Guardian Academy Methodology - Finance (Basic)
Level 3 - Master of Mundane
Our mission is to help you reach your full potential. We realize that while money is not everything, getting your finances dialed in provides the stability necessary to pursue the higher level things. Our methodology/philosophy is to first handle the mundane and lock in the important things - the world of form. Only after mastering the world form can we explore the world of “formlessness”.
Our structure and commandments make up the foundation of the financial and investing methodology.
1. Guardian Academy Structure
2. Ten Core Beliefs [Commandments]
3. Financial and Investing Methodology/Philosophy
First, be sure to review the Guardian Academy Structure and Commandments. Below is our financial and investing methodology. You do not have to adopt it, but it will be helpful to understand that this is the base from which we are reasoning.
Step 1: Solvable Problem
First, we must clearly define what we are solving for and an acceptable timeline. For example:
Ten Million dollars by January of 2033.
Obviously, we don’t want you to pick random numbers. Sit down and figure out how much you actually need to fund your top priorities. Be conservative with the timeline, you can learn how to “collapse time” later. First, lock in a worst case scenario that is acceptable, then find ways to collapse time to get there faster. Irrational goals are rarely the problem, irrational timelines are.
Step 2: Check the Gap
Once defined, we want to see if we are on track, how far off we are and what kind of risk we need to take or moves we need to make to get on track. For the sake of this example we are starting with the goal stated above.
Ten Million dollars by January of 2033.
For the sake of example, let’s assume we have $350,000 right now, an additional $50,000 a month to invest and are currently taxed at 40%. In this example we would need 16% return on our money before taxes to hit the goal in the stated timeline. This gives us an idea of how much risk we need to take to lock in our priorities.
Step 3: Close The Gap
Once we can quantify and see the gap, we work on closing it. The ideal situation is to own or start your own business, but this also works if you’re a W-2. Of course, a W-2 employee never has as much control or reliability as they are led to believe.
We close the gap with the following steps:
Basic recapture. Before taking on the risk that comes with trying to get “more”, we recapture what is slipping through the cracks. If we are able to recapture $5,000 a month and reallocate it to our investment strategy it looks like this:
In just a few minutes we have driven down the return we need from 16% to 13%. Needing a lower return means we can take less risk. You can see how to do the basic recapture below.
Basic Tax Strategy.
Here, we need to keep fighting the urge for “more” and continue to recapture through tax savings. Most small businesses are paying close to 40% tax rate when they could be paying closer to 20%. If we can get the tax rate down to 20% it looks like this:
Now we only need 9.9%. 9.9 percent is significantly less risky and easier to find than the 16% we started with… and we haven’t even increased income yet! That comes next…
Once you’ve recaptured through basic recapture and tax strategy, you may still need to make more. Ideally, the target return would be zero - meaning even if you didn’t get a return on your capital, you’d still reach your goals. This is rarely the case, but that is what we are working toward.
Before taking bigger or riskier bets we suggest increasing your income - generally through a side hustle or growing your core business. So few are willing to do the work, it’s relatively easy to make progress if you are.
If you’re able to add $20,000 a month to your income it looks like this:
You’d only need a 2.7% return on your money to lock in your goals on your timeline. Since what you need is lower - you will have more, lower risk options to lock in your priorities. The lower the return you need, the more capital you have to collapse time - to get there faster.
* We do have Guardians, partners and collaborators that have a track record of helping increase their income. You can see a list of them on the collaborators page.1
Step 4: Collapse Time or Reduce Risk With Your Macro Belief
Once you are on track, any over performance or overage can get reallocated** to either:
a riskier investment with a higher potential return in order to collapse time. This increases the probability that you get to your goal faster.
a less risky investment, taking risk off the table. This increases the certainty that you get to your goal on the timeline you decided on.
**we only take risks with overage. Regardless of the outcome, we are still on track to reach our goals in an appropriate timeline. Our methodology is to collapse time without putting the core priorities at risk.
Using the above example:
If you need 2.7% a year and you get 9%, you have a 6.3% over-performance. This 6.3% can be reallocated toward:
Higher risk investments to collapse time
Lower risk investments to take risk off the table
Left right where it is because the over performance is already collapsing time for you
Notice that if you want to collapse time, more income will drive down the target return, which creates more overage, which creates more capital to take risk with. If you want to take more risk off the table, more income will create more overage that can be taken off the table.
Regardless of how you want to invest, having control over and knowing how to increase your income amplifies your strategy.
The best move for you depends on your risk tolerance, macro-belief and personality. Most of our overage goes into crypto and testing new things on the business development side - because we’re builders and have a macro belief in crypto. Some team members and contributors have different macro beliefs for different reasons. It’s important that you know what you believe in and why.
Remember Guardian Academy Commandment 32: Know Yourself
There will be a follow up article breaking down the buckets of investments based on target return. Make sure you're subscribed if you want to get notified when it drops.
Step 5 (Advanced): Be Your Own Bank and Advanced Finance
This will only make sense for high net worth individuals and business owners. It requires a lot of attention to detail.
For most, this is a version of “stepping over dollars to pick up pennies” - especially if you are trying to do it yourself. We recommend bringing on a professional with a background in finance to dabble in behaving like your own bank.
Our methodology is to first lock in the important things and then strategically collapse time without risking the important things. To master the esoteric things like “purpose” or “mindset” or “legacy” you must first master the mundane. Certainty that you can pay your bills and that you’re on track relieves stress and anxiety so that you can play a bigger game, if you choose.
PS. We’re working on a whole investing section that will be heavy in crypto, AI, new tech and the boring stuff like equities and commodities. But it’s important to us that the above framework is made explicit. Follow whatever framework or rules make sense to you or customize ours however you see fit. This is not meant to be prescriptive or taken as advice - it’s just the framework we use given our backgrounds, risk tolerance and personalities.
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