Your Financial Freedom Playbook

Tony Robbins

Summary in 100 words or less

To achieve true financial freedom, invest in the long-term, minimize fees and taxes, and diversify intelligently. The best thing you can do is to start investing early—as soon as possible—regardless of the amount. However, money does not equal true wealth. While you work hard to achieve financial success, don’t forget to keep growing and contributing to being truly fulfilled.


My Highlights

You don’t have to predict the future to win. Here’s what you do have to do: you have to focus on what you can control, not what you can’t.

When a person with experience meets a person with money, the person with experience ends up with the money; and the person with money ends up with experience.

We’re not rewarded when we do the right thing at the wrong time. If you plant in winter, you’ll get nothing but pain, no matter how hard you work. To survive and thrive, you and I have to do the right thing at the right time.

By starting earlier, the compound interest you earn on your investment adds more value to your account than you could ever add on your own.

You’re never going to earn your way to financial freedom. The real route to riches is to set aside a portion of your money and invest it, so it compounds over many years. That’s how you become wealthy while you sleep. That’s how you make money your slave instead of being a slave to money. That’s how you achieve true financial freedom.

Save and invest—become an owner, not just a consumer. Pay yourself first by taking a percentage of your income and having it deducted automatically from your paycheck or bank account.

When any market falls by at least 10% from its peak, it’s called a correction—a peculiarly bland and neutral term for an experience that most people relish about as much as dental surgery! When a market falls by at least 20% from its peak, it’s called a bear market.

The last thing you and I want s to make fear-based financial decisions. So we have to remove as much emotion as possible from this game.

The stock market is a device for transferring money from the impatient to the patient. —Warren Buffett

The stock market isn’t looking at today. The market always looks to tomorrow. What matters most isn’t where the economy is right now but where it’s headed. And when everything seems terrible, the pendulum eventually swings in the other direction. In fact, every single bear market in US history has been followed by a bull market, without exception.

Market turmoil isn’t something to fear. It’s the greatest opportunity for you to leapfrog to financial freedom. You can’t win by sitting on the bench. You have to be in the game. To put it another way, fear isn’t rewarded. Courage is.

When it comes to your finances, ignorance is not bliss. Ignorance is pain and poverty. Ignorance is a disaster for you and your family—and bliss for the financial firms that are exploiting your inattention.

Index funds take a “passive” approach that eliminates almost all trading activity and thus reduces the fees you need to pay.

Warren Buffett, Ray Dalio, Carl Icahn, and Paul Tudor Jones, who not only are brilliantly clever but also have ideal temperaments, enabling them to remain calm and rational even when markets are imploding and most people are losing their minds. One reason why they win is that they base every investment decision on a deep understanding of possibilities, not on emotion or desire or luck.

The vast majority of experts in the financial have good hearts and intentions. The trouble is, they work in a system that’s beyond their control—a system that has tremendously powerful financial incentives to focus on maximizing profits above all else. This is a system that richly rewards employees who put their employer’s interest first, their own interests second, and their clients’ interests a distant third.

Remember, people can be sincere—and sincerely wrong.

In reality, all financial advisors fall into just one of the three categories:

  1. A broker
  2. An independent advisor, or
  3. A dually registered advisor

No matter how much you may like your broker, “Your broker is NOT your friend.”

Ideally, if you’re using an advisor, you should be getting more than just someone to design your investment strategy. What you really need is someone who can help you as the years go by to grow your overall wealth by showing you how to save money on your mortgage, insurance, taxes, and so on—someone who can help you to design and protect your legacy.

The most successful people in any field aren’t just lucky. They have a different set of beliefs. They have a different strategy. They do things differently than everyone else.

The best investors are obsessed with avoiding losses. Why? Because they understand a simple but profound fact: the more money you lose, the harder it is to get back to where you started.

Asset allocation is simply a matter of establishing the right mix of different type of investments, diversifying among them in such a way that you reduce your risks and maximize your rewards.

The best investment doesn’t fall for this high-risk, high-return myth. Instead, they hunt for investment opportunities that offer what they call asymmetric risk/reward: a fancy way of saying that the rewards should vastly outweigh the risks. In other words, these winning investment always seek to risk as little as possible to make as much as possible.

The best investors know that it’s not what they earn that counts. It’s what they keep after taxes. That’s real money, which they can spend, reinvest, or give away to improve the lives of others.

There are four important ways to diversify effectively:

  1. Diversify across different asset classes
  2. Diversify within asset classes
  3. Diversify across market, countries, and currencies around the world
  4. Diversify across time

You can be unshakeable, too, but this is a gift that only you can give yourself. When it comes to the areas of your life that matter most—your family, your faith, your health, your finances—you can’t rely on anybody else to tell you what to do. It’s great to get coaching from experts in the field, but you can’t outsource the final decision.

If you live in fear, you’ve lost the game before it even begins.

Cowards die many times before their deaths; the valiant never taste of death but once. —Shakespeare

None of us knows when a bear market will come, how bad it will be, or how long it will last. 90% of surviving a bear market comes down to preparation. And the other 10% is all about how you react emotionally in the midst of the storm.

Deciding on the right balance of stocks, bonds, and alternatives is the most important investment decision you’ll ever make. Never bet your future on one country or one asset class.

Use index funds for the core of your portfolio because they give you broad diversification in a low-cost, tax-efficient way, and they beat almost all actively managed funds over the long run.

You never want to be in a position where you’re forced to sell your stock market investment at the worst moment. So it makes sense to maintain a financial cushion. This puts us in a strong position where we can view the bear as a friend rather than a fearsome enemy.

Start with an achievable goal and keep raising the bar as you progress. For example, you might start with a goal of saving three or six months of income, and then work your way—over many years—toward the ultimate goal of setting aside seven years of income.

Never underestimate the awesome power of disciplined saving combined with long-term compounding.

The single biggest threat to your financial well-being is your own brain. The human brain is perfectly designed to make dumb decisions when it comes to investing. You can do everything right but if you fail to master your own psychology, you may ultimately become the victim of a costly form of financial self-sabotage.

The problem is that our brains are wired to avoid pain and seek pleasure. Instinctively, we yearn for whatever feels like to be immediately rewarding. Needless to say, this isn’t always the best recipe for smart decision making.

Beliefs are nothing but feelings of absolute certainty governing our behavior. Handled effectively, beliefs can be the most powerful force for creating good, but our beliefs can also limit our choices and hamstring our actions severely.

It’s not enough to know what to do. You also need to do what you know.

The best investors know they’re vulnerable to confirmation bias and, accordingly, do everything they can to counter this tendency. The key is to actively seek out qualified opinions that differ from your own.

One of the most common and dangerous investing mistakes is the belief that the current trend will continue. And when investors’ expectations aren’t met, they often overreact, leading to a dramatic reversal of the trend that previously seemed inevitable and unstoppable.

The biggest mistake that the small investor makes is to buy when the market is going up on the assumption that the market will go up further—and sell when the market is going down on the assumption that it’s going to go down further. —Harry Markowitz

Humans have a perilous tendency to believe that they’re better or smarter than they really are and it’s called “overconfidence.” To put it simply, we consistently overestimate our abilities, our knowledge, and our future prospects.

By admitting to yourself that you have no special advantage, you give yourself an enormous advantage! How come? Because you’ll do so much better than all those overconfident investors who delude themselves into believing they can outperform.

Greed and impatience are dangerous traits when it comes to investing. We all have the tendency to want the biggest and best results as fast as possible, rather than focusing on small, incremental changes that compound over time.

The best way to win the game of investing is to achieve sustainable long-term returns. But it’s enormously tempting to swing for home runs, especially when you think other people are getting rich faster than you.

When people dream of becoming rich, they’re not fantasizing about owning millions of pieces of paper with pictures of dead people on them! What we really want are the emotions we associate with money. In other words, it’s the feelings we’re after, not the money itself. Real wealth is emotional, psychological, and spiritual.

The first step to achieving anything you want is focus. The second step is to go beyond hunger, drive, and desire, and to consistently take massive action. The first step to achieving whatever we want is grace.

The first principle of fulfillment is that you must keep growing. If you don’t, you’ll become frustrated and miserable, no matter how many millions you have in the bank. The second principle is that you have to give. We’re driven by our desire to contribute. If we stop feeling that deep sense of contribution, we can never feel truly fulfilled.

Remember: money doesn’t change people. It just magnifies who they already are: if you have a lot of money and you’re mean, then you have more to be mean with; if you have a lot of money and you’re generous, you’ll naturally give more.

More book notes

The Psychology of Money
The Richest Man in Babylon
Just Keep Buying
The Almanack of Naval Ravikant
The 4-Hour Work Week

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