Financial Jiu-Jitsu

A Fighter's Guide to Conquering Your Finances

Scott Ford

• Publisher: Wiley
• Year: 2010
• ISBN:
  9780470910757
• Edition: 1
• Topic: Personal Development
• Subtopic: Personal Finance

A unique approach to personal finance that tackles money like a jiu-jitsu fighter would tackle an opponent

In martial arts and personal finance, fundamentals are important. But while failing in Brazilian Jiu-Jitsu may be disappointing, it's nothing compared to failing to build wealth and creating a better future for your family.

Nobody understands this better than Scott Ford, a top-ranked financial advisor and Jiu-Jitsu enthusiast. Now, in Financial Jiu-Jitsu, he shows you how to overcome your emotions and state of mind to excel at your investing endeavors. Along the way, Ford teaches you fundamental skills such as automating your savings and investments, the importance of paying yourself first, and managing credit wisely.

• Compares the patience and practice of the martial arts, specifically Jiu-Jitsu, to investing
• Offers an approach to adapting to financial change as you move through life, while maintaining the same guiding principles
• Author Scott Ford is ranked in the top one percent of all financial advisors

The guiding principles in this book are the foundation of your financial fight plan and the keys to reaching your financial dreams. No matter what punches the market or the economy throws at you, if you follow these principles you'll always react well in the face of adversity.

CHAPTER 1

Prepare to Win—Now and Forever

Problems are a part of life. I want puzzles to solve. I need problems
to solve. I want to take on problems I can’t fix; if they have
solutions they are already solved. Problems make me think, push me,
and make me try harder. Recently I signed up UFC for six fights. I
did it to challenge myself. People flourish under pressure.
Plus I love the sport too much to ever leave it.

—Renzo Gracie

I’m no Renzo Gracie.

But I don’t feel bad. No one else is, either.

Who is Renzo Gracie? He’s a member of the legendary Gracie family, the “first family” of mixed martial arts. While the Ultimate Fighting Championship (UFC) has certainly popularized mixed martial arts, the Gracie family embraced and then reinvented traditional martial arts and along the way revolutionized the art of fighting. It can be argued that without the Gracie family there would be no Mixed Martial Arts (MMA) and there would be no UFC.

Renzo is a Black Belt in Brazilian Jiu-Jitsu and helps run the world-renowned Gracie Academies, a series of schools around the world that teach Brazilian Jiu-Jitsu. He has competed for years, recently returning to the UFC, even though he’s more than 40 years old, simply because, “I want problems to solve. Challenges make me better.”

Renzo brings a variety of skills to every fight. In addition to Brazilian Jiu-Jitsu he has developed a broad range of strikes, kicks, and wrestling skills. Go to YouTube and check out highlights from his fights; he’s a master at taking opponents to the ground, controlling them, and forcing submissions.

Renzo bases his entire fight plan on his ability to protect himself, when necessary, by falling back on his Brazilian Jiu-Jitsu skills—and using those skills to regain the offensive and regain control of a fight. His confidence and his ability to handle almost any situation are based on a fundamental set of fighting skills and principles.

In short, he’s prepared—for anything.

And because he’s prepared, he’s able to react under pressure. In Brazilian Jiu-Jitsu and in personal finance, the most important skill you can develop is the ability to react under pressure. Watch an MMA fight or go to a gym and watch a Brazilian Jiu-Jitsu Black Belt in action. The best MMA fighters—and Black Belts—are always calm. They can find themselves in horrible positions, but they have trained themselves to remain calm, stay relaxed, and stick to their game plan. They don’t panic because they’re prepared, and that preparation gives them incredible confidence.

Preparation also helps them relax.

And stay objective.

Think about the financial meltdown our country recently faced; many investors panicked—and as a result froze. They had no “sell discipline” (you’ll learn what sell discipline is later) and made horrible decisions based on fear instead of rational, objective decisions.

In Brazilian Jiu-Jitsu, our biggest enemies are our emotions and our state of mind.

In investing and personal finance, our biggest enemies are—that’s right—our emotions and our state of mind. It’s not the market, it’s not the economy, it’s us.

Your biggest enemy is you.

But it doesn’t have to be.

The same approach Renzo Gracie and top Brazilian Jiu-Jitsu practitioners use—applied to personal finance and investing—will work for you, too. No matter what your current financial situation, no matter what obstacles you may encounter, no matter what changes in the market or financial crises you face . . . if you take care of the basics, stay calm, and don’t panic . . . you will achieve financial success and you will reach your financial goals.

What is financial success? And how do you achieve it? You may think that achieving financial success (whatever “financial success” means to you, because it means different things to different people) is based on mastering complicated investment techniques.

It’s not. Most people become wealthy because they do the little things right—time after time. They don’t panic, and they don’t give in to emotion. Instead they stay calm and focused, and they stick to their plans.

Financial Jiu-Jitsu is based on taking care of the basics first, using straightforward, easy-to-understand principles and strategies as a platform and springboard to future success. Of course, your financial plan will adapt and evolve as economic conditions change and you move through your life, but the guiding principles will never change. Renzo Gracie uses Brazilian Jiu-Jitsu as the foundation of his fight plan. Although he is certainly confident—justifiably so—in his punching and kicking abilities, his real confidence comes from knowing if those punches and kicks aren’t effective he can fall back on his Jiu-Jitsu skills and regain control over the fight on the mat, no matter what his opponents throw at him.

Think of the following guiding principles as the foundation of your financial fight plan and the keys toward reaching your financial dreams—no matter what punches the market or the economy fires at you. If you follow these principles you should always react well in the face of adversity. Then, if you later decide to try more advanced investment strategies and techniques, go for it! You can add complexity, try new things, even take a few risks . . . secure in the knowledge that you constantly and consistently take care of the basics and are prepared to win any financial fight.

So what are your guiding financial principles? Here we go.

Give Back

I understand it might seem odd that the first principle of financial success is to give back. After all, isn’t building wealth based on accumulating assets instead of giving assets away? (Of course, building “wealth” depends on your personal definition of “wealth,” which you’ll determine in Chapter 2, but for now you can assume “wealth” refers to financial and material assets.)

How do you succeed if you give away what you hope to accumulate?

I look at it differently. I think it’s impossible to get what you are not willing to give.

Some people see giving back as a form of tithing. Spirituality is an important part of my life, and I tithe regularly. You may also. But even if you don’t see giving back in religious or spiritual terms, you should plan to give back in a way that is personally meaningful to you.

For example, at the Clinch Academy where I train, we focus heavily on teaching and helping others gain Brazilian Jiu-Jitsu skills. We’re all there to develop our skills by learning from instructors—and from each other. Stop by and you can see Brown Belts rolling with Purple Belts, Purple Belts rolling with Blue Belts, even Black Belts rolling with White Belts. Can a Black Belt, a person who has probably spent a minimum of 10 years perfecting his or her skills, learn from a White Belt who has spent less than a month practicing the sport?

Most of the time, the answer is yes.

Many people learn the most when they’re teaching instead of being taught. Think of times you’ve trained another person to do a job or perform a task. I’ll bet you ended up learning new things in the process.

In short, by giving back you also gain.

And you make the world a little better place. And feel good about it.

Plan to give back. Maybe what you can give is money. Maybe what you can give is knowledge. Maybe what you can give is time. Whatever you can give, I guarantee you will get back more in return—if not materially then certainly in terms of knowledge and self-satisfaction—than you ever gave.

Pay Yourself First

If you’re living paycheck to paycheck, I’m sure you’ll disagree with the next sentence.

Everyone makes enough money to be able to save.

That’s right. Everyone makes enough money to be able to save—even if it’s just a few dollars a week.

How can I say that with confidence? One, I’ve worked with hundreds of clients over the years, from young people just getting started to millionaires enjoying the fruits of their hard work and success. Their financial situations vary widely, but a common denominator is that all of them are able—even if it requires making a few changes to how they approach their financial life—to start saving money.

And here’s the good news: Saving money doesn’t require setting up and living by a budget.

Think of it this way. Say you move into a new apartment or a new house. It’s bigger than your old place, and you don’t have enough furniture to fill all the rooms. The first few weeks it feels a little strange as you walk around seeing all the empty space . . . yet before you know it each room is cluttered, your closets are full, and you wish you had a larger place.

What happened? You filled the space. The rooms were empty so you filled them.

In fact, you filled them almost without noticing.

The same thing happens in our financial lives. No matter how much money you make, over time you’ll find a way to spend it. Think about the last time you got a big raise—for a couple weeks you felt “rich,” but over time you grew accustomed to your new level of income, adjusted your lifestyle to fit your new level of income . . . and filled your financial house with furniture. The problem is that at some point you look around and realize the furniture you have isn’t really the furniture you want.

In case you’re wondering, the same thing happens in Brazilian Jiu-Jitsu. Every student learns new techniques and gains new skills. That’s great, but most then spend more time learning more skills and learning more advanced techniques than on working hard to refine and perfect the skills they already have. At some point most take a step back and realize they collected a wide variety of techniques . . . but they aren’t nearly as good at performing those techniques as they would like to be or need to be.

So how do you get out of this rut? How do you start saving when you currently live paycheck to paycheck? Do you—gasp!—create and live on a budget?

You certainly can, but you don’t have to.

Instead of budgeting, get started by taking control. Start saving the simple way.

Pay yourself first.

Instead of paying your mortgage, paying your rent, paying your car payment . . . pay yourself. Pick a number. Maybe it’s a set dollar amount. Maybe it’s a percentage of your pay. I don’t care what amount you choose, but always pay yourself before you pay anyone else. (In my opinion, you should always pay yourself 10 percent, but feel free to choose the amount that’s right for you.) Fill your savings “house” with furniture first and then worry about filling all the other rooms with financial “furniture.” You’ll quickly adapt to your new “living conditions” and will adjust your spending accordingly—and your net worth will grow.

Worried you won’t have the self-discipline to pay yourself first? No problem. It’s easy to pay yourself first whe...

Table of contents

• Title Page
• Copyright Page
• Foreword
• Acknowledgments
• Introduction
• CHAPTER 1 - Prepare to Win—Now and Forever
• CHAPTER 2 - Balance and Base
• CHAPTER 3 - Closing the Gap
• CHAPTER 4 - Family
• CHAPTER 5 - Your Team of Advisors
• CHAPTER 6 - Timing
• CHAPTER 7 - Gain Control
• CHAPTER 8 - Position Before Submission
• CHAPTER 9 - Attitude
• CHAPTER 10 - Leverage
• CHAPTER 11 - Love, Discipline, and Dedication
• Conclusion
• AFTERWORD
• APPENDIX - Seasons of Investing
• About the Author
• Index