Financial Fitness

The 47 Principles · by Brady & Woodward

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Basics

BasicsPay Yourself First

It's not what you make but what you keep that determines financial success. Pay yourself first and save what you pay yourself.

BasicsMoney Is a Gift (Stewardship)

Money is a gift. It has a specific use. This means that you have a stewardship. You are to use your money for something that matters, for your family and beyond.

BasicsLive Within Your Means

Live within your means. Always. No exceptions. Follow a good budget. Give each spouse a small allowance so you have a little discretionary money each month and don't nitpick each other on the little things.

BasicsGet Advice from the Right People

Stop getting financial advice from broke people; get it only from those whose finances you want to emulate.

BasicsBudget for the Unexpected

Consistently budget and save for unexpected expenses.

BasicsGive 10% – Tithing

Pay 10% of your income to tithing. Give even if you are really broke. Giving puts you in a mindset of abundance and puts any financial worries in their proper perspective, so it should not be limited to just tithing. The Bible categorizes giving as: 1. tithes and 2. offerings.

BasicsServe Others to Find Happiness

Using your time, money, and talents to genuinely help others naturally increases your happiness. Seeking money for money's sake may or may not influence your happiness, but seeking money in order to fulfill your stewardship and serve and bless others automatically increases it.

Offense

OffenseRight Moneyview & Long-Term Vision

People with the right moneyview discipline themselves to live the principles of financial fitness, make financial decisions based on a long-term vision, adopt the habit of delayed gratification, and use the compounding nature of money to constructively achieve their dreams.

OffenseInvest in Yourself – Read & Learn

Financially fit people are avid readers and consistently invest in themselves by increasing their financial and leadership education, skills, experience, knowledge, and ability.

OffenseExcel Now, Invest in Your Future

Financially fit people excel at the work and projects they are doing now, and at the same time, they invest in themselves in order to achieve their long-term vision.

OffenseNever Sacrifice Integrity for Money

Never sacrifice principles for money or possessions. Be honest. Keep your integrity. Keep your priorities in the right order.

OffenseGain Mastery (10,000 Hours)

Do the work to gain mastery in what you do (usually about 10,000 hours).

OffenseAsk "Do We Really Want This?"

Financially fit people don't ask "Can we afford it?" as much as they ask: "Do we really want this? Will it help our purpose and dream? How will it help our purpose and dream? In what ways might it be a distraction? Will it cost more money to take care of it or keep it? Would saving or investing the same amount be a bigger help? Is now the best time for this purchase?" They cultivate a habit of saying No to purchases even when they can easily afford them, and put much of their money into savings or investments instead.

OffenseAnalyze & Choose Your Habits

Financially fit people analyze their habits—in life as well as finances—and work to break bad habits and cultivate good ones. They think about and choose the habits they want and need to achieve their life dreams.

OffenseOwn a Business

Own a business, even if you start out working on it part-time. You can apply all the other principles in this book and obtain wealth over time, but those who apply them in their own businesses can become wealthy much more quickly.

OffenseBuild Passive Income

Increase your passive income to the point that 1. most of your income is passive and 2. you can live off your passive income.

OffenseRedefine Retirement

Retirement should not be an issue of age but rather a function of having enough passive income to live on for life. Retirement means retiring from things that are not part of your purpose so you can focus your productive work on your life mission.

OffenseThe 4-Step Path to Financial Freedom

To really attain financial success, focus on: 1. Truly excel in your current job and simultaneously start a business; 2. Put in 10,000 hours to gain mastery over your business while still excelling at your current job; 3. Make a plan to become financially free by reaching a point where the passive income from your business more than covers your family's needs; and 4. Once financially free, put your full-time focus on building your business to fund your life purpose. Each of these requires deep focus, one at a time.

OffenseGet Good Mentors

Get good mentors and really listen to them.

OffenseUse Money Productively

Use your money productively—by putting it where it will bring you back more than you put in—rather than nonproductively. The best investment is in yourself and your own business. Wisely and appropriately use some of your savings to increase your business assets and returns.

OffensePrepare for Worst-Case Scenarios

Put some money into preparing for a worst-case scenario. Don't be fanatical about this, but don't ignore it either.

OffenseTargeted Savings Fund – Pay Cash

Build up a regular targeted savings fund for things you want to buy later. Consistently fund this account and buy consumer items with cash (not financing).

OffenseOnly Speculate with Expendable Money

Only invest money you can afford to lose entirely in speculations outside your area(s) of mastery. Only invest a little, if any, in such ventures.

OffenseNever Gamble Your Savings

Do not ever use your savings to speculate.

Defense

DefenseGet Rid of Debt

Get rid of debt.

DefenseAvoid the "Business Debt" Trap

If you aren't financially sound, don't get caught in the trap of using "business debt."

DefenseDon't Use Credit Cards for Credit Building

Do not use credit cards to build your credit because this almost always leads people to more debt.

DefenseAvoid Predatory Loans

Never use title pawning, "ninety-days-same-as-cash" loans, payday loans, rent-to-own plans, layaway debt, or similar schemes.

DefensePay Cash for Cars

See your car(s) as transportation, not status symbols. Save up and always pay cash for them.

DefenseDebit > Credit, Cash > Debit

Debit cards are better than credit cards for many people, and cash is even better.

DefenseTeach Children Financial Fitness

Teach your children and youth the principles of financial fitness. Set the example for them. Mentoring them will help you as well as them.

DefenseAvoid Second Mortgages

If you are not wealthy, do not get sucked in to using second mortgages.

DefenseUse the Roll-Down Method

Use the roll-down method to pay off all credit card debts and then apply it to all other debts.

DefenseBe Skeptical of Advertising

Learn to be skeptical of advertising, media, and marketing.

DefenseAccumulate Wisdom, Not Stuff

Accumulate slowly; build your inventory of resources and wisdom, not stuff.

DefenseLive by True Principles

Get right with God, apply true principles in all areas of life including finances, pursue your stewardship, serve others—and leave impressing others in God's hands.

DefenseConsumer Debt Is a Cancer – Cut It Out

Do not use consumer debt. Wise financing for business investment may be okay at times, but consumer debt is like a cancer. Cut it out!

DefenseBudget for Memories

Make memories part of your lifestyle, budget, and life plan. Start simple and add big memories, too.

DefenseNavigate the 10 Financial Danger Zones

Be very, very careful as you make decisions about the danger zones: taxes, home ownership, divorce, credit cards, lawsuits, insurance, seeking status, college, addictions, and investments. Get good advice from your financial mentors, and study things in detail before taking action.

DefenseHome Buying – The 2X Rule

If you buy a home, follow the 2X Rule. For example, if your income is $50,000 per year, do not buy a home that costs more than $100,000. If you want a bigger home, earn more money first.

DefenseEarn Your Toys – Be Debt Free First

If you are not financially fit and you have a bunch of "toys," it means that you do not really deserve them and you are using your savings or debt on the wrong things. If your debts are all paid off, you follow the savings guidelines, and you have the cash, you can buy a few "toys" and still be financially fit.

Playing Field

FieldStudy Free Enterprise

Studying and understanding free enterprise is an essential part of financial fitness.

FieldProtect Economic Freedom

Financially fit people who want to maintain an environment that encourages opportunity and prosperity pay attention to the principles of freedom and the ongoing actions of government.

FieldSave Beyond Fiat Currency

In addition to cash savings, save some of your money in something other than fiat currency.

FieldResearch Before You Invest

Study up on investments in metal, and any other investment, before you buy. Do your homework. Take your time.

FieldLive an Enterprising, Purposeful Life

Invest even more in yourself by learning to be the kind of person who consistently engages in an enterprising, creative, enthusiastic type of life. Fill your days with enterprise, action, and doing things that matter. And teach your children and the people you work with to do the same. Become the kind of person and leader who consistently works on your current enterprise.

FieldStudy & Prepare for Economic Downturns

Study the strengths and/or weaknesses of your nation and economy (and others where you do business) and wisely consider and prepare for potential economic downturns.

Key Terms

24 Hour Rule

If you see an excellent deal, wait at least twenty-four hours before you buy. Think about the purchase and determine whether it will be an investment or just money used and gone.

2X Rule (Woodward Rule)

You should not buy a home that costs more than twice what you make annually. Some realtors will try to convince you to spend more on a home than you should.

Active vs. Passive Income

Active income is earned as a result of work you do, so it requires your active participation to get it; passive income keeps paying you even if you stop working.

Assets vs. Liabilities

An asset is something you own that brings you additional money, while a liability is something you own that costs you additional money.

Budget

A plan of how to spend your income. A good budget accurately outlines income and keeps expenditures lower than income.

Build Your Pipeline

A phrase used to communicate the effectiveness of building your business or other income streams to consistently increase your passive income. Those without a pipeline frequently struggle to create lasting prosperity.

Commodity vs. Fiat Money

Commodity money has value for its own sake, such as eggs or cattle or gold, while fiat money only has value because a government says so. Through history, the government backing of fiat money has proven unstable and risky.

Compound Interest

Interest paid on both the principal and the accrued interest. People who pay compound interest usually end up spending much more money than their purchases are worth, while those who collect it make money faster than others.

Debt

Money a person owes to someone or some entity. Most debt should be avoided, especially consumer debt.

Delayed Gratification

The state of waiting to spend money on things until you can truly afford them.

Depreciation

The decrease in value of an asset over time. Never use credit to finance something that depreciates.

Emergency Fund (Rainy-Day Fund)

A fund that covers unexpected or emergency expenses when they come. Financially fit people consistently accumulate at least three to six months worth of living expenses in this fund.

Entrepreneur

A person who takes the risk to build things and create increased value and profits. Societies that incentivize entrepreneurial success are more free and prosperous than others.

Financial Danger Zone

A situation that is likely to cause significant financial problems without wise planning and decision making.

Financial Fitness

The state of understanding and applying the forty-seven laws of financial success covered in this book.

Financial Myth

A fake principle of finance that is widely believed but ultimately false.

Goose That Lays the Golden Eggs

Your business or career that is the source of your financial success. Taking care of the goose means taking actions to ensure that your income will continue.

Impounding

Saving money in a safe place for a worst-case scenario.

Inflation

A decrease in the value of money due to a persistent, substantial rise in the general level of prices related to an increase in the volume of money. This is often caused by government printing of fiat money.

Invest in Yourself

To devote time, money, effort, etc. to things that will increase or improve your own knowledge, mastery of what you do for a living, financial and leadership education, personal abilities, business, and so on. Investing in yourself is the most important investment you can make.

Live within Your Means

A phrase asserting that you should not spend more than you have. This is essential to financial fitness.

Make It Automatic

Arranging to have a percentage of your income automatically diverted for a specific purpose, such as directly depositing money into your savings account(s) or paying tithes and debts, before you receive payment.

Mastery

Command or grasp, as of a subject. Financially fit people gain mastery in their area of expertise, the career or business that brings them most of their income. Those who do not gain real mastery often struggle to succeed financially.

Mentor

A wise and trusted counselor or teacher/an influential senior sponsor or supporter. A good financial mentor is one who has achieved what you want to achieve and is living the kind of life you want to emulate.

Mindset of Abundance vs. Mindset of Scarcity

A general mindset of abundance is a belief that good things will come to those who learn and apply true principles, while a scarcity mindset is a belief that you can't or won't succeed regardless of what you do. Financially fit people adopt an abundant mindset.

Moneyview

A person's beliefs and perspective on money, its value and purpose in life, and how to obtain and use it.

Pay Yourself First

This is the first principle and one of the most important factors of financial fitness. People who consistently pay themselves first and always keep this money in savings are nearly all financially fit. Those who do not usually struggle financially.

Principal and Interest

Principal is the original amount of money lent, while interest is the amount you pay to borrow the money to buy something. Always find out the total cost by adding the principal and all the interest you will have to pay.

Productive Use of Money

Spending money on something that will bring you back more money.

Prosperity

The state of being financially fit and seeing your finances succeed and flourish because you have learned and applied the laws of financial fitness.

Retirement Rule

You are ready to retire when you have enough passive income to live on for life.

Roll-Down Method

A technique of getting out of debt by paying off your smaller debts first and then using the payment amount from the smaller debt to help pay off the next smallest debt—and continuing this process until all of your debts are retired.

Savings

Money you put away each time you receive income and which you never spend. The level of your savings is the measure of your prosperity.

Savings Accounts (Types)

There are several kinds: 1. Emergency Fund – at least 3-6 months of living expenses for unexpected events; 2. Long-term savings – to build more wealth; 3. Targeted savings fund – for special planned purchases such as a car, a trip, or college for a child.

Shopaholism

The habit of spending, often using consumer debt, for things you do not really need.

Spending Multiplier

This occurs when people spend so much on things they do not really need that they create a momentum to spend more and more. This is a serious financial disease that causes many financial problems.

Spontaneous Purchases

Buying things in the moment without taking the time to really consider the wisdom of the purchase. See "24 Hour Rule."

Status Trap

The allurement of looking successful and important that can cause people to spend beyond their means to keep up appearances when they are in fact financially broke.

Stewardship

The responsible overseeing and protection of your money, assets, energies, and other resources in order to truly build God's kingdom in the way you feel is best suited to your calling in life.

Tithing

Giving 10% of your income to your church or other appropriate recipient.

Wealth

The state of having a pipeline of passive income that keeps paying you more than you need for your bills, expenses, and enjoyments. The excess is often used by financially fit people to serve and improve the world in important ways.

YOU, Inc. Investment Hierarchy

A hierarchy that prioritizes the various investment categories into levels of significance: Level 1 – Yourself; Level 2 – Emergency Fund; Level 3 – Survival Preparation; Level 4 – Long-Term & Targeted Savings; Level 5 – Secure Investments; Level 6 – Real Estate & Stocks; Level 7 – Other Speculation.