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Scott Ford ‘Financial Jiu-Jitsu’ interview

This is the Trading Diary interview with Scott Ford, author of Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances.

1. Who are you?

Scott Ford - author I am the president and founder of Cornerstone Wealth Management Group where I provide my clients with proactive investment and wealth management advice based upon my trademarked system Way2Wealth. I was recently named one of “20 Rising Stars of Wealth Management” by Private Asset Management Magazine. I live in Hagerstown Maryland with my wife Angie and children Lakin and Jacob. I study Brazilian Jiu-Jitsu at Clinch Academy in Maryland.

2. What is your new book about?

Financial Jiu-Jitsu: A Fighter’s Guide to Conquering Your Finances is about going back to basics and executing the sound financial principles that allow you to consistently build wealth and master your finances, no matter what the market throws at you. So many smart, intelligent people fail to build the wealth they really want because they neglect some of the key foundational elements to create financial freedom. As with the sport of Jiu-Jitsu, it is by learning to protect what we have and to master certain fundamentals that we can build a lasting financial foundation.

3. Why is your book called Financial Jiu-Jitsu?

Mastering your finances is a lot like mastering a martial art. It has nothing to do with perfecting technically challenging moves, rather mastery is as simple as performing a handful of basic moves thousands of times. What are some basic moves of money management?

  • Establishing an emergency fund
  • Maintaining a budget
  • Setting aside money for education and retirement

Financial Jiu-Jitsu teaches you how to use the guiding principles of finance to build a solid financial foundation that can then be leveraged to help you achieve your long-term financial goals, while building lasting wealth for you and your family.

4. There are a lot of finance books out there, why did you decide to write one? Why should I buy yours?

Financial Jiu-Jitsu is based on taking care of the basics first, using straight-forward, easy-to-understand principles and strategies as a platform and springboard to future success. It acknowledges that not everyone has the same financial goals and that everyone’s financial plan will adapt and evolve over time, but its basic principles are principles that everyone can understand and apply. In this troublesome economy, I feel like it’s more important than ever for people to feel like they have control over their financial situation. My goal with this book was to show that you don’t have to be a financial expert to be financially successful. I use easy-to-understand language and exercises so that anyone can take these principles and apply them to their lives.

5. What simple steps do people need to take to master their finances?

  • Prepare to Win: Paying yourself first, maintaining a cash safety net, managing credit wisely, and never procrastinating.
  • Balance and Base: Determining your specific financial goals, and developing a vision for your life.
  • Closing the Gap: Overcoming your fear of the unknown by creating a personal balance sheet and using it to analyze your current situation.
  • The Power of Respect: Choosing and working with a financial advisor.
  • Timing: Taking advantage of tax-deferred investments, maxing out 401(k) contributions, and contributing to IRAs.
  • Gain Control: The basics of an estate plan, living trust, pourover will, and power of attorney.
  • Position Before Submission: Protecting yourself with insurance
  • Attitude: Planning for your retirement

6. In your book, you mention that it is possible to build real wealth regardless of what the market throws at you. Given today’s volatile market, can you explain how that works?

I believe that there are seasons to investing just like there are seasons in nature. Most investors and professionals helping investors are applying a spring and summer strategy to a fall and winter season which isn’t working. My company has tailored its investment strategies to meet the needs of the investment season. During the spring and summer season we can use a sailing strategy. A modified buy-and-hold approach makes sense and we can take advantage of the bull market and not only enjoy the upswing, but also work hard to beat the markets. A rowing strategy is needed for the fall and winter seasons. The goal is to preserve capital and then make investments that take advantage of what opportunities do exist even during a bear market. Seasonal investing is based on a relatively simple premise: When the sun is shining almost anyone can make hay. When winter comes…it’s not so easy.

7. In Chapter One, you talk about the 9 guiding principles of financial success. Can you say more about these principles and why they’re so important to building wealth?

Scott Ford - authorGive back: How do you succeed if you give away what you hope to accumulate? I believe it’s impossible to get what you are not willing to give. Some people see giving back as a form of tithing. Spirituality is an important part of my life and I tithe regularly, you may also, but even if you don’t relate giving back in spiritual or religious terms, you should plan to give back in a way that is meaningful to you. By giving back you also gain and you make the world a little better place and feel good about it. Maybe what you can give is money, maybe its knowledge or time. Whatever it is, I guarantee you will get back more in return, if not materially, then certainly in terms of knowledge and self-satisfaction.

Pay Yourself First: Everyone makes enough money to be able to save, even if it’s a few dollars a week. Saving money doesn’t require setting up and living by a budget. No matter how much money you make, over time you’ll find a way to spend it. Instead of budgeting, get started by taking control and paying yourself first before you pay your mortgage, your rent your car insurance. Pick a number, (in my opinion you should pay yourself 10% of your gross but feel free to choose what works for you). If you pay yourself first, you will adjust your spending accordingly.

Automate: The easiest things to do are the ones you don’t have to think about doing. The easiest choices are the ones you don’t have to think about making. Automate the process of saving. Make the choice, weekly or monthly, but set up a system where paying yourself is automatic. A draft from checking into a savings account, money deducted from a paycheck for deposit into a 401(k). With electronic banking and web-based financial services – it’s simpler than ever.

Maintain a Cash Safety Net: Most financial experts feel you should maintain an emergency fund to cover true emergencies (losing a job, unexpected medical expenses, etc.). I agree, not just because an emergency fund makes good financial sense, but because it gives you peace of mind. Instead of worrying about things that might go wrong, prepare for the possibility that things might go wrong. I think three months of expenses is a great goal, but it may be a bit unrealistic for most people. I suggest you take a good look at your expenses and see exactly what you would HAVE to spend in an emergency and come up with an emergency fund number that’s right for you. Then don’t use your emergency fund unless it’s truly an emergency and if it is, replenish it as soon as possible.

Manage Credit Wisely: We all have it. We all use it. We all secretly hate it. Credit is not a necessary evil, credit is actually an incredibly useful financial tool if managed wisely. The key is to ensure that the credit you use fits within your overall financial plan and helps you build wealth. Credit should not be something you fall back on because you want to; credit should be a financial tool employed as the result of an informed and intelligent financial decision.

Get Time on Your Side: Time is arguably the most powerful component of any investing plan – and often the most overlooked. Understand the effect of time and compounding. It’s never too late to take control and make time work for you. Every wealth-building and investment strategy that makes up the Way2Wealth is based on harnessing the power of time and compounding. Think of time as an opportunity, not as a regret and you’ll succeed.

Never Procrastinate: Waiting is the worst approach you can take in terms of building wealth. Procrastinating is the polar opposite of getting time on your side. Time is only on your side when you take action and let time work its magic. Which is worse the pain of discipline or the pain of regret? I’ll take discipline any day. Never look back and say “I wish.” Look forward and say “I will.”

Make Reality Your Perception: Most people say “Perception is Reality.” In many cases that phrasing is true, but in financial terms perception often is not reality. On a daily basis you can get overwhelmed by all the “experts” spouting their financial advice. Most are loud, most are certain, most are wrong. If they weren’t wrong, they would all be rich and we would too! The key is to know reality when you see it and to make decisions based on accurate information and accurate advice. That’s what smart investors do – and over time smart investors tend to become wealthy investors.

Follow a Simple and Comprehensive Strategy: Many people in the financial industry make building wealth and achieving financial freedom seem incredibly difficult when in fact, it really isn’t. The key is to follow a simple strategy that takes into account all aspects of your personal and financial life. Not matter how much money you have, the basic principles are the same: Use strategies that seek to minimize risk, maximize return, and build a smart plan that helps you pursue your individual goals. That’s it. Simple. Comprehensive. Easy to follow.

8. What is True Wealth and how does it relate to reaching our financial goals?

True Wealth is made up of all the things money can’t buy and death cannot take away. By figuring out what True Wealth means to you, you’ll also determine your goals and start to build a blueprint for your own simple, comprehensive financial strategy. Then you can figure out how to get where you want to go, but first you must determine where you want your journey to take you.

9. Many financial experts preach about the importance of budgets, but you say to forget about budgets. Tell us more about budgeting and why it may not be the best use of your time in order to reach your financial goals?

I’m not a big budgeting guy. Sure, my wife and I know our monthly expenses. We know what we spend, know what we save, know what we put aside for a rainy day…but we don’t live by a budget. We spend our money on the things we feel are important, and we save money in order to build our vision for our family and to ensure that we leave the legacy we want to leave. If you want to create a budget and feel like creating and following one will help you, then feel free. Everyone has individual strengths and weaknesses and everyone uses different tools to help them succeed. My point is, that budgets don’t work for everyone. If you don’t want to create a budget, put your effort in other activities instead.

10. What is the Family Benchmark and why is it so important to know in order to create a strong financial foundation?

Your Family Benchmark is not an amount of savings per month. Your Family Benchmark is not what seems like an impossibly high savings target. Your Family Benchmark is the rate of return you need to achieve to reach your goals. You may not always be able to control how much you bring home. You may not always be able to control how much you save. But if you stay focused and get the right people in your corner, you can over time enjoy a fair amount of control over your rate of return. Your Family Benchmark is your “required” rate of return. Not a dollar amount, not an end goal, but what you need to earn on your investments to reach your goals. Focusing on your Family Benchmark makes it easier to adapt to a changing environment, because your Family Benchmark can naturally be more flexible than a fixed rate of pay or a fixed amount of annual savings.

11. Can you share a few of the common elements that are part of a sound investment strategy?

Build an emergency fund. Determine the size of your emergency fund by really evaluating your expenses. What could be cut in an emergency and what is truly a necessity?

Own your own home. Even in down markets, real estate tends to be a good long-term investment. Understand the tax benefits of owning your home.
Take advantage of tax deferred investments. Understand the basics of a 401(k), the tax advantages and “free money” due to employer matching.

Max out 401(k) Match Contributions. Don’t pass up “free money”. If you can’t max out today take steps to do so as soon as possible by putting a pay increase towards your contribution or cutting monthly expenses.

Contribute to Traditional and Roth IRAs. Understand the advantages and disadvantages of both, compare your options and go with the options that provides the best combination of fees and services.

Determine how to invest your funds: Understand the differences between Stock mutual funds, Bond mutual funds, Stable value accounts, Money market accounts, and endless combinations of the choices above. Spread your investments across different funds to try to maximize your returns and hit your Family Benchmark while only taking on the amount of risk you wish to face.

Diversify into Other Investments: If you are fully funding a 401(k), taking advantage of traditional and Roth IRAs and have more money to invest, make sure those funds work just as hard for you. No matter what, start investing today.

12. How does the Jiu-Jitsu principle of “position before submission” apply to building wealth?

The phrase “position before submission” carries different meanings at different levels of the sport. Like investing, simple principles can become complex; so can the idea of position before submission. For beginners, it is based on protection and security. Great teachers make sure that the beginners focus on the basics. Position for submission, in financial terms, is a lot like insurance. Insurance helps reduce or eliminate some of my concerns or worries about unpredictable or unexpected events.

You can find out more about Scott on his blog at www.scottdford.com. Financial Jiu-Jitsu is available now.



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