leverage the contribution rules by maximizing contributions to invest in passive income investments to grow wealth tax-free.
Tax-free gains mean accelerated income. The less you pay in taxes, the more you’ll be able to reinvest, and the quicker you’ll be able to achieve your wealth objectives.
For those without the time or expertise, take a page out of the wealthy’s playbook. Leverage everything at your disposal to advance your wealth goals.
Nobody has the time to learn everything about every industry in every locale. Still, by leveraging your connections, you can leverage the expertise and experience of others to invest in credible passive income opportunities.
By leveraging the tax and retirement laws, you can maximize your investment gains for reinvestment to accelerate your wealth-building goals.
Our investors rely on us at TruePoint to achieve their goals by leaning on our expertise, our proprietary processes, our experience, and connections to benefit financially from passive income opportunities without having to learn everything from scratch.
Kyle Jones is a co-founder and Key Principal of TruePoint Capital, LLC. Kyle is responsible for the company’s strategic planning, investment decisions, asset management, and overseeing all aspects of the company’s financial activities, operations, and investor relations.
Kyle obtained a Bachelor of Science degree from Texas State University – San Marcos, where he also played Division 1 Baseball.