Money, Master the Game: 7 Simple Steps to Financial Freedom by Tony Robbins

Here are my notes on the book “Money Master the Game: 7 Simple Steps to Financial Freedom” by Tony Robbins.

There are 3 things you need to know about this book:

1. This book is huge
   • Most business books take me 4 hours to get through, this one took me 12
   • I read it on my Kindle, so at times I thought it would never end (whereas, with a hardcopy book, you can feel with your fingers how far through you are)
2. Tony repeats points over and over
   • This can be a bit annoying at times. But that’s just his teaching style. He knows that for the important bits to stick in your head, he needs to repeat them.
3. His writing style is not crisp and concise like most business authors
   • His writing is like a conversation in your head between you and him. It’s like he’s talking to you personally

Having said that, this was a very good book. I’ve broken it into 4 parts:

1. Part one is about psychology, how your brain works, what humans really need, how money serves those needs
2. Part two is a lesson on how the economy works (watch the video, it is a real eye opener)
3. Part three shows you what a truly balanced portfolio looks like
4. Part four is a 7 step checklist to get started in investment

 

Here’s a collection of my favourite bits from this book.

Part One: Human Needs

• If we get underneath what you’re really after, it’s not money at all.
• What you’re really after is what you think money is going to give you.
• Ultimately, it’s a set of feelings.
• And beneath those feelings are needs.

NEED 1: CERTAINTY/COMFORT

• It’s our need to feel in control and to know what’s coming next so we can feel secure.
• It’s the need for basic comfort, the need to avoid pain and stress, and also to create pleasure.
• Our need for certainty is a survival mechanism.
• It affects how much risk we’re willing to take in life – in our jobs, in our investments, and in our relationships.
• The higher the need for certainty, the less risk you’ll be willing to take or emotionally bear.
• By the way, this is where your real “risk tolerance” comes from.

NEED 2: UNCERTAINTY/VARIETY

• We need variety. We need surprise.
• You like the surprises you want. The ones you don’t want you call problems!
• But you still need them to put some muscle in your life.
• You can’t grow muscle – or character – unless you have something to push back against.

NEED 3: SIGNIFICANCE

• We all need to feel important, special, unique, or needed.
• So how do some of us get significance?
  • You can get it by earning billions of dollars or collecting academic degrees—distinguishing yourself with a master’s or a PhD.
  • You can build a giant Twitter following.
  • Or you can go on The Bachelor or become one of the next Real Housewives of Orange County.
  • Some do it by putting tattoos and piercings all over themselves and in places we don’t want to know about.
  • You can get significance by having more or bigger problems than anybody else. “You think your husband’s a dirtbag? Take mine for a day!”
  • Of course, you can also get it by being more spiritual (or pretending to be).
  • Unfortunately, one of the fastest ways to get significance—that costs no money and requires no education—is through violence. If someone puts a gun to your head, in that instant he becomes the most significant thing in your life, right?
  • Spending a lot of money can make you feel significant, and so can spending very little.
  • We all know people who constantly brag about their bargains, or who feel special because they heat their homes with cow manure and sunlight.
  • Some very wealthy people gain significance by hiding their wealth.
• Significance is also a moneymaker—that’s where my dear friend Steve Wynn has made his fortune.
  • The man who made Las Vegas what it is today knows people will pay for anything they believe is “the best”—anything that makes them feel special, unique, or important; anything that makes them stand out from the crowd.
  • He provides the most exclusive, luxurious experiences imaginable in his casinos and hotels—they are truly magnificent and unmatched in the world.
  • He’s got a nightclub called XS (what else?) that is the hottest spot in Las Vegas.
    • Even on a weeknight, it has a line out the door.
    • Once you’re in, you have the privilege of purchasing an ordinary bottle of champagne for $700, or if you want to step up and show everyone you’re a player, you can spend $10,000 for a special “Ono cocktail” of rare vintage cognac and fresh orange juice that comes with a white-gold necklace.
    • Hey, it comes to your table with a sparkler, just so everybody knows you’re significant (and out of your mind).

NEED 4 LOVE AND CONNECTION

• Love is the oxygen of life; it’s what we all want and need most.
• When we love completely, we feel alive, but when we lose love, the pain is so great that most people settle on connection, the crumbs of love.
• You can get that sense of connection or love through intimacy, or friendship, or prayer, or walking in nature.
• If nothing else works, you can get a dog.

NEED 5: GROWTH

• If you’re not growing, you’re what? You’re dying.

NEED 6: CONTRIBUTION

• The secret to living is giving.
• Sharing enhances everything you experience.
• Life is really about creating meaning.
• And meaning does not come from what you get, it comes from what you give.
• Ultimately, what you get will never make you happy long term.
• But who you become and what you contribute will.
• “What’s the secret to wealth?” And he said, “Tony, you know it, and you know it well. You teach it to everyone. It’s gratitude.”

Part Two: How The Economy Works

All you need to do is watch this 30 minute video:

Also available from www.EconomicPrinciples.org

Part Three: What A Truely Balanced Portfolio Looks Like

Ray’s view boils it down to only four different possible environments, or economic seasons, that will ultimately affect whether investments (asset prices) go up or down. (Except unlike nature, there is not a predetermined order in which the seasons will arrive.)

They are:

1. higher than expected inflation (rising prices)
2. lower than expected inflation (or deflation)
3. higher than expected economic growth, and
4. lower than expected economic growth.

You should have 25% of your risk in each of these four categories.

“Today we can structure a portfolio that will do well in 2022, even though we can’t possibly know what the world will look like in 2022.

So let’s call this portfolio herein the “All Seasons” portfolio:

• 30% in stocks
  • for instance, the S&P 500 or other indexes for further diversification in this basket
• 15% percent in intermediate term [seven- to ten-year Treasuries]
• 40% in long-term bonds [20- to 25-year Treasuries]
  • “Why such a large percentage?” I asked. “Because this counters the volatility of the stocks.”
• 7.5% in gold
• 7.5% in commodities
  • “You need to have a piece of that portfolio that will do well with accelerated inflation, so you would want a percentage in gold and commodities. These have high volatility. Because there are environments where rapid inflation can hurt both stocks and bonds.”

Lastly, the portfolio must be rebalanced.

• Meaning, when one segment does well, you must sell a portion and reallocate back to the original allocation.
• This should be done at least annually, and, if done properly, it can actually increase the tax efficiency.

Part Four: Guide to Getting Your Investment Started

Step 1: Make the Most Important Financial Decision of Your Life

1. Did you make the decision to become an investor, not just a consumer?
2. Have you committed a specific percentage of savings that always goes toward your Freedom Fund?
3. Have you automated it? If not, do it now: www.tdameritrade.com or www.schwab.com.
4. If the amount you’re committing now is small, have you committed to your employer to use the Save More Tomorrow program? See http:// befi.allianzgi.com/en/befi-tv/pages/save-more-tomorrow.aspx.

Step 2: Become the Insider: Know the Rules Before You Get in the Game

1. Do you know the 9 Myths, and are you now protected? Here’s a mini- test:
   • What percentage of mutual funds beat the market (or their benchmark) over any ten years?
   • Do fees matter, and what’s the average mutual fund fee?
   • If you pay 1% versus 3% in fees, how much of a difference does it make to your final nest egg?
   • Have you taken your broker for a test drive? Have you gone online and seen what your current costs are, how much risk you have in your current investments, and how your current investment strategy has compared over the last 15 years with other simple, inexpensive options?
   • Do you know the difference between advertised returns and what you actually earn?
   • Do you know the difference between a broker and a fiduciary?
   • Are target-date funds your best option?
   • How do you maximize your 401(k), and should you elect to use a Roth 401(k)?
   • Do you have to take huge risks to make big rewards? What are some of the tools that will allow you to get the upside of the market without the downside losses?
   • Have you identified any of the limiting stories or emotions that have held you back or sabotaged you in the past, and have you broken their pattern of control in your life?
2. Do you have a fiduciary now representing and guiding you? If not, go online and find one at http://findanadvisor.napfa.org/home.aspx or go to Stronghold and review its services approach (www.Stronghold Financial.com).
3. If you own a company, or you’re an employee with a 401(k) plan, have you taken 30 seconds to check how your fees compare with the rest of the market? Go to http://americasbest401k.com/401k-fee-checker.
4. If you’re a business owner, have you met your legal requirement to benchmark your 401(k) against other comparable plans? Remember, the Department of Labor has reported that 75% of the 401(k)s it audited resulted in an average penalty of $600,000 (www.americasbest401k.com).

Step 3: Make the Game Winnable

1. Have you made the game winnable?
   • Have you found out what your real numbers are? Have you figured out what it’s really going to take for you to achieve financial security, vitality, and independence? Have you calculated it?
   • If not, go back and do that right now. Or if you want to revisit them, go back and do the numbers now or go to your app, where you can keep the numbers in your pocket, and it will be calculated in a few minutes. You can do it in just a few minutes.
   • Remember, clarity is power. See www.tonyrobbins.com/masterthegame.
2. Once you’ve got the numbers, did you use your wealth calculator and come up with a plan that shows you how many years it will take in a conservative, moderate, or an aggressive plan to achieve financial security or independence? If not, give yourself the gift. Go to the app and do this now.
3. Have you looked over and made any decisions about the five elements of how you can speed up your plan and achieve financial security or independence even faster?
   • Save more:
     • Have you looked at the places you could save? Your mortgage? Daily purchases?
     • Have you implemented a Save More Tomorrow plan so that you don’t have to give up anything today, but when you get additional income in the future, you’ll save more? Go to http://befi.allianzgi .com/en/befi-tv/pages/save-more-tomorrow.aspx.
     • Have you found something that you could cut down easily in order to increase your savings? Is it the $40 pizza? Is it the water bottle? Is it Starbucks? And have you calculated how much more money you’ll have in your Freedom Fund and how much faster you can achieve your goals by doing this?
     • Remember, $40 a week can equal $500,000 over an investment lifetime.
     • You don’t have to do any of these if you’re already on target, but these are options if you’re not yet on target to achieve your financial goals.
   • Earn more.
     • Have you found ways to increase the value you can add to others?
     • Do you need to retool yourself and switch to a different industry?
     • What are the ways you can add more value and grow more so you can give more?
   • Save in fees and taxes.
     • Have you come up with a way to apply what we’ve taught you to reduce your fees and/or reduce your taxes?
   • Get better returns.
     • Have you found a way to invest with greater returns without undue risk?
     • Have you reviewed any of the portfolios that are here that might enhance your earnings and protect you from those gut-wrenching downturns in the market?
   • Change your life—and improve your lifestyle.
     • Have you considered a new location with an even better lifestyle?
     • Have you considered putting yourself in a place where you reduce or eliminate state taxes and then put all of that money toward building wealth and your family’s financial security and freedom?

Step 4: Make the Most Important Investment Decision of Your Life

1. Have you decided on asset allocation so that you never put yourself in a position to lose too much? (Not all your eggs are in one basket, right?)
2. Have you decided what percentage belongs in your Security Bucket and what specific types of investment you’ll use to be safe and still maximize returns?
   • Are you diversifying with different types of investments within the Security Bucket?
   • Have you decided what percentage of your savings or investment capital will go in the Security Bucket?
3. Have you decided what percentage belongs in your Risk/Growth Bucket and what specific types of investments you’ll use to maximize returns yet still limit your downside as best as possible?
   • Are you diversified with your Risk/Growth Bucket?
4. Have you evaluated your actual risk tolerance effectively?
   • Did you take the test developed by Rutgers (http://njaes.rutgers.edu/money /riskquiz)?
5. Have you considered your stage of life and whether you should be more or less aggressive based on the length of time you have to save and invest?
   • (If you’re young, you can lose a bit more because you have more time to recover; if you’re closer to retirement, you have less time to recover, and perhaps you need more in your Security Bucket.)
6. Have you evaluated the amount and size of your cash flow and whether that will play a role in your level of conservativeness or aggressiveness in your asset allocation?
7. Have you resolved the ratio of Security versus Risk/Growth as a percentage of your overall investments?
   • 50/50? 60/40? 70/30? 30/70? 40/60? 80/20?
8. Have you come up with a list of short-term and long-term goals for your Dream Bucket that excite you?
   • Do you have to wait until someday in the future, or do you have some things you’re going to make happen right away?
9. Have you established a way to fund your Dream Bucket with either a small amount of savings or a portion of the profits of windfalls from successes in your Risk/Growth Bucket?
10. Rebalancing and dollar-cost averaging:
    • Are you consistently committing the same amount of money to investments regardless of whether the market is moving up or down? Remember, timing the market never works.
    • Are you continually rebalancing your portfolio, or do you have a fiduciary doing this for you? Either way, this is crucial to optimizing returns and minimizing volatility.

Step 5: Create a Lifetime Income Plan

1. The power of All Seasons:
   • Have you taken the time to read, understand, and take action on the powerful insights that Ray Dalio gave us with his All Seasons approach? He has brought successful investment returns 85% of the time and lost money only four times in 30 years, but never more than 3.93% to date!
   • Have you gone to Stronghold and taken five minutes to see what kind of returns you’re getting on your current investments compared with All Seasons (and other portfolios) or to see what it would take to set up an All Seasons portfolio in minutes?
2. Income Insurance:
   • Have you done the most important thing of all? Have you made sure that you will not run out of income as long as you live? Have you established a guaranteed lifetime income plan?
   • Do you know the difference between an immediate annuity and a deferred annuity, and have you selected which might be right for you depending on your stage in life?
   • Have you reviewed and initiated a hybrid annuity or tapped into the upside-without-the-downside strategy that’s now available to anyone regardless of age and without any lump-sum payment whatsoever?
   • Have you gone online and found out how much future income you could have for as little as $300 a month or more? If not, go to www.lifetimeincome.com or call an annuity specialist at Stronghold.
3. Secrets of the Ultrawealthy:
   • Have you investigated how to drastically cut the amount of time it will take you to achieve financial freedom by 30% to 50% through the use of tax-efficient life insurance strategies? Remember, PPLI (private placement life insurance) is great for high net worth, but anyone can use the policies offered through TIAA-CREF (Teachers Insurance and Annuity Association – College Retirement Equities Fund ) with minimal deposit amounts. If you haven’t yet explored these tools, reach out to a qualified, expert fiduciary today or contact Stronghold for a free analysis
   • Have you invested the $250 to set up a living trust so that your family is protected and your assets will go to them without going through a year of probate Have you protected your wealth not only fro your current generation but also your grandchildren and your great grandchildren?

Step 6: Invest Like the .001%

1. Have you taken the time to absorb some of the short interviews with 12 of the smartest financial people on earth, the greatest investors in history?
2. Who is the “Master of the Universe” in the financial world? What kind of returns has he gotten compared with anyone else, including Warren Buffett, and how could you invest with him if you wanted to?
3. What did you learn about asset allocation from Yale’s David Swensen? Or J.P. Morgan’s Mary Callahan Erdoes?
4. What did you learn from the indexing master Jack Bogle? Or from Dr. Doom, Marc Faber?
5. Did you capture the simple strategy that Warren Buffett now recommends for everyone, including his wife and her legacy trust?
6. Did you absorb the importance of how to get asymmetric returns?
7. Did you absorb the $100,000 MBA that Paul Tudor Jones gave you by never making an investment of less than five to one and always tapping into the power of the trend?
8. Did you check out Ray Dalio’s How the Economic Machine Works—In Thirty Minutes video? If not, watch it now at www.economicprinciples.org.
9. Did you soak in the concepts of Kyle Bass’s solution on investing where you cannot lose money? Remember the power of nickels? Where investments are guaranteed forever by the US government, and you’ll have a potential upside of anywhere from 20% to 30%?
10. Did you take in the core lessons from Charles Schwab, and Sir John Templeton’s gift that continues to give of being able to know that the worst environment is your greatest opportunity—to be most optimistic when the world is “ending” like it did in World War II, like it did in inflation in South America, like it did in the Depression, like it did in Japan after World War II? Did you absorb his true core strategic philosophy that made him the first international investment billionaire in history?
11. What actions can you take today to start investing like the .001%?

Step 7: Just Do It, Enjoy It, and Share It!

1. Your Hidden Asset:
   • Have you connected to the truth that the future is a magnificent place?
   • It will be filled with exciting challenges.
   • Opportunities and problems are always there, but are you clear that there is a wave of technology that is going to continue to innovate and empower us as individuals and enhance the quality of life for human beings all over the earth?
2. Have you given yourself the ultimate gift?
   • The commitment to be wealthy now, not someday in the future – by appreciating and developing the daily habit of priming your appreciation of what you already have and building on that success?
3. Would you trade expectation for appreciation?
   • And have you committed to a life of progress?
   • Progress equals happiness.
   • Life is about growing and giving.
4. Have you figured out what you’re here to serve and what the higher purpose is for your life?
   • Have you begun to think about your legacy?
5. Have you decided to convert your pocket change into massive change in the world?
   • If so, go to www.swipeout.com now, take one minute, and start the process of saving lives while you enjoy your own.
6. Are you embodying the truth that makes you wealthy in this moment: the secret to living is giving?

What Do You Think?

Have your say in the comments below.