The Leverage Ratios
We are bringing you a Macro Q and A video and we just did a recent video on “The Wealth Ratio” now we’re gonna talk about “The Leverage Ratios.” Again, something that I’m studying and learning and really been trying to implement the last five, six years of my life and still every single day trying to implement this in my life. The Wealth Ratio is a ratio that passive income plus portfolio income divided by expenses. You want a number of over 1, and that’s going to give you a ratio that is you know, out of the rat race, in essence. You are financially free. You aren’t beholden to a job, you know you’re getting cash flow every single month greater than your expenses. So if something happened to you, you’re still being, you can cover all the expenses in your life from the castle that’s working, your money working for you that way you don’t have to.
Teaching and Learning
So, really quick. I want to just talk about the leverage ratios and leverage ratios are just kind of like more of – it’s kind of like the wealth ratio in essence, but it’s broken down a little bit more if that makes sense. The wealth ratio is kind of just like an overarching, like kind of looking at from the macro level and again. With our Macro Q and A’s here and this is something get asked a lot and something I get asked a lot. Again, I’m nowhere near where I want to be, but I love learning the stuff and trying to implement it in my life every single day and helping people around me and teaching because the best way to learn is to teach it really other than doing the actual thing as to teach and hopefully understanding it, what you’re learning and grasping and then being able to teach it to other people. Right?
So really quick, for instance, the, your leverage ratios are quick ratios to understand,. Where you’re at and how you’re doing. So, for instance, we have just you is them to one 1: 1 ratio, you know, you work hard for your money day in and day out. You punch the clock, you know, you have billable hours as a lawyer, accountant, attorney, whatever it is, a doctor. You have the billable hours, you have a real estate team, whatever it may be, and you get commission checks. You’re an employee and you get a paycheck. 1:1 , your hours, you trading time for hour, you know, and hours, time and hours for money. So, when you start increasing that wealth ratio it’s kind of broken down in different parts and kind of look at it and some couple of different ways. So for instance, again, you as the baseline you – 1:1, um, if you had, you know, businesses or if you had interest in different businesses, you would have, you know, say this is always going to be 1 as the front number and then you, say you had a couple of different interests in businesses. Say you have three different pieces of a business for instance. So 1 : 3. Say you had, you know, you’re looking at your dollars, for instance, how many dollars you have saved up, you know. We all start at beginning of life, 1:0 right? The more we build, and maybe it’s 1:10,000, right? So the more these ratios go up, the more your wealth ratio in essence could be going up, not always, because remember the wealth ratio is passive income plus portfolio income divided by expenses.
But this will give you an idea when you start breaking it down and start working at these. A lot of times you can start chipping away. A lot of times it’s business might give you passive income that you can add to that wealth ratio. Maybe you can add to your portfolio income by shares. How many shares do you have on a lot of people, right? So beginning of life you start at one to zero. You don’t have anything, it’s just you. But maybe you have a thousand shares in the company that’s giving them maybe some portfolio income, possibly. I don’t know, maybe it’s given you some capital gains, maybe it’s giving you some dividends, but the more you increase that and you can see as you go through here, maybe you have real estate, your own real estate. So maybe you own 3 duplexes and you have 6 tenants, so you’re 1:6, you have six tenants paying you.
What’s in it for you?
So again, these ratios start to help you. Courtesy of a Retire Young, Retire Rich is the book that talks a lot about these ratios. If you want to go check it out. These ratios give you basically the approach to how you are building your wealth. But it also gives you these quick ratios, this quick little, you know, how am I doing. A quick checkup -How am I doing? So keeping track of all these ratios, you can kind of get into a, you know, I’m giving you a handful of them. You can get into even more and more and more and just keep adding to that and making your list bigger and bigger and trying to increase these ratios all the time, right? If you’re at one to zero and everything, then how can I start building things? How can I start doing things? Maybe it’s starting a network marketing business. Maybe it’s buying some shares of a company that you’ve been following and really tracking and researching. Maybe it’s a buying some gold and silver. Maybe – there are all kinds of things you can start building your wealth and you can start adding to your portfolio and start increasing these ratios. So, you know, starting a part time business, a direct selling business or network marketing, and then it’s going to increase hopefully the dollars that you have. Like I said, you’re going to start getting some shit, you know. Look, start looking at property, whatever it may be.
There are lots of different ways to increase those ratios, but it’s just, again, like I said, it’s something that we get a lot. Something that we’re constantly, you know, I’m trying to work on. I’m trying to talk to our, our employees, to our clients about it because again, having a real estate business, I believe, it’s truly our priority to you know, really educate our clients as to what’s going on. I look at that as a real estate agents’ true job is to educate people on what’s going on around them and especially when you’re dealing with such large assets and liabilities as a house.
So, I hope this makes sense for you guys. I hope this is something that, you know, you can take this and run with and get something out of it. Again, I appreciate all the questions that you guys give and everything that you guys send us in the comments, questions, concerns, and we’ll keep bringing this stuff to you. I obviously love learning this stuff and teaching it and trying to implement in my life. So I appreciate your time and energy watching this cause that’s truly out of all these things. That leverage ratio is a time and energy and money. Currency. Money is just a container for the art stored up, you know, blood, sweat, and tears and time and energy we put into things. Money is that tool that we use to buy more of our time back. That’s all it is. So I appreciate your time and energy spending with us and hopefully you’ll learn something from it and hope you’re always learning something from the videos we’re putting out. So if you’re not, please let us know that as well. So I appreciate you guys and we look forward to seeing you soon.