[ CONTINUED FROM FRONT FLAP ] A FIGHTER S GUIDE TO CONQUER IN G YO U R FIN A N C ES What is mind over market? SCOTT FORD is President and founder of Cornerstone Wealth Management Group. Named one of 2008 s 20 Rising Stars of Wealth Management by Private Asset Management magazine, he provides proactive investment and wealth management advice based upon his trademarked system Way2Wealth to a limited number of business owners, entrepreneurs, and affluent families. Ford has been a guest on NBC and Fox affiliates and has contributed to the Today show. Additionally, he has been featured in the New York Times, Christian Science Monitor, Wall Street Journal and, InvestmentNews. Ford studies Brazilian Jiu-Jitsu at Clinch Academy in Maryland. J A C K E T D E S I G N : C. WA L L A C E The financial market is like an adversary that s bigger, faster, and stronger than you as an individual investor could ever hope to be. Financial Jiu-Jitsu: A Fighter s Guide to Conquering Your Finances evens the playing field, showing you how to be a smarter fighter in the battle for financial freedom. From year to year and even minute to minute, financial markets change, sometimes dramatically. The average investor grapples with this fact in one of two ways: fear everything and do nothing, or get emotionally caught up in Wall Street s every move, reacting impulsively and irrationally to each up or down. There s a third option. And if it s your hope to achieve a firm financial footing, it s your only option master the guiding principles of finance to achieve mind over market, expertly and effortlessly adapting to and overcoming market swings. Financial Jiu-Jitsu shows you how to master the basic principles of finance to: JACK ET I MAG ES CO U RTESY I STO C K P H O TO A ND THE ARTIS T: BE LT G ERVI LLE H ALL, B I LLS M A RK H I C K S I I, C A RD S ANTHO NY TAY L O R AUTHOR PHOTO: JAMIE TURNER FROM TURNER PHOTOGRAPHIC STUDIO Everyone s fighting a battle for financial freedom. Most are losing. Financial Jiu-Jitsu shows you how to win. FINANCIAL A FIGHTER S GUIDE TO CONQ UE RING YOUR F I NA NCE S A FIGHTER S GUIDE TO CONQUERING YOUR FINANCES Overcome fear Set aside emotions Build a financial foundation that can be leveraged to build real wealth regardless of what the market throws at you FINANCIAL You can t plan for everything life and the economy might throw at you. But after reading Financial JiuJitsu, you ll be prepared for almost anything. FINANCIAL RENZO GRACIE, WORL D RENOWNED PRACTITIONER OF BRAZILIAN JIU-JITSU AND MMA FORD finance to build a solid financial foundation that can then be leveraged to help you achieve your longterm financial goals, while building lasting wealth for you and your family. FOREWORD BY $27.95 USA $33.95 CAN Trading either commodities or foreign currencies might sound exciting. But if you haven t mastered even the basics of money management establishing an emergency fund, maintaining a budget, and setting money aside for your children s education and your retirement can you honestly say you re on the path to perfecting the art of personal finance? In Financial Jiu-Jitsu: A Fighter s Guide to Conquering Your Finances, financial advisor and Jiu-Jitsu enthusiast Scott Ford shows how mastering your finances like mastering a martial art has nothing to do with perfecting thousands of exotic, technically challenging moves. Rather, mastery is as simple as performing a handful of basic moves thousands of times. These basic financial moves include: Prepare to Win: Paying yourself first, maintaining a cash safety net, managing credit wisely, and never procrastinating Balance and Base: Determining your specific financial goals, and developing a vision for your life Closing the Gap: Overcoming your fear of the unknown by creating a personal balance sheet and using it to analyze your current financial situation The Power of Respect: Choosing and working with a financial advisor Timing: Taking advantage of tax-deferred investments, maxing out 401(k) contributions, and contributing to IRAs Gain Control: The basics of an estate plan, living trust, pourover will, and power of attorney Position Before Submission: Protecting yourself with insurance Attitude: Planning for your retirement Learning Jiu-Jitsu taught Scott Ford to face both personal and professional challenges head on to anticipate problems, to be open to new ideas, and to seize opportunities. Now, in Financial Jiu-Jitsu, he teaches you how to use the guiding principles of [ CONTINUED ON BACK FLAP ]
Financial Jiu-Jitsu
Financial Jiu-Jitsu A FIGHTER S GUIDE TO CONQUERING YOUR FINANCES Scott Ford John Wiley & Sons, Inc.
Copyright 2011 by Scott Ford. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions. Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages. Way2Wealth is a registered trademark of Scott Ford. For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 572-4002. Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com. Library of Congress Cataloging-in-Publication Data: Ford, Scott. Financial jiu-jitsu : a fighter s guide to conquering your finances / Scott Ford. p. cm. Includes index. ISBN 978-0-470-64830-8 (cloth); ISBN 978-0-470-91069-6 (ebk); ISBN 978-0-470-91074-0 (ebk); ISBN 978-0-470-91075-7 (ebk) 1. Finance, Personal. I. Title. HG179.F575 2011 332.024 dc22 2010018281 Printed in the United States of America 10 9 8 7 6 5 4 3 2 1
Contents Foreword Acknowledgments ix xiii Introduction 1 Chapter 1 Prepare to Win Now and Forever 5 Give Back 8 Pay Yourself First 9 Automate! 10 Maintain a Cash Safety Net 11 Manage Credit Wisely 12 Get Time on Your Side 13 Never Procrastinate 15 Make Reality Your Perception 16 Follow a Simple and Comprehensive Strategy 17 Chapter 2 Balance and Base: What Is True Wealth to You? 21 Step 1: Forget Financial Goals (At Least for Now) 22 Step 2: Develop Your Vision for Your Life 24 Step 3: Determine Your Specifi c Goals 29 v
vi Contents Chapter 3 Closing the Gap: Analyze your Current Situation 33 Before You Close the Gap: Overcome Your 34 Fear of the Unknown Step 1: Forget about Budgets 36 Step 2: Make Sure You Have Positive Cash Flow 36 Step 3: Create a Personal Balance Sheet 38 Step 4: Keep in Mind the Total Financial Picture 42 Chapter 4 Family: Your Family Benchmark 45 Your Family Benchmark: An Introduction 46 The Family Benchmark in Action 49 Time and the Power of Compounding 51 Tie the Steps Together 53 Starting Point 54 Chapter 5 Your Team of Advisors: Two Is Better Than One: The Power of Respect 61 Types of Advisors 63 All Those Initials: Professional Designations 66 How Financial Professionals Earn Their Keep 68 Choosing an Advisor 70 Interview! 74 Trust But Verify 77 Chapter 6 Timing: What Is Your Investment Strategy? 79 Stage 1: Build an Emergency Fund 80 Stage 2: Own Your Home 84 Stage 3: Take Advantage of Tax-Deferred Investments 86 Stage 4: Max Out 401(k) Match Contributions 90 Stage 5: Contribute to Traditional and Roth IRAs 92
Contents vii Stage 6: Determine How to Invest Your Funds 96 Stage 7: Diversify into Other Investments 103 Chapter 7 Gain Control: Your Estate Plan 107 Estate Plans: The Basics 108 Revocable Living Trust 109 Pourover Will 111 Health-Care Power of Attorney 112 HIPAA Power of Attorney 113 Property Power of Attorney 113 Family Retirement Preservation Trust 114 Estate Planning Letter 115 But Don t Simply File Your Plan Away! 115 Pay Attention to Benefi ciaries 118 Chapter 8 Position Before Submission: Analyze Insurance Needs 121 Protect Yourself But Not to the Extreme 122 Life Insurance 124 Auto Insurance 131 Property Insurance 133 Health Insurance 135 Disability Insurance 135 Chapter 9 Attitude: Life in Retirement 139 How Much Money Will You Need? 141 Current Spending Estimate 141 10-10-4 Rule 144 Chapter 10 Leverage: Establish Your Tax Plan 147 Tax Savings: Homeowners 149 Tax Savings: Students and Their Parents 150 Tax Savings: Retirement 154
viii Contents Chapter 11 Love, Discipline, and Dedication: Have Your Plan Updated 157 Conclusion 161 Afterword 163 Appendix 169 About the Author 183 Index 185
Foreword Even when I started to feel ligaments tear and knew my arm was about to break, I stayed calm. I was leading the match against Kazushi Sakuraba, but with about twenty seconds left I had made a mistake and gotten caught in a kimura arm lock. The kimura is a basic yet powerful submission hold; executed properly the elbow and shoulder are locked and when applied at full speed can easily dislocate the shoulder, rupture elbow ligaments... and break bones. So I felt my arm start to go, but there was no way I was willing to tap, which in fighting terms means to concede defeat. Don t get me wrong. I m not afraid to tap. Every fighter taps in training. We do it every day. That wasn t the problem. You see, I had time to tap, but I just couldn t do it. Deep inside I had always wanted to answer the question, Can I listen to a bone being broken and still not quit? I found out I could. Since I didn t tap, Sakuraba continued to apply more pressure, and suddenly my elbow audibly snapped. My arm was twisted at what other people have described as a horrific angle, but I kept my face as calm and composed as possible, mostly for the referee s benefit. The referee looked at my arm, looked at me, looked at my arm... and I tried to convince him I was fine. I even said, No, I m okay... this happens all the time in training. He didn t buy it. He stopped the contest. Although I did lose the fight, I gained something incredibly more important than any victory I could have won. I learned, once and for all, that my mind truly is stronger than my body. Today, when things get tough, all I have to do is remember that if I can ix
x Foreword watch my arm get broken and still keep fighting... I can do anything. Our minds can be incredibly powerful tools if we let them. That s why I agree completely with Scott s perspective, which you ll read about later, regarding the pain of discipline and the pain of regret. Scott s point is simple yet powerful: The pain of regretting what you didn t do or didn t try is so much worse than the pain of doing your best in any situation. I hope I never feel the pain of regret. In fact I love the pain of discipline because it ensures that I will never feel the pain of regret. (I say pain because doing the right thing for yourself and your family is never painful; doing the right thing is rewarding in and of itself.) I know that if you try, anything is possible for you, for me, for all of us. If you can dream it you can do it: In your personal life, your professional life, and in your financial life. But you have to get started somewhere. I know. I m not just a martial artist, an MMA fighter, and a passionate Brazilian Jiu-Jitsu practitioner. I m a family man and a businessman as well. I spent the last years working to develop my schools so that I can provide for my family, teach Brazilian Jiu-Jitsu to future generations, and continue my family s legacy in the sport. Family is at the core of everything I do. I apply the same skills, the same discipline, the same drive and passion to building a financial future for my family that I bring to fighting. Yet in all these areas the same principles apply. Think of it this way: Mixed Martial Arts is a blend of fighting styles and disciplines, but Brazilian Jiu-Jitsu is the backbone of MMA. Not a single great MMA fighter lacks Brazilian Jiu-Jitsu skills; even if you don t want to apply finishing holds you still must be able to defend against them. Ground skills are the backbone of any fighting art. Along the way Brazilian Jiu-Jitsu showed me how to see life diff erently. It taught me to look at every angle, to be open to new ideas, to anticipate problems and seize opportunities.... Brazilian Jiu-Jitsu has taught me how to do things the right way by seeing the whole situation and choosing the right move.
Foreword xi Most important, Brazilian Jiu-Jitsu taught me to face challenges head on. If you face challenges, you learn... and those challenges are no longer new. There is no challenge you can t overcome. Building wealth may seem impossible. It s not at least it s not as long as you try. You will achieve nothing if you don t try. You can achieve anything if you try. You may never step on a mat and you may never have to wonder whether you should tap or not but each of us fights to provide better lives for ourselves and our families. That s a fight we all want and deserve to win. Scott will show you how. Renzo Gracie Brazilian Jiu-Jitsu Black Belt Owner and Chief Instructor, Renzo Gracie Academies
Acknowledgments Thanks to my wife Angie, for her constant love and support. Special thanks to my pastor and church family, living reminders of the fact that any good resulting from this book and from everything else in life is a gift from God. He deserves all the thanks and praise. In addition, I would like to extend my sincerest appreciation to the individuals directly represented in this book: Alan Weiss, President, Regent Wealth Management Group Jeff Rozovics, CPA, financial consultant and partner, Rozovics & Wojcicki; Brazilian Jiu - Jitsu Black Belt and gold medal winner of the 2004 Pan American Games Jim Lake, National Sales Manager of Guardian Annuities, Brazilian Jiu - Jitsu Purple Belt Luke Rinehart, Head Instructor, Clinch Academy Mike Brown, former World Extreme Cagefighting (WEC) featherweight champion Renzo Gracie, Brazilian Jiu - Jitsu Black Belt; Owner and Chief Instructor, Renzo Gracie Academies Ron Carson, CEO and founder of Carson Wealth Management Group Sam Sheridan, best - selling author of A Fighter s Heart and The Fighter s Mind xiii