01:08 Introduction to the Perpetual Wealth Strategy and the three core principles
Patrick Donohoe: Hi there! Welcome to the Perpetual Wealth Podcast, season three. My name is Patrick Donohoe, and this is episode one.
Today I will invite you into the paradigm of Paradigm Life. Since 2007, after working with over 8000 clients, we as an organization have experienced the good, the bad, and the ugly of personal finance. Our mission, as it continues to evolve, is to guide clients to financial independence, and the vehicle that we use to do that is the Perpetual Wealth Strategy.
The Perpetual Wealth Strategy is a holistic and comprehensive approach to personal finance, focusing on three core principles: cash flow, protection, and wealth building. Depending on your stage of life, wealth building can either be wealth accumulation, wealth building, wealth distribution, or legacy – passing on your wealth.
02:17 What is the first core principle, cash flow, and why is it important?
Patrick Donohoe: Let’s begin with the first principle: Cash flow. Today, I’ll be focusing on this foundational aspect of finance. Cash flow, often regarded as the lifeblood of finance, is the starting point. It represents the funds flowing into and out of both your personal and business finances. But it goes beyond mere figures on an income statement. In my view, it’s pivotal to achieving financial independence, both now and in the future, spanning all life stages.
A positive cash flow means you have more money coming in than going out. This foundational principle is essential for financial well-being, ensuring you can cover daily expenses, evade the pitfalls of debt, and maintain a clear vision for informed decision-making. With a strong cash flow, decisions become proactive instead of mere reactions.
However, cash flow isn’t solely about staying afloat; it’s about prosperity. Robust cash flow ensures you have readily accessible assets to handle both anticipated and unexpected expenses. It provides the flexibility to capitalize on opportunities and tackle challenges without resorting to high-cost external financing. Furthermore, it prevents premature withdrawals from your wealth-building accounts, safeguarding the trajectory of wealth accumulation. This is why we commonly recommend maintaining liquidity for at least three months’ worth of expenses, if not six, as a buffer against unforeseen disruptions.
Cash flow’s significance isn’t limited to the inflow and outflow of funds. It also informs your investment priorities. When cash flow is central to your objectives, you’ll find yourself valuing investments based on their cash flow potential rather than just the rate of return. Over time, this focus can lead to the creation of income streams that can supplement and eventually replace your regular earnings. Picture the liberation that comes from realizing that your financial stability isn’t contingent on trading hours for dollars. An effective cash flow strategy is multi-faceted. It’s not just about selecting the right financial tool or strategy. It paves the way for financial autonomy and surety. That’s why we see it as the inaugural step in your financial journey, warranting continual attention.
05:00 What cash flow topics will the podcast discuss this season?
Patrick Donohoe: This season, we’re going to discuss, from a cash flow perspective, the importance of a spending strategy, which is paramount to curbing our natural inclination to consume. We’re going to talk about tools and apps so that you can implement an effective spending strategy. We’ll also discuss ways to minimize taxes, one of the most significant expenses we have. Furthermore, we’ll emphasize a continual focus on personal and professional development, investing in yourself. These are strategies that lead to increasing your most valuable asset—the value you bring to the world, and ultimately, the income that comes as a result. That asset is you. This is just a taste of what’s to come this season as we discuss the principle of cash flow.
05:54 What is the second core principle, protection, and why is it important?
Patrick Donohoe: Okay. Next is protection. The second principle of the Perpetual Strategy is protection, which is a crucial aspect of financial life that, in my experience, is often overlooked and highly undervalued. Protection is the shield that safeguards your wealth. It’s the strategy that ensures your hard-earned wealth—what you’ve built and set aside to grow—continues to do so regardless of the inevitable curveballs that come your way. And we’ve experienced these curveballs in spades.
Life is unpredictable, right? There’s job loss, disability, medical conditions, the death of a loved one, divorce, lawsuits, market volatility, and disruption. All these events, all these curveballs, cause a disruption to wealth building. A holistic or comprehensive wealth strategy requires emphasis and focus on a protection strategy. Simply put, it’s about finding efficient ways to mitigate the negative impact of disruptive events.
The Perpetual Strategy is about optimizing protection and managing risk with the least out-of-pocket expense, focusing on protecting what I consider the two elements of your financial foundation: your assets and your income. Building wealth isn’t just about growing assets; it’s about protecting them. The fuel for wealth is cash flow, which results from income. So, protecting against disruptions to your income is also a critical piece of financial health.
Implementing a protection strategy is more than just a financial decision. It’s a commitment to your peace of mind. It’s about reducing the stress and anxiety that come from unexpected events and knowing that your financial future is secure, no matter what happens.
07:59 What protection topics will the podcast discuss this season?
Patrick Donohoe: In this season, I’m going to be covering topics such as personal, commercial, and business insurance, along with tactics to optimally cover these disruptive events with the least out-of-pocket expense. We’re also going to discuss legal entities, including wills, trusts, and business entities that shield your assets in the event of personal liability.
08:17 What is the third core principle, wealth building, and why is it important?
Patrick Donohoe: The final principle we’re going to discuss is wealth building. Wealth is the journey to growing your capital. It encompasses short-term capital needs and long-term capital needs. Those long-term needs could involve funding a college education, buying a new home, or securing a time when you can live off your assets either partially or completely.
As much as we’d like to believe, wealth isn’t a magical concept. It doesn’t materialize overnight. It takes time and requires consistency. And achieving it requires a well-thought-out strategy, not just an investment or a financial tool. For instance, when you deposit your first $20,000 in a 401k, an investment account, or as a down payment on a rental property, it doesn’t suddenly become $1,000,000 overnight. It grows over time with consistent returns and consistent contributions. That’s why starting today is crucial, even though the most significant growth happens further down the road.
09:26 The power of the Perpetual Wealth Strategy as a path to wealth building
Patrick Donohoe: If you’ve been investing for several decades across various economies, you know the path to wealth isn’t always smooth. Events like death, divorce, disability, health issues, and market volatility cause disruptions. There are many other events as well that can prolong the time required to build wealth. And sometimes, because of one or two major disruptive events that could have been avoided, people never achieve their wealth goals. That’s why we emphasize protecting alongside wealth building. By prioritizing protection, we increase the probability of our wealth curve materializing with the highest degree of certainty possible.
If we were to gather our clients in a room, I believe they’d agree they’d rather have a 100% probability of achieving 95% of their target wealth than the possibility of achieving 100% but with a likelihood of getting significantly less. That’s the power of the Perpetual Wealth Strategy: ensuring that your wealth-building activities are protected from these and other disruptive events.
Our evolution as an organization has helped us develop this approach. We’ve done it collectively with our wealth strategists and alongside our industry colleagues and mentors. This effort spans hundreds of thousands of man-hours and tens of thousands of cases over multiple decades. If you’re like us, you know that experience teaches patterns and exposes what works and what doesn’t. This collective experience is now aimed at helping you achieve the optimal amount of wealth with the highest degree of certainty.
11:16 Which free tool helps you get the highest return with the highest degree of certainty?
Patrick Donohoe: As I mentioned in the trailer for this season, we’ve developed some tools. One of which is the Hierarchy Of Wealth, a visual organization of your assets into four graded tiers. These tiers are based on the inherent risk of loss and your degree of personal control. The Hierarchy Of Wealth tool, which is available on our portal, is accessible to you at no cost as a client. It ensures that you have an ideal distribution of wealth, financial products, and investments, allowing you to achieve the highest returns with the highest degree of certainty.
11:55 The foundational product that The Perpetual Wealth Strategy is built upon.
Patrick Donohoe: Now, this is a broad overview of this season. Still, I’d be remiss not to mention our foundational product that many of you likely have with us: whole life insurance, primarily high cash value whole life. This product arguably sits in a category of its own, which sometimes makes it complex and challenging to explain due to its versatility and the multiple roles it plays.
Whole life insurance ensures an optimal cash flow strategy. As a financial product, it requires lifetime contributions, allowing you to contribute to this beneficial vehicle indefinitely. Your policy ensures liquidity without disrupting the wealth curve that benefits from compound interest. It protects not only against premature death but also against creditors who might make claims on assets due to unforeseen disruptive events and potential liabilities.
Whole life insurance is a tier-one asset in the Hierarchy of Wealth due to its consistent historical performance and the financial strength of the underlying insurance company. It provides a level of confidence because of the consistently stable returns observed over the last 100 to 150 years. It’s the ideal financial asset at the foundation of your wealth. In our experience, it amplifies the role and impact of all your other assets and investments. However, it should not be the only asset or wealth-building activity you pursue.
13:36 What is the main focus of wealth accumulation?
Patrick Donohoe: Whether you’re just embarking on your financial journey or seeking to bolster your financial strategy as one of our existing clients with Paradigm Life, keep in mind that wealth accumulation isn’t merely about a balance sheet or a figure on a piece of paper representing your net worth. It’s about ensuring a future you can rely on.
I invite you to join us this season as we delve into the power of the Perpetual Wealth Strategy. More specifically, we’ll concentrate on understanding the three core principles: cash flow, protection, and wealth. Our aim is to identify opportunities to enhance your financial future.
Keeping this introduction brief, be sure to tune in for the next episode. We’ll delve deeper into the realm of cash flow and offer insights, experiences, tools, and strategies for the continued success of our invaluable clients with Paradigm Life.
Thank you for joining us for this succinct season introduction. I eagerly anticipate our upcoming episodes, especially those featuring a special guest: one of our wealth strategists, Wade Reed. While he’s been an advisor with us for just over three years, he boasts a financial advisory experience spanning several decades. Wade and I will discuss cash flow, protection, and wealth-building within the context of the Hierarchy Of Wealth.
Stay with us for the next installment, and thanks for tuning into this one.