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Playing It Too Safe
My Latest
Offense vs. Defense
Playing It Too Safe
A Money Question
My Latest
The tax code is more than 7,000 pages long.
Add in the IRS interpretation pages and it balloons to over 75,000 pages.
Add in the fact that nearly no one understands taxes, things get frustrating…fast.
To help you I am doing a YouTube series on taxes.
Starting with foundational concepts and taking it to specific strategies for athletes and entrepreneurs.
You can check out the first video here ⬇️⬇️⬇️
Offense vs. Defense
If you are a sports fan or a fan of any competition ask yourself this:
How many times have you seen your team go up big only to almost lose at the end?
The first part of the game they are just dominating.
So much so it doesn’t look like the other team shouldn’t be in the same league.
Yet little by little the momentum shifts and before you know it, we got a nailbiter.
It happens because of a mindset shift ~ The team with a big lead goes from trying to win to just trying not to lose.
Prevent Defense
Playing It Safe on Offense
Trying To Get To The End
This doesn’t just happen in sports, it happens with our money too.
It is a trap that I have fallen into.
Prevent defense is great but let’s not forget what got us the lead…our offense.
In today’s newsletter, I am going to explain the problem, outline the solution, and give you real-life examples to help you avoid this trap.
Let’s dive in…
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Playing It Too Safe
First some context ~ Our specialty at Moment is working with clients navigating significant income (often in a short time frame).
I describe it as sudden wealth.
Example:
A business owner works for years to pay his bills and before he knows it he is making more in a year than he did in the first 5 combined.
An athlete is earning life-changing money in a contract that only lasts a few years.
These types of individuals are often all gas no breaks.
They bet on themselves
They ignore all the doubters
They made it happen against the odds
So the result is big sums of money with decades to figure out how to use it best.
An analogy I would give you is they are hiking across the country, and have all the best gear, but are facing a mountain covered in trees.
The gear (the money) is great but the unknown (mountain + trees) makes it feel like every step needs to be calculated.
So here is where that leads…
The Problem
You go from spending a lifetime with your foot on the gas ~ increasing your nest egg along the way.
You then slam on the breaks and start spending off that net egg?
Incoming…anxiety, stress, doubt
Said another way, you go from offense to defense.
Your mindset shifts from how to make this happen (your career) to how do I not blow this opportunity (your money)?
Trust me I have been there doing the mental gymnastics trying to figure out:
If I spend this ➡️ Never make another dollar ➡️ Will I not run out of money?
Literally, the opposite mindset that I had the previous decade.
If you haven’t been following along let me share my belief about money:
To spend it (while you are alive) on the things, people, and memories that matter most to you.
Now if that is my belief it requires an offense thinking not a defensive one.
Let me show you how to flip the script…
The Solution
My average client earns north of $1,000,000 a year in personal income.
So when the income shuts off ~ sell their business or retire from their career ~ it is a shocking change.
The natural reaction is to go from offense to defense immediately.
Let me show you a better way…
Step One:
You have to know your numbers.
To reduce anxiety around money you have to know what it costs to be you.
As in how much are you spending every year to live your current lifestyle?
Step Two:
Determine how much money you need in your war chest (safe investments) to withstand an economic downturn.
We take our clients through an exercise called a lifeboat drill to determine how much we need in these safe investments.
In short ~ If the worst-case scenario happens (great depression, tech bubble, etc..) how much money do we need in our war chest (safe investments)?
Remember many of our clients are young so I want to keep as much on offense as possible (while protecting their downside).
Step Three:
Determine what supplemental income you could generate.
This can be as much for your mindset (keeping it on offense) as it can be for your bank account.
My last year playing baseball I earned more than $1,500,000.
So with that as my baseline…the $15-hour position I took next felt like I was earning nothing.
Yet it was a game-changer for my mindset.
It allowed me to understand I could (if desired) earn income outside of the thing I had been doing my entire life.
It helped me to start playing offense again.
Now let me show you two client examples that illustrate the power of this…
Real World Examples
Client 1: Exited Business Owner
***Numbers have been changed to protect client privacy
This client was earning north of $1,000,000 when he sold his business.
Through his business sale, he got an additional $5,000,000.
Easy math says that a $5,000,000 nest egg could produce ~ $200,000 in income for the rest of his life (4% withdrawal rate).
A good life but not the income he was earning previous to his exit.
Our client was feeling bored and facing increased anxiety from “doing nothing”.
Today that client earns an additional $75,000 in consulting roles he loves.
It utilizes his skill set.
It gives him a sense of purpose.
It led to a 37% increase in lifestyle spending ($200k vs. $275k).
See the power of a little bit of offense?
Client 2: Professional Athlete
***Numbers have been changed to protect client privacy.
This client built a foundation of saving throughout his career and ended it with more than $10,000,000 in investable assets.
While playing we utilized a relatively conservative portfolio ~ 65% toward growth positions and 35% toward defensive positions.
Given his modest lifestyle, we have gotten more aggressive with his portfolio today ~ 90% toward growth and 10% toward defensive positions.
We project this shift will earn him roughly 1.5% more over the next several decades.
Said another way ~ By continuing to play offense (in a smart way) this client projects to have millions more than he would have if we just played defense.
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The thing I want you to take away is playing it too safe can be as big of a detriment as risking too much.
I see it with everyone, not just our clients.
Your situation is unique to you.
Find a financial team that can serve as an intellectual sparring partner, challenge your mindset, and watch your money (and mindset) grow.
Until next time my friends…
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A Money Question
How many chips do you have on offense and how many chips do you have on defense?
The beauty of this question is the answer should be hyper-specific to you.
For me keeping more chips on offense has shifted my mindset from one of scarcity to one of abundance.
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3 Ways I Can Help You
💰 Schedule an introductory call with Moment. We help athletes, entrepreneurs, and key employees build and protect wealth.
📹 Check out my YouTube channel. A safe place to get smarter with your money.
📷 Interact with me on Instagram. Where I provide bite-sized daily content to level up your money game.
Moment Private Wealth, LLC is a Registered Investment Advisor, located in the State of Missouri. Moment Private Wealth provides investment advisory and related services for clients nationally. Moment Private Wealth will maintain all applicable registrations and licenses as required by the various states in which Moment Private Wealth conducts business, as applicable. Moment Private Wealth renders individualized responses to persons in a particular state only after complying with all regulatory requirements, or under an applicable state exemption or exclusion. Nothing in this content is intended to be, and you should not consider anything in this content to be, investment, accounting, tax, or legal advice.