Applying leverage to your financial swing

In this Master the Green you'll learn:

💰5 ways to apply leverage on your financial course

💰7 other underrated personal finance concepts

AND

⛳The key to unlocking more distance from your drives

One part golf, all parts money

Let's tee this one up🏌️

Power and Leverage

If you’re looking to add some yardage to your drives, the solution can be found in leverage.

Mechanical leverage is the means by which we amplify force while using levers.  Understanding this property is essential to generating power in your golf swing since, after all, at its root the golf swing is just a series of levers.

Levers were something Homer Kelley covered extensively in The Golfing Machine.  According to Kelley’s manifesto, there are two primary levers in the golf swing:

1. The Primary Lever Assembly: This consists of the entire left arm and the club. The fulcrum is the left shoulder, the weight is the golf club, and the input force is provided by the arms or body pushing the left arm and club

2. The Secondary Lever Assembly: This comprises the left hand, wrist, and club. The fulcrum is the left wrist, the weight is the clubhead, and the input force is provided by the hands

Kelley described these levers as "speed multiplier levers", meaning that the speed at the end of the lever, ie the clubhead, is greater than the speed of the input force.  The input force is generated by you, the golfer, maneuvering your body through your swing. 

The key to unlocking more distance is maximizing the input force, while also synchronizing the two levers, to produce a well-coordinated and efficient lever system. 

Types of leverage

Leverage also plays a role on your financial course, but not in the same way as the golf swing. 

There are different types of leverage – financial leverage, operational leverage, even positional influence is a form of leverage.  While they may be different than mechanical leverage, they all share the common theme of taking a small input and multiplying it’s impact.  

Understanding how these types of leverage apply to various facets of your life can accelerate your path to financial independence and can also lead to greater fulfillment.    

Here are five ways to apply leverage in your life that aren't always obvious:

1. Leverage your skills for higher paying positions

Human capital is your greatest asset, especially early on in your career.  If you invest your time wisely, and build specialized, high-demand skills, you’ll find that overtime you’ll be able to command higher wages. 

This is why surgeons are paid more than family doctors.  With a somewhat small investment of additional time, becoming a surgeon requires an additional few years of residency, a med school graduate can 2x-4x their annual earning potential depending on their surgical specialization. 

Focus on becoming an expert in your field and seek roles that compensate you accordingly.

2. Leverage your network to find new opportunities

Who you know is just as important as what you know.  Your network is a powerful tool, and small efforts, like remaining curious in social settings, can compound over time.  Even if you’re building a virtual network via LinkedIn or another social platform, small introductory Zoom calls provide an opportunity to grow a robust network.  

Eventually, you can leverage these connections to discover job opportunities, collaborations, or partnerships that could advance your career or financial goals.

3. Leverage your time by delegating 

Your time is valuable.  Whether it’s as an employee, business owner, spouse, or parent, how you invest your time is critically important.  This is one of the reasons why leaders often cite “delegation” as one of the most important skills to learn.  

Delegation applies to your personal life as well.  One powerful lens to view delegation and leverage through is to leverage the expertise of others to gain better results.  Plumbers, electricians, doctors, mechanics, and accountants are just a few professions that require a specialized set of skills.  Yes, you could fix that leaky faucet or change the oil in your car, but you’re likely to get better results (in a shorter period of time) if you delegate those tasks to a professional.   

4. Leverage your attention by practicing Deep Work

Cal Newport describes deep work as, “"The ability to focus without distraction on a cognitively demanding task. It's a skill that allows you to quickly master complicated information and produce better results in less time."

Deep work, or the ability to focus your attention on one specific task for a 60-90 minute period, is a perfect illustration of leverage.  By focusing your attention on one task - whether work or family related - you’re able to achieve a greater impact within the same allotment of time.   

5. Leverage your effort by focusing on one critical activity at a time

Similar to the concept of deep work, less is more when it comes to applying effort.

For example - let’s say you’re trying to start a consulting business, get in better shape by exercising more regularly, and be a more supportive partner when it comes to managing the house and kids activities.  Would it be wise to tackle all three of these in the same quarter?  

Probably not.  Each requires an increased commitment of time and effort on your part.  Doing all three simultaneously will likely produce mediocre results in all three and probably create a lot of stress.   

Instead of spreading yourself thin, identify the one priority that will make the biggest impact on your goals. Channel your energy into completing that change before moving on.

Leveraging golf to find your financial swing

When you think about money, you probably don’t think about golf all that often. 

The two don’t naturally fit together, but for me, it’s become one of those things that once you see it, you can’t unsee it. 

Here’s 7 more parallels between two of the most confounding exercises known to humankind - golf and making sense of money - 

1. Play your own course

Comparison is the thief of joy

We all have different financial circumstances at different points in life. 

Advice on how much insurance you should have or how you should invest for someone in their 30s is drastically different than the advice that’s appropriate for someone in their 60s.  The same goes for advice for a doctor or a teacher.  The right financial advice for you is as unique as you are.   

Know what the hole you’re playing demands, build a strategy within your comfort zone, and execute each decision accordingly.

2. The ultimate goal of money isn't more money.

The ability to do what you want, when you want, with who you want is true wealth

Whether it’s more distance, straighter drives, lower scores, or a better handicap, we’re always chasing something on the golf course.  

But the true reward of golf isn’t in the scores or stats - it’s the comradery we build with our playing partners and the intrinsic motivation gained by engaging in challenging activities.  

Money is similar.  It’s a means to an end, not the end itself.  Understanding this is the difference between being “rich” and “living a rich life.”

Money and golf are simply vehicles by which we’re able to find fulfillment in life.  

3. Accept luck's influence.

Even the best drives can land in a fairway divot

Luck will be an ever-present factor in your life.  When you are born, where you live, the people you meet, the relationships you build all have an element of randomness, and the will have influence on the outcomes of your life. 

You can’t control luck; you just have to plan for the unlucky bounces and bad lies every now and then.  

4. Pick the equipment that's right for your own game, not someone else's.

"Man is the creature who does not know what to desire, and he turns to others in order to make up his mind. We desire what others desire because we imitate their desires."

French philosopher, Rene Girard, is the originator of mimetic theory which posits that we desire objects that others place value in, as opposed to the value we define ourselves.   

Acushnet, makers of Titleist golf balls, have made a fortune off of mimetic desire with their “most played ball” marketing campaign.  If most professional golfers play ProV1’s, they must be the best golf balls.  We should play them, too.  

The key to breaking the stranglehold of mimetic desire is aligning your actions with your own values.  Fame, status, luxury cars, and big homes might be a part of your neighbor’s value system, but are they a part of yours?  

5. Penalty strokes are the silent killers of wealth.

You’ll gain more from avoiding the “blow up hole” than you will chasing birdies

Sometimes the best offense is a good defense.  This applies on the golf course as well as your financial course.  

There is very little satisfaction to be gained from spending your money on taxes, fees, and interest, yet they’re an inevitable part of life.  Some can be avoided all together. 

You should have a strategy to minimize them over the course of your life. 

Pay taxes at the lowest effective rates.  

Leverage interest to acquire assets or improve future income.  

Avoid fees at all costs.

6. Good decisions start with evaluating the risks in front of you.

All decisions involve some element of risk.  Whether you’re evaluating a potential investment or an approach shot to the green, there is a tradeoff between your potential for gain and potential for loss. 

You should evaluate risk through three dimensions that are unique to you:

•        Risk Tolerance – your psychological appetite for risk

•        Risk Capacity – your ability to bounce back from a loss

•        Risk Need – your ability to reach your goal without risk

7. There's no prize for being first to finish nine holes.

Your investment strategy should be focused on the long-term – not years, but decades. 

Build a plan to keep you in the game long term so that you can capitalize on the benefits of compound interest.  Never unnecessarily interrupt compounding.

Have you found your financial swing?

Your financial swing is unique to you and your financial course.

Each of these tips will mean something unique to everyone. Your financial swing will not look like your neighbors, your coworkers, or your friends. You're all playing on your own financial course. Use these tips to master your own green, and enjoy the walk along the way.

If you’re interested in building confidence and clarity on your financial course, there's three ways I help people like you:

1.  Ask me anything – Do you have money questions?  Are you over asking friends or the internet for advice?  As a newsletter subscriber, I’m happy to take 30 minutes out of my day to help you.  I'll do my best to be sure you leave with something of value to consider.

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Am I saving enough for retirement?

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If you've never considered hiring an advisor before, this is a great way to see what comprehensive financial planning looks like.

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