“The 9 Principles of Leverage govern how the 6 Types of Leverage operate in your wealth plan. They are the “how” and the “why” that drives every strategy you’ll use to overcome the resource limitations you face and to break through the constraints that block your wealth growth. By understanding the 9 Principles, you keep yourself from becoming over-worked, distracted, hampered by limited resources, or tempted into risk beyond your tolerance.” – Todd Tresidder
Summary of The Leverage Equation
In The Leverage Equation (TLE), you will learn a new way of thinking about building wealth and achieving your business goals. Most times when you hear leverage you immediately think to yourself financial leverage i.e. loaning money to make more money. As a matter of fact, there are many other forms of leverage that can be applied. The book starts off with the premise: it is damn near impossible for one to build wealth without applying leverage.
After having a career as a hedge fund guy for many years, the author, implemented a lot of the strategies he learned to create realistic methods of achieving financial freedom. the author explains how leverage is vital to achieving wealth.
” What lies between one and achieving a goal is constraints and its only with the use of leverage one can move past the constraints.” – Todd Tresidder
The author shares the principles of leverage (there are 9) and explains the 6 various types of leverage one can apply to blast through constraints. He also gives examples of how he used leverage in his life. The 6 types of leverage mentioned in the book are Financial leverage, Time, Technology (Systems) leverage, Communications and Marketing Leverage, Network & Relationship Leverage, and Experience & Knowledge Leverage.
Some of the TLE’s best ideas include:
A. Research on how to get rich that way proves that the vast majority of wealth is created through business entrepreneurship and real estate. Conventional paper asset investing through stocks, bonds, and mutual funds takes a distant third place, and even then it’s usually after an entire lifetime of saving and compounding.
B. Instead of being limited by your time, skills, or resources. –The author makes a key point that by not leveraging you are limiting yourself
C. Principle 1 of the book: the concept of mathematical expectancy. Mathematical expectancy here means A better way to think of risk and payoff. (there will be a separate blog post about this in the future). Todd explains that sound investing is all about mathematical expectancy and applying risk management.
D. Addressing the myth of retirement planning as preparing for old age: Here’s a quote from the book; “Retirement planning is NOT just about saving and investing until age 65 (Spoiler alert: You can become financially independent at any age! You don’t have to wait until age 65; leverage will show you how to enjoy financial freedom earlier).”. Instead of waiting till old age to enjoy the fruits of your labour (i.e. your savings and investments to live a life on your own terms), you can do it now by applying various forms of leverage to building the wealth you seek.
THIS BOOK IS FOR YOU IF you’re at the point of readiness to take control of your finances on the journey to financial independence. Read this book before consulting your financial advisor, and you would have the most amazing conversation. Why? Because your advisor wouldn’t have to explain so much to you, as you understand everything being said. Its then just a matter of guiding you towards the right investments.
Although the book is beneficial to anyone thinking about financial freedom or starting a business, it wouldn’t provide you with a plan or know where you’re going (hence why Todd wants you to take his online course).
For leverage to work you should have a clear desired outcome. That way, you can consider faster ways to reach the goal. Also, don’t expect to get the exact leverage to apply. If you’re looking for this, then you won’t find it here.
Need to Know
| Leverage | A method of achieving goals faster. The book talks about 6 forms of leverage you can apply to building wealth:
Financial leverage, Time, Technology (Systems) leverage, Communications & Marketing Leverage, Network & Relationship Leverage, and Experience & Knowledge Leverage |
| Mathematical Expectancy equation (ME)
|
ME simply means probability times payoff. The formula shows wealth planning is a rational and repeatable system that can be reduced to equations and principles that are safe and smart to use. |
| Paper Asset Investing | Paper assets in investments literally are pieces of paper that define ownership of an asset. Examples are stocks, currencies, bonds, money market accounts etc
|
Source: TLE, Google
Paper assets in investments literally are pieces of paper that define ownership of an asset. Classic examples of investing paper assets prove to be stocks, currencies, bonds, money market accounts, and similar types of investments.
Book Review
Book Review Meter (5 means perfect, 1 means poor effort)
Length of the book: 5/5
At 272 pages, the book is a good length and can be finished (not counting the extra cheats sheet for downloads) in a sitting. Although the idea of thinking about various forms of leverage can be explained much shorter, that’s not what you need. Instead of just being told what leverage is and what it can do for you, you need to see examples and understand the logic behind it. You need to go through the process of seeing things differently so you can apply it for wealth achievement. A shorter form of this book could fail to achieve that. Current length, Todd has written a motivational personal finance book, that fills you with ideas as well as the belief that you can do it because it’s not rocket science.
Ideas/insight/substance: 5/5
Wow! the ideas just make sense. Especially when you start applying them. Take this quote for instance:
“Making more money is NOT just about getting a promotion, or a raise, or working longer hours (Spoiler alert: trading time for money caps your income because there’s a limit to how many hours you can work). You must learn how to separate your income from hours worked so you can make more while working less).”
What the book suggests from the above quote is that instead of focusing solely on getting a raise in a job where you have specialised knowledge or skills, focus on applying Leverage. Some examples of leverage you can employ to your advantage are: You could become a tutor, speak at an event, write a book, and even create an online course. Now instead of the single income stream, you CAN HAVE 5 STREAMS of income from ONE PIECE of knowledge simultaneously. See why I say the ideas make sense? Thinking more like this will help you get richer. If you get this idea and you choose not to apply it, then YOU willingly accept to limit YOUR CREATIVITY, and in the process your ability to create the wealth you desire.
Format of the book: 2/5
Moving through the book could be a hassle for 3 main reasons. The first hiccup is the lack of a table of content pages (ToC). This applies to the book’s digital version. For learning, note-taking, and organising key ideas, the ToC cannot be understated. Secondly, as you make your way through the book, you may start to feel like you’re being sold oversold on the author’s courses (he refers to the website quite a lot). And finally, ‘the readers’ takeaway could have been improved with questions/ exercises at the end of the chapters instead of the summary.
Final words
Buy this book, refer to it often, and listen to some of the author’s interviews on YouTube.
Although you wouldn’t be told the exact leverage to apply (you’ll have to figure which applies to your particular situation), you would have many examples to spur you to think about your particular goals, and possible leverage that can be applied (provided as a downloaded cheat sheet). You will also be encouraged by personal stories from Todd on how he used leverage to achieve his wealth building and business goals.
The Leverage Equation is a key addition to your library
As it provides you with a way of thinking that would provide returns one practice. Although one may need to read the book more than once to fully familiarise with the language and lens through which the author explains the book. Having a copy to refer to will do some good. A great outcome from reading the book is to begin to think in terms of leverage to achieve worthwhile goals.
Reading this book a few times, referring to it frequently until the ideas start to click with you naturally (and they will!), and listening to some podcasts with the author will have you thinking differently about how you can successfully achieve your financial goals.
Key takeaways
- Buy the book here
- Listen to Todd discuss the book here, here and here
- To read an article about the 6 forms of leverage, click here
Action steps:
“Without an idea of a clear outcome, there is no point of applying leverage.”
- Identify what stage you are on your path to wealth and create a goal of where you want to get to in the next 6 to 12 months
- Think through what you’re your natural leverage is, and make it a point key to practice using other forms of leverage to build one’s wealth by taking one risks with higher expected payoffs
Thank you for reading!
