Caleb Guilliams believes his book, The And Asset, can change your life. But he also knows that folks have different learning styles, so he put together a video series to go over the main ideas.
Overall, this book will teach you a couple things.
First, efficiency matters. If you could do just one thing, think about your money and efficiency. Second, we’ve all heard that compound interest is this amazing wonder; let’s understand how it actually works and how we can get in our life. And finally, let’s figure out how to take back control. These are the three pillars.
Find your why. Simon Sinek wrote the book, Start With Why. After giving an incredibly powerful Ted Talk, he wrote a book on it to talk about how people don’t care what you know, people don’t even care how you do what you’re doing. People care about your why.
How versus what. Most people are so focused on what to do, whether it’s investing in the market, real estate, or just quitting your job. Whatever it is, let’s focus on how to do whatever you currently want to do. Take whatever you want to do and make it better.
Figure out what your why is; what would you do if money wasn’t an issue?
Financial independence or financial freedom.
Financial freedom is when you have enough income, preferably passive income, coming in to fund your why. I highly suggest your read Robert Kiyosaki’s book, Rich Dad, Poor Dad. He says that you are financially free, or financially independent, when you have enough passive income coming in to fund your expenses. I want to take that concept to the next level; you’re financially free when you have enough passive income funding why you want to do what you’re going to do.
Caleb also takes Albert Einstein’s famous equation E equals MC2 and transform it into a wealth equation: E stands for efficiency, equaling M stands for your money being compounded by compounding and control. And when you have efficiency at its finest, you have your money compounding and control at its max.
This is actually the foundation.
If you play golf and I asked you the question, What’s more important, the club or the swing? A lot of people that have played before would say the swing. Even if you have some nice clubs, you won’t necessarily be that good at golf if you don’t practice. A professional golfer can outplay a novice with mediocre clubs, because they have a better swing.
The same thing applies when it comes to money. Most people out there are focused on the product, ie. the club. They’re think if they get the right club, they’ll be a great golfer. The reality is great golfers have good clubs, but they spend a lot more time on their swing.
In this chapter, Caleb covers the process of swinging or the process of efficiency as it relates to your money, and also touches on what an ideal investment or a club looks like.
Warren Buffet is noted for saying that he has two rules to investing rule: Number one is don’t lose money; And rule number two is to listen to rule number one. It’s really important as we think about the fact that every time we lose a dollar, we don’t just lose that dollar, but we lose what that dollar could have earned the rest of your life. Think about that.
Whether we talk about losing our money to fees, to market losses, to taxes, even using your money, in every one of these scenarios, losing a dollar is a really bad idea because you’re not just losing that dollar, you’re losing what that dollar could have earned the rest of your life.
Wealth transfer and opportunity costs. Through the lack of efficiency, you might lose a dollar. That’s the wealth transfer. And a lot of times people are losing money that they don’t even know that they’re losing, but the more scary thing here is the opportunity cost or what they’re really losing in the future.
Look at fees and how they affect us. Every time we lose a dollar and we have to understand the difference between actual and average rate of return. For example, if I gave you a hundred dollars and we made a hundred percent the first year, your a hundred dollars becomes $200. That’s your money doubled. But then the next year you lose 50%. Now your $200, go back down to $100. We just averaged a 25% return on your money. But the problem is your actual rate of return was zero.
Finally, you really, really want to be careful that you’re being most efficient with your taxes.
The ideal investment.
There are 16 benefits listed on page 18. Your rate of return is important, but it’s not he end all be all. Ask yourself the question, what’s the value of safety? What’s the value of liquidity, having my money available to do access? What’s the value of growth?
So many people are so focused on where they want to go or invest, they want to be active with their money, but maybe they don’t know exactly how; they’re trying to do things by pressing on the gas and brake at the same time. They get nowhere. Make sure you understand the process and have an amazing product that goes with it.
The most efficient way to buy your house. This chapter is I about buying a house vs. renting. There are benefits to both. Let’s assume that you’re going to buy a house.
The next question is how you’re going to buy that. And, and the question that I’d like to ask a lot of people is, if you could pay cash for a house, let’s assume that your house is going to be $250,000, and you could pay cash for it: would you? Most people would say yes, absolutely, because there’s a lot of peace of mind that comes with that.
I believe if I had $250,000 that I could pay cash for that house, I wouldn’t necessarily do that, because of efficiency.
Keep three things in mind as you think about this: How to minimize losses; how to maximize future growth; and how to have the most security or control. You want to minimize a wealth transfers. You want to maximize your ability to grow your money. And you want to maintain full control over your money, giving you a sense of security.
Look at what the payments would be, and you have to look at what the tax benefits could be. Look at the house value. Whether you pay cash for something or whether you finance something, the house is going to grow or decrease in value. It doesn’t matter how you pay for it. So by taking all your money and putting it into your house, that doesn’t make it more valuable, you’re just tying up your money.
You have to also look at the importance of inflation. Could it be that the 30 year mortgage could work for us because every year dollars get less and less valuable, but we have this contract that allows us to pay for a house that we’re currently living in now with less and less valuable dollars. That’s something really fascinating to think about.
The thing that I think is most unique is the difference between earning versus paying. A lot of people say, and I, this is the graph 25. A lot of people say, Caleb, if I paid $250,000 of how of my house, and I took a 30 year mortgage, assuming a 4% mortgage rate, I would be paying over $178,000 worth of interest. That’s a lot of interest. And, and they, and they would say if I paid cash, I wouldn’t have to pay $178,000 worth of interest over 30 years, which is correct. But I would say if you had $250,000, assuming you could earn 4% over 30 years, you would have, um, you would have earned over $578,000 worth of interest. Think about that 578,000 versus 178. That’s a huge difference.
And so we really have to look at the two. We have to look at the full picture, how much you can earn and paying and understanding the difference between uninterrupted compounding versus paying on an ever decreasing a mortgage.
We have to look at opportunity costs. You know, the meaning. If you have all your money tied up in your house and an opportunity comes, your money’s all tied up versus, you know, other,
The last piece – security. And this is the piece that everyone should be aware of is the security. I would say that you are less secure when you pay off your house.
And here’s why when you lose your job or when, whether you get disabled or something really bad happens to you, what do you need? Do you need more? Or do you want your house to be paid off? For example, I would say the access to capital is your greatest financial need. And, and really, if something happens to your job, how are you going to get that money? You’ll either have to sell the house or refinance it. And how many companies will refinance it when you have no source of income?
And so I always suggest not giving up control or taking risks with that money, but having a secure place to save that money where it’s going to grow, where you have access to it.
I don’t believe that the mortgage is a problem. I believe that the mortgage payment is what people get emotional about. And if you can have a strategy and a system to take care of that in the future, you’re going to be fine. So the house, uh, kind of. Um, the house is a really emotional topic and I believe that how you pay for your house really matters and paying cash is not necessarily the most efficient.
And I break down and I gave a summary of a couple areas on the house.
Uninterrupted compound interest.
How you get lifetime uninterrupted compounding interest is your money has got to be in a place that will never, ever lose to market crash, to unnecessary fees, to paying an unnecessary tax, or to the use of your dollar.
There are nine areas that you need to master control, listed on page 49.
1. Keep your money safe. What’s the importance of safety? What’s the ROI of having a system and a strategy that keeps your money safe? Keeping your money liquid, means you’ll have more control over access and getting into your money for opportunities or emergencies.
3. Keep your money leverage-able. What’s the power of instead of using your money, borrowing against your money?
4. Keep your money private. There’s a lot of security that comes with keeping your money off the radar screen of maybe the IRS or maybe away from creditors.
5. Taxes. You have to protect your money from taxes and really being controlled. If the tax rate doubles in the future or the threshold you want to be in control of that.
6. Protect your money from fees. Think about fees like a bucket with holes in it; it’s just constantly eating away at your money. We want to make sure that that doesn’t happen to your money.
7. Keep your money from inflation. If we experience high inflation, make sure your money’s not going to be eroding in value.
8. Keep your money from restrictions and compulsions. Unfortunately, a lot of people are saving their money and accounts that they don’t really control.
9. Protect human life value. You are your greatest asset.What if something happens to you? You want to make sure that you want to happen will happen, even if something happens to you.
I have a question for you: Do you think taxes are going up or going down?
Check out the usdebtclock.gov. and you’ll get to see kind of where our financials are as a country.
I firmly believe that taxes are going up. And if that’s the case, we have to start thinking about our money differently. We have to start taking control. Like I talk about in chapter 5, we really need to take responsibility is if taxes double. Are we going to be okay? And in this chapter, I lay out why I think it’s inevitable that taxes go up and really get you us to start thinking about maybe we should pay taxes today so that we never have to pay taxes ever again, on our growth in the future.
Controlling your money, like a banker.
Banks get a bad rap, but they have a lot they can teach us about money management. The business of banking is super profitable. Think about how they’re literally controlling your money better than you and I. They take your money, loaning it out, and make money off of it. That’s all they’re doing. It’s really quite fascinating. Instead of saying, The banks are bad, let’s learn and what they’re doing and apply it to our own lives.
The first thing is flow. Banks are getting money to flow to them. Think about their masters. They get the money before we even get it.
Number two is they understand leverage. They understand that they’re using your money, not theirs. And so a spread of like 3% is not actually just a net 3%, it’s a lot more because their investment is only the interest that they’re paying you. Read the book and I actually show you the difference between a cash investor and a bank investor.
Number three is liquidity. The bank has all the money. Where do opportunities come? When someone wants money, whether it’s a business, whether it’s someone who needs a loan, they’re coming into the bank. Banks don’t have to advertise, people just know that if they have an opportunity, they go to a bank.
Number four is collateral. The banks aren’t taking that much risk because when they loan you money, they’re making sure that if you don’t pay it back, they have something that they can go and access to make up for it.
Number five is velocity. The key to understanding velocity is understanding how banks turn your money multiple times. They never let money sit stagnant, the more opportunity they can create out of your money, the more profit they can earn. They want to flip the money they control as often as possible.
So we want to have flow. We want to understand how we can master flow. We want to be able to understand how we can start leveraging things. We want to have liquidity. We want to understand how to collateralize our savings or other opportunities. And finally, we want velocity to start working in our favor.
Controlled compounding interest.
When I started learning about money, I faced a dilemma: should I save my money in a place that I have control over it, because I’m an entrepreneur and I know that opportunities are going to seek me out? Or, should I take my money in a place and let it grow, long-term for the future?
And the light bulb went off and I realized that there was a strategy, a system that I could use to have full control over my money and also let it continue to grow for the future.
Before I get into how we do that, I want to explain how this works. Let’s use an example. There are three ways to buy your car.
The first way is to literally not save, go into debt, and pay back the debtor. This is probably the worst way, because not only are you in debt, but you’re constantly having to work just to get back to ground zero.
The second way is what most people see as financial freedom, saving your money and then when you’re going to go buy the car, your take that money and pay cash for it. The problem with that is while you’re not paying anyone interest, you’re also losing the interest that your savings could have grown to.
Think about it. If you pay $10,000 for a car that that $10,000 is never able to earn for you ever again. And if you remember back to uninterrupted, compounding and efficiency, a dollar lost is not just worth that dollar it’s that dollar plus all that dollar could have earned. We want to avoid that.
The third way is what I call the maximizer way. It’s how to save your money in a place that’s going to grow the rest of your life, and then collateralize that savings, meaning put up that savings as collateral and pay someone else interest, but let your money continue to grow. Now in the short term, that doesn’t seem like that’s that magical. It could be a wash. It could even mean paying more interest than you’re earning.
Where the magic comes in is the long-term strategy of every dollar, continuing to compound on a greater volume, or dollar amount, while you also have access to your money, to hopefully invest into things that are profitable.
The controlled compounding strategy is ultimately the way to save your money where it grows and also have access to it to collateralize it, to go out and do whatever you want to do. You can fund your why. That’s a controlled compounding strategy. It’s very profound. I recommend you go to chapter eight and read it, study it because that one strategy alone can put hundreds of thousands of dollars back in your pocket, if you understand it.
Creating your master account.
Think back the 16 ideal benefits The master account that I’m about to share with you when set up and use properly has 15 out of the 16 benefits. The only thing that it does not have is you don’t get a tax deduction today. I’m okay with that because I would rather pay taxes today and, and have full control over the future than have a have a benefit today and give up control over the future.
Your Master account is a specially designed dividend paying contract with a mutually owned life insurance company.
The first thing you need to know is that it’s a contract between two people, you being one of them and the second is the life insurance company, specifically, a life insurance company that’s mutually owned – that’s owned by you. These companies have been around for a long time, they’ve been super stable, they’ve been profitable for the longterm. They also are dividend paying, that means all the profits that they make, instead of making the insurance costs cheaper, they’re actually paying you a dividend. Paying it to your master account, increasing the pool of capital.
Most people, when they’re looking for life insurance, they’re trying to put as little money in and get the most amount of insurance benefit.
What we’re doing is we’re looking at getting a contract where we can put as much money in for the least amount of insurance benefit. Why? Because we could care less about the insurance. We care way more about all the benefits. We want to decrease the death benefit – the insurance costs and increase the living benefits. And when you have that, you have the most ideal place to start saving your money for the future, but also having access to it in the present.
Combining the controlled compounding and the master account.
Control compounding is the theory of saving money in a place that’s going to grow the rest of your life and also borrowing against it or using it as collateral to invest in whatever you want to invest in. The master account was talking about this important contract between a life insurance company that was owned by you. That was paying dividends and is structured for the maximum amount of benefit, living benefits, cash benefits. When you combine those together, the controlled company strategy is simply this save money in a master account and let it grow the rest of your life with all those benefits. You now have the ability to borrow against that, whether it’s to pay off debt, to invest in your business, to invest in real estate, whatever it is, you can use it for whatever you’d like.
Caleb Guilliams’ The And Asset.
I want to ask you a question, what’s the value of a dollar that can be saved and be used? In the book, we talk about a lot of things, but the And Asset is the concept of the value of saving your money where it’s going to grow the rest of your life to literally the day that you die, but where you also have the ability to use that dollar to funding your why.
Think about the difference between and versus or. Most people are putting their money in maybe a savings account, or a retirement account, or the market, or whatever that is. And that money is doing one thing, hopefully it’s growing. But the problem is that if you take that out to invest it, or if you take that money out and pay off debt, or if you take that money out and pay cash for something, that dollar is no longer growing. It’s an or product. Most things that you put your money in are an or product.
The master account when set up and used properly is all the ultimate and product because your money is in there and it’s growing the rest of your life and it gives you the ability to fund your why.
If you’re nearing retirement and you want to, um, get income, this is a great option for you. If you’re an entrepreneur and want to invest in your business, this is a great option for you. If you’re a real estate person and you understand real estate, this is a great strategy and process for you. If you’re someone that’s looking to accelerate and pay off your debt, this might be a great strategy for you.
Ultimately it’s reframing our brain on not what to do, but how to do it.
Like what you read here?
Check out the book, and start making the most out of your dollar.
Want even more?
Beware the get rich quick scheme. Make sure you’re vetting your information and the “experts” you listen to.
And check out this conversation Caleb and I had about how frameworks can transform your business.
About the Author