WealthTalk - money, wealth and personal finance.

WT011: Creating Leverage Using F.I.R.S.T

Episode Summary

What is Leverage? Leverage is the key to the creation of wealth. In today’s episode of WealthTalk Kevin shares another of his unique acronyms which can help you to accelerate your wealth building - F.I.R.S.T.

Episode Notes

Links and a full transcription of this episode can be found at www.wealthbuilders.co.uk/wealthtalk

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Episode Transcription

Chris Rodwell: Welcome to episode 11 of Wealth Talk. My name is Christian Rodwell, joined by Mr Kevin Whelan, founder of Wealth Builders. How are you Kevin?

Kevin Whelan: I'm great today Chris. What's on our agenda today?

Chris Rodwell: Well, we ended episode 10 last week with talking about leverage and the model FYRST, F-Y-R-S-T.

Kevin Whelan: Right.

Chris Rodwell: So what is leverage, Kevin?

Kevin Whelan: Well, in it's simple terms, Chris, leverage is getting more for less. It simply means that you're applying a force. Remember when you did maths at school? I assume you did your GSCE maths right?

Chris Rodwell: I did. I didn't enjoy it too much, but I did. I got through okay.

Kevin Whelan: Okay, well fair enough, but the principle you remember, there's a picture in your mind and you've got a big lever and then you apply a small force on one end and you life a big object.

Chris Rodwell: That's right. Yes.

Kevin Whelan: That's essentially what you're doing in leverage. And when you think about it and joking apart, I know we're having a bit of a laugh about it, but leverage is the key to the creation of wealth.

Chris Rodwell: Well, that's pretty important then.

Kevin Whelan: It's pretty important subject, and you know, my experience, we've got what is it now? F-I-R-S-T? So we've got our five core areas where leverage is possible. I think we said six, didn't we?

Chris Rodwell: I think we haven't been thinking of that one.

Kevin Whelan: No wonder your GCSE account didn't work out.

Chris Rodwell: We'll put a full stop at the end, and we'll think of something.

Kevin Whelan: Anyway, and we spoke last time, I think when we talked about one of the examples of you taking some of the money someone had found in their debits and making that work. That was a form of leverage, because they took money that wasn't working and made it work tons harder. Or that was the idea. And that is the 'F' in our formula.

Chris Rodwell: Okay.

Kevin Whelan: Which is 'financial' leverage.

Chris Rodwell: Right.

Kevin Whelan: So, it's taking money or something that is working like money and you make that particular fund or funds or asset work more effectively than it did before.

Chris Rodwell: Okay. What would be an example there?

Kevin Whelan: Well an example might be money that is wasted in paying expenses. You find that money and you put it into trackers. Remember when we talked about that last time.

Chris Rodwell: You mentioned that.

Kevin Whelan: So that's a very, very simple form of leverage. Another form of leverage might be, well, if we look at the main assets that people own when they're building their wealth or thinking about it anyway, is their pension. So one of the ways you can leverage your pension is to turn it into a pension you can own and control, and then you can direct that to assets that you wanna invest in, instead of assets that you're told you need to invest in by the financial industry. So, you end up being exclusively in stock market. And we've talked about that before.

Chris Rodwell: Pillar two. Pensions.

Kevin Whelan: Pillar two. Pensions. And we just love the concept of people being in control of their assets, not delegating that control away, because delegation turns into abdications and abdication means you've given up.

Chris Rodwell: Yeah.

Kevin Whelan: The rights to everything. So the topper pension, we use there, we call the director's pension or [sass 00:03:31] and it's perfect for those who are business owners.

Kevin Whelan: Another way to get leverage which is very, very popular with property people, is they get debt leverage.

Chris Rodwell: Right.

Kevin Whelan: So, they're bi-property. So for example. Let me give you an example of that. If you've got 100000 pounds and you decide you want to invest 100000 pounds in stock market, this is not a trick question for your maths now, if want to buy 100000 pounds worth of money and I will go to my stock broker or I go to the fund, and I want to buy funds, how much value will I get for that?

Chris Rodwell: 100 grand.

Kevin Whelan: 100 grand. You don't get more.

Chris Rodwell: Plus the fees.

Kevin Whelan: Well, obviously the importance there is to keep fees down as low as possible. We talked about that last time as well.

Kevin Whelan: But the issue there, of course is you're buying the value based on price. If you buy property, 100000 pounds worth of money, your money, if you leverage that three to one, so if you get 300000 pounds worth of a mortgage, and 100000 pounds of your starting capital, you now control 400000 pounds of the value. So, if you rented that property out for 10% rental on 400000, that's a 40000 pounds rental return in exchange for 100000. So while you've got costs and you gotta think about the pros and cons of debt, and the difference between good debt and bad debt and so forth, putting those things to one side, that's leverage.

Chris Rodwell: Okay.

Kevin Whelan: So, that's financial leverage and there are many ways you can explore turning your assets into higher performing assets than before. Sometimes it's reducing costs, sometimes it's improving your turn or a combination of both. So that's financial leverage and almost everybody I've ever met has got some form of financial leverage they can employ, even if they just apply the simplistic model of the debits, find some money and then use that money to invest in something wherever they invest, they're getting leverage.

Chris Rodwell: Yeah. It's a step-by-step process isn't it?

Kevin Whelan: It's really quite simple. So financial leverage is the easy and obvious one for pretty much everybody.

Chris Rodwell: Wonderful. What does the 'I' stand for?

Kevin Whelan: Well the 'I' stands for intellectual leverage. Now, that's the other good thing, everybody's got an intellect. So we all have intellect that we often will trade or sell and give or provide value to somebody else for that leverage or for that value. Let me correct myself there. There's a difference in trading value than creating leverage. So, if I've gotta job, and I'm pretty skilled at what I do and I sell my skills to you as my employer, then who owns that intellect?

Chris Rodwell: The employer.

Kevin Whelan: The employer owns it, right. So all the value is retained by the employer. So, the skill and intellectual leverage is saying, "Okay, even if you're employed, what is it about what I do that's exceptional? What do I do that's outstanding? And how could I turn that value that somebody else is paying for into something that I could package, I could repurpose or I could create value from in different way?"

Kevin Whelan: And for many people that revolves around books and training, and a distinction that somebody else would pay for. And the internet is completely full with people who are outstanding at something. It doesn't have to be something that is high-brow or intellectual. It could be, "I know how to get the best return from a piece of ground. I know how to make dogs feel fantastic when they're being washed." The list goes on. I'm being facetious.

Chris Rodwell: Yup.

Kevin Whelan: But, you get the point.

Chris Rodwell: Yup.

Kevin Whelan: Everybody's exceptional at something. And using your wealth dynamic, you get a basic idea of what you're exceptional at. And turn that value into something that you do the work once and then you get paid indefinitely.

Chris Rodwell: Yeah.

Kevin Whelan: And that's very, very different from going to work, going to work, going to work, going to work, 30 days at work, or 20 days at work getting paid to do the work for 30 days or 20 days and get paid indefinitely.

Chris Rodwell: Yeah.

Kevin Whelan: And I know you're working hard on that with your own books and training materials as we are together. So, I think I would endorse the thought that everybody has a little think about what they're outstanding at and if necessary, have a look at what people told you you're good at.

Chris Rodwell: I was just gonna say, I've done-

Kevin Whelan: What have you been patted on the back for? What do you get awarded for?

Chris Rodwell: Yeah.

Kevin Whelan: And maybe, if they can't pull it out of themselves, have a conversation with you Chris and say, "See if you can pull it out of them." Because that's another way you can get leverage.

Chris Rodwell: Yeah, you often can't see these things yourself, can you?

Kevin Whelan: Yeah, and that's the leverage, Chris, the relationship. So, often a relationship and all sorts of different guises and colors can bring an incredible value in a way that you can't possible perceive. So, give you some examples of that.

Chris Rodwell: Yeah.

Kevin Whelan: Okay. So for example. I've gotta brilliant brain. I can diagnose the health, financially of anyone with a cat scanned brain.

Chris Rodwell: I've seen it.

Kevin Whelan: Yeah, you've seen it work, right? So, I know I can sit down with someone and zip, zip, zip, zip, zip, I can work out three or four different ways they can immediately put to use and they couldn't see them. That's the value of the leverage of relationship.

Kevin Whelan: So, you have to try, and discover relationships that could bring that value from you. Another one could be, well you look at your wealth dynamic and you might be perhaps more on the steel side, more the analytical side, more of that kind of a person, but you're really great at doing property say. But you need funds and you're not so brilliant at raising funds, so you connect with somebody who has got lots of blaze energy. So, they can help find the investors, which you're outstanding ability can find the right property opportunities. So you create a business of that connection, that fate between two people with a completely different set of skills. And that would be a relationship.

Chris Rodwell: Yeah.

Kevin Whelan: So, wherever you can harness the true value of relationships and what I mean by the true value Chris, is you have to truly resonate with someone. Feel the integrity of who they are. Feel like you want to be connected to them and they want to be connected to you and it's a genuine thing. It's not something to rush, it's not something to try, and grab. It's something that you take time to build.

Chris Rodwell: Yeah. Or we say, the win-win. There's gotta be wins on both sides.

Kevin Whelan: Yeah, but it takes time.

Chris Rodwell: Yeah.

Kevin Whelan: And empathy and relationships take time to build but nonetheless you should have some of your time in a month trying to seek out those opportunities. Do you remember, I explained to you in a previous episode, we talked about the ROI?

Chris Rodwell: Mm-hmm (affirmative).

Kevin Whelan: This idea which is why even though I've been doing this for years, I still get enthusiastic and feel like a kid, because I'm looking for that one relationship, opportunity or idea that completely transforms my thinking.

Chris Rodwell: Yeah.

Kevin Whelan: I just love it. So, that's the ROI. Relationship, Opportunity or Idea. And Chris, I've just had one.

Chris Rodwell: Please.

Kevin Whelan: Yeah.

Chris Rodwell: Tell us. Share.

Kevin Whelan: So, up until now, the biggest opportunity I've had, probably to speak to people about my ideas and about how you can build wealth and so forth, has been to probably around 2-300 people? Okay, so next year, in April 2020, I've been invited to speak to 2000 people.

Chris Rodwell: Wow.

Kevin Whelan: Yeah.

Chris Rodwell: You've 10X'd it, have you?

Kevin Whelan: I've 10X'd. And that's great for me. Of course, I'm gonna step up right?

Chris Rodwell: Where is this?

Kevin Whelan: Well this is gonna be something called the Business Excellence Ball Room.

Chris Rodwell: Right.

Kevin Whelan: In Celtic Manor. So, I will be taking a few days off to play some golf as well. And it's to 2000 business owners.

Chris Rodwell: Right.

Kevin Whelan: And my role is to explain to them how to create multiple streams of recurring income.

Chris Rodwell: Your favorite topic.

Kevin Whelan: My favorite subject, both inside and outside of their business. Now, I've leveraged a relationship, and the relationship that I have is with a group of coaches in the UK, who are just brilliant at coaching business owners on the inside of their business. And that groups called Action Coach.

Chris Rodwell: Oh, yeah.

Kevin Whelan: And, I built a relationship with them, and worked with them and over the course of the time of working with them, they've said, "This guy's alright. Knows what he's talking about. Comes from a place of integrity. Build, build, build. Would you like to speak at our event? 2000 people?" And guess who's on the stage with me? Only Sir Bob Geldof.

Chris Rodwell: Wow.

Kevin Whelan: Yeah. Only Dame Kelly Holmes.

Chris Rodwell: That's some big names.

Kevin Whelan: Do you think I'm due for an award?

Chris Rodwell: Wow.

Kevin Whelan: Probably not. But-

Chris Rodwell: Fantastic opportunity.

Kevin Whelan: Yes, but that's the point. One relationship, opportunity or idea away from a complete transformation.

Chris Rodwell: Right.

Kevin Whelan: And that's a transformation for me and I'm thrilled and of course we wanna share that with our community for those who are business owners.

Chris Rodwell: Yes.

Kevin Whelan: Who want to participate, and not just see me speak, but see some great speakers talking about the best practices to make their businesses as successful as possible because if you make your business as successful as possible Chris, you've applied leverage. You've made your business worth infinitely more, than it would've been had you not taken that step. So, that's relationship leverage.

Chris Rodwell: Yeah, and this links back to wealth dynamics. I know we mentioned this a lot, but it's such a tie in, is when you've created value, the only way to leverage them is through either systems or people.

Kevin Whelan: Got it.

Chris Rodwell: And systems-

Kevin Whelan: Is the next one. You've read my mind, Chris.

Kevin Whelan: So, systems, so if you're more steely, if you're more 'how to improve' things, how to maximize things, how to document things, then that's the way that you can create wealth, by using your brain to systematically apply to something that currently isn't working as well as it could do. And pretty much all business owners or most business owners who tend to come from business from the creative end of the spectrum, they're more dynamo energy, in my experience, then they lack often the systematic energy. And so by if you have a systematic brain, now, I don't, although, actually you could argue I do, because I've created systems for creating wealth, but not the system as in the technology.

Chris Rodwell: The detail.

Kevin Whelan: Yeah. Not the detail but the process to think. So, my energy is more in the thinking, and then the application in terms of technology comes from working with people like you who've got much more of a solid energy around that. Yeah.

Chris Rodwell: Okay, great. So that's systems, so that leaves 'T'.

Kevin Whelan: Yeah, so 'T' is available for everybody. And that's time leverage. And so, time leverage at it's simplest, listen to a podcast. Get maximum value when you're doing something else. Leverage your time.

Kevin Whelan: I think I mentioned, I was recently talking to one of our clients who was commuting two hours each way.

Chris Rodwell: Each way!

Kevin Whelan: It's like, "Oh, my goodness me! What a shocker!" But you can get leverage wherever you are. So, one of the things that people always tell me about their wealth building, they just say, "Well, I don't have time." And well, that's an excuse, because everybody's got time, because you can create time in so many ways and I try to encourage people to box time. So, earmark time, just like you would in your calendar. But people don't put their wealth in their calendar. So, we encourage people to box that time to take two hours a month as a minimum and box that time off, so that you never spend more than 30 days without doing something to create more in your wealth, whether it's building a relationship, whether it's building more leverage, whether it's looking at debits, whatever it is, you're doing something that is moving you forward in your wealth plan, really.

Kevin Whelan: So, the other ways to create time leverage is to work with people who have time. So, again, going back to this idea of property as an example, yeah. So, you could have lots of money, but you just don't have time, because you're flat out. Well, there are people who have that leverage of time and they can find things for you that your money could be deployed in. And this is very common, this idea of sourcing property for example.

Chris Rodwell: Yeah.

Kevin Whelan: And there's no shortage of business opportunities that take care of the time of busy people. [VIA's 00:16:54] and concierge type services and things that you can either take advantage of if you're lacking in time or you can provide if you have a surplus of time. But either way, time leverage is a really important thing.

Kevin Whelan: So, when you combine financial leverage, intellectual leverage, relationship leverage, systems and time, maybe we'll find number six somewhere Chris, we'll probably invent it, right? So, but for now, then that's gonna be an opportunity for anybody to move forward.

Chris Rodwell: Wow. So I think we talked about a foundation, but really now, we've cover leverage as well. That pretty much puts everything there for someone to get started to find some extra money in their life and start making that money work for them and leveraging that as well.

Kevin Whelan: Yeah, I don't really think there are any more ideas now that we can give at the foundation level. I think we just have to work out how do we dive a bit deeper into things which are a little bit more focused around each asset. So, maybe we'll think about ... well actually why don't we talk about business next one?

Chris Rodwell: Okay.

Kevin Whelan: Given that we're talking about creating recurring revenue streams.

Chris Rodwell: Yup.

Kevin Whelan: And we know about each of the assets of the ability to create recurring income. But what's really interesting about each asset is each asset itself is multifaceted. In other words its like a diamond. It has many faces. And because it has many faces you can employ many, many, many different tactics or in our case, we turn the wheel and you can turn as many wheels as you want provided you've got the time, and maybe I'll talk about how to create real value, recurring revenue rather than chasing profit. You're building revenue streams that repeat, repeat, repeat and that will set me up for my presentation in 2020 and I'll do a little practice run. How about that?

Chris Rodwell: That sounds good. And we talked about the roof in a previous episode as well, so I think we need to start filling in, don't we, with the pillars? That makes good sense.

Kevin Whelan: Yeah. So, why don't we do that? Fill in with some of the pillars and then catch up on the roof as we get there? But we know we want to make that water tight though.

Chris Rodwell: We do.

Kevin Whelan: If you need me to jump on the roof next time and then fill in the pillars, I'm happy to do it in whichever order we think would make sense. Let's see how we get on next one and leave with baited breath and on a cliff hanger.

Chris Rodwell: That sounds good. And don't forget if you're listening and you do have questions that pop up as you listen, then head over to wealthbuilders.co.ukforward/wealthtalk. Hit the button, the record button and you can leave a message for Kevin and myself and we'll pick those up and respond to those in future episode.

Chris Rodwell: Thanks Kevin.

Kevin Whelan: Okay, thanks again.

Chris Rodwell: Speak soon.

Kevin Whelan: 

See ya.