Beyond Financial Fitness Workbook

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provides information the authors believe to be accurate on the subject matter covered. It is
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financialfitnessinfo.com
ISBN: 978-0-9976311-5-9

First Edition, July 2016
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CONTENTS
Introduction
Part I—Comprehensive Financial Plan
CHAPTER ONE: Having the Right Idea about Money
CHAPTER TWO: Directing the Cash Flow
CHAPTER THREE: Building Your
Financial Life—A Complete Picture
Part II—Investment Policy
CHAPTER FOUR: The Top of the Hierarchy
CHAPTER FIVE: Risk Factors Working Against You
Part III—Asset Allocation Plan
CHAPTER SIX: Assets Explained–
Part I: The Left Side of the Risk Meter
CHAPTER SEVEN: Assets Explained–
Part II: The Right Side of the Risk Meter
CHAPTER EIGHT: Diversification and Asset Allocation
CHAPTER NINE: Putting It All Together
CHAPTER TEN: The Future

INTRODUCTION
“It is easy in the world to live after the world’s opinion; it is easy in solitude
to live after our own; but the great man is he who in the midst of the crowd
keeps with perfect sweetness the independence of solitude.”
—Ralph Waldo Emerson
What are the three main areas of personal finance?
1.
2.
3.
The ____________ section of our Financial Fitness training concentrates on
helping people get out of debt and stay out of debt, developing productive
habits that, over time, can help them beat the Financial Matrix.
“Those who don’t understand the power of ______________
______________ are destined to pay it.”
The ____________ section of our Financial Fitness training is the idea that in
order to truly get ahead financially in life, we need to not only learn how to
keep more of what we make (defense), but also learn how to make more as
well.
The ____________ _____________section of our Financial Fitness training
refers to the forces at work in the Financial Matrix and how they affect every
single aspect of our financial lives. This includes considerations like inflation,
interest rates, market volatility, tax laws, investment strategies, and a whole
gamut of factors that play into our overall ability to get ahead financially.
The _______, ________ _____________________ __________________ is
simply a graphical representation of the priorities of where to focus your
money, depending upon your particular progress on your journey to financial
fitness.
What are the three considerations of the intelligent investor?
1. A _____________________ _____________________ ___________

that outlines how you will earn, save, spend, borrow, and invest your
money.
2. An _____________________ ____________ that spells out your
fundamental approach to investing.
3. An ____________ _____________________ ___________ that details
how much money you will keep in different investment categories.
Fill in the blank key for Introduction:
Offense, Defense, Playing Field, Defense, Compound Interest, Offense, Playing
Field, YOU Inc. Investment Hierarchy, Comprehensive Financial Plan,
Investment Policy, Asset Allocation Plan

ONE
Having the Right Idea about Money
“Rich men use most of their money to get richer.
Poor men use most of their money to look richer”
—Mokokoma Mokhonoana
The middle class mindset thinks money is something to be used to buy
__________ __________ __________.
In the Cashflow Quadrant, what do the following letters stand for?
E - ______________________
S - ____________ – __________________ or ________________
B - ________ ______________ or ___-________ _____________
I - __________________
According to the Cashflow Quadrant, which side makes most of the wealth?
_______________
Explain the crank:

Your goal should be to get by on only a portion of the money you earn so that
the rest can be put into efforts to _________________ itself.
The chief purpose of your money is to build and acquire ______________.
Before reading this book, what did you think money is supposed be to used
for?
From which quadrants of the Cashflow Quadrant do you earn money?
What are some ways you can accumulate wealth?

TWO
Directing the Cash Flow
“Those who do not understand the power of
compound interest are doomed to pay it.”
—Anonymous
In essence, you never stop paying ________________ first; you just change
where it goes as time passes.
A life lived _______________ mere financial fitness involves the mature and
responsible allocation of your money flow into the uses that will best serve the
overall needs and higher ________________ for your life.
When we are blessed with money, even the tiniest amount, we are duty-bound
to become a ________________ with a portion of that money.
It is hard to build ___________________ when you yourself are someone
else’s _______________.
In the original Financial Fitness book, we talked about the very simple but
important concept of “paying oneself first.” The idea is that a portion of all the
money you earn is yours to keep. Turning the crank on the pump represents
what you do to earn your money with your job and/or business. The concept of
paying yourself first involves automatically and consistently channeling some
of the cash flow from your money pump into asset accumulation. Let’s take a
look at the status of your current You, Inc. Investment Hierarchy.
What percent are you currently “paying yourself” monthly?

In what ways are you currently “investing in yourself”?
Do you see areas where you could invest more in yourself? If so, where?
How much money do you currently have in Level Two (Emergency Fund), and
how many months expenses does that equal?
What is your Emergency Fund goal? (Circle one)
3-4 months 5-6 months 7-8 months more than 8 months
What is your goal date:___________________________

What money or other items do you already have set aside for Survival
Preparation (Level Three)?
Do you have other items for Level Three that you would like to add to this
level? If so, make a list of things that should eventually be added (certain
amount of cash, food storage, water, batteries, lights, 72-hour kits, silver coins,
guns, ammo, etc.):
What percent of your monthly income is for giving?
How much consumer debt do you now have, and when is your goal to get rid of
it?

Think of some examples of people you know who have been the “later” person
and others who have been the “now” person?
How do you relate with this graph?

THREE
Building Your Financial
Life—A Complete Picture
“Hope is not a strategy.”
—Anonymous
Unless your circumstances are extremely rare, _____________ will be the
biggest expense you have to deal with in your lifetime.
One of the shortcuts to wealth is to see what the wealthy do and
____________ them.
We believe that you will never regret a moment spent making your future life
______________ for yourself.
CHAPTER 3 ACTION LIST
1. Find an accountant to file your taxes for you and (if applicable),
keep your books for you on an ongoing basis.
What is your plan to reduce your tax burden, but also be compliant with the
law?
Do you already have a competent tax professional? If not, what is your plan?
2. Hire a lawyer or legal service to prepare your Will and Testament
and Durable Power of Attorney documents.
Do you already have your Will and Testament prepared? If not, when?

Do you already have a Durable Power of Attorney? If not, when?
3. Have an initial conversation with an Estate Planner and see if there
are steps you should be taking in this category.
Do you already have a competent estate planner? If not, what is your plan?
4. Think about and investigate whether or not starting a business of
your own might be right for you.
Do you already own a business? If not, what are some initial ideas you might
have about starting one?
5. Make sure you have the following insurances in place: home, flood,
car, medical, disability, critical illness, extended care, and an
umbrella liability policy.
Which of these insurances do you currently have?
6. Consult a professional to either review or initiate life insurance
policies appropriate for your situation.
What type(s) of life insurance do you currently have?

7. Determine the amount of money you’d like to have coming in each
year in “retirement” and set 20 to 30 times that amount as your
target principle amount.
How much annual passive income do you need do you need to be able to
“retire” comfortably?
The two ways of receiving passive income for retirement are through the “B”
(business owner) and the “I” (investor) quadrants. If you build up a business,
that business is an asset (maybe your biggest one) and can be sold or lived off
of when the time is right for you to do so. If your plan is to live off of your
investment portfolio, it is recommended that your total investment principle
should be at least twenty times the amount of the annual income you wish to
receive. That means that if you think you’ll need $50,000 per year, your
targeted principal amount of assets you’ll be drawing from should be at least
$1 million. How much would you need in your portfolio to be able to “retire”
comfortably?
Fill in the blank key for Part I – Comprehensive Financial Plan:
Part I: The Basics
WHAT THEY WANT, EMPLOYEE, SELF-EMPLOYED, SMALL BUSINESS
OWNER, BIG BUSINESS, B-TYPE BUSINESS, INVESTOR, RIGHT,
MULTIPLY, ASSETS, YOURSELF, BEYOND, PURPOSE, BLESSING,
ASSETS, ASSET, TAXES, COPY, EASIER

FOUR
The Top of Hierarchy
“The great majority of people do not build up any wealth because they do
not practice the self-discipline of saving some of their income every month.”
—Sir John Templeton
It’s time to begin developing your ___________________
________________. This is where you will determine exactly how your
money will flow from your efforts to your assets.
Finding value at a low price based on corporate financial fundamentals, buying
in heavy, and then holding for the extreme long-term is the essence of
________________ ____________________.
This is one of the signs of maturity: the ability to turn impulse into
______________.
You will automatically be going in _______________ when things are on sale
and ________________ when they are pricey.
Take a look at the other levels of the YOU, Inc. Hierarchy and write down a
strategy for flowing income into these various asset levels.

Circle True or False
True/False
1. Having a professional manage your investments will increase your odds of
beating the market.
True/False
2. An index fund will give you a higher return than handing your money to a
professional money manager.
True/False
3. Index funds are the most cost-effective funds an average investor can buy
into.
True/False
4. Only invest when you are able to find good deals.
Your Investment Policy – Summary
• Goal is to create assets.
• Flow money from your “money pump” into the YOU, Inc. Investment
Hierarchy, working from the bottom up.
• It is futile to try to “beat the market,” so you will take a long-term view and
buy value over time.

• Index funds are an easy way to invest with minimized risk and fees, over
time.
• Make your investments automatic through dollar-cost averaging.

FIVE
Risk Factors Working Against You
“There are really two Americas, one for the grifter class, and one for
everybody else. In everybody-else land, the world of small businesses and
wage-earning employees, the government is something to be avoided, an
overwhelming, all-powerful entity whose attentions usually presage some
kind of financial setback, if not complete ruin. In the grifter world, however,
government is a slavish lapdog that the financial companies . . . use as a
tool for making money.”
—Matt Taibbi, Griftopia
Who controls the interest rates in the United States? ___________________
___________________
The burden of _____________________ on the engine of business seems to
grow over time like a burgeoning coral reef.
Believe it or not, one of the most expensive things you will ever encounter is
_______________.
If you’re going to pay for a financial advisor, we particularly like a ________-
__________ __________________.
_____________________ is a term that describes how easily you can access
your money once you’ve put it into a particular investment.
Don’t get sucked into __________________ for the _________________ by
someone who doesn’t even know how to hit the ball.
“Ultimately, ___________________ ___________ resides not in what kinds
of investments you have, but in what kind of investor you are.”
How does inflation affect your finances?

How does deflation affect your finances?
True/False
5. In order to drop unemployment (and therefore put more people to work), an
economy needs to have a little bit of inflation.
What kinds of changes in the markets have you seen because there was a big
political election?
What kinds of regulations have you seen hinder the growth of the company you
own or work for? (This can be a very long list, so maybe just stick to a few
main ones.)
True/False Answers
1. False
2. True
3. True
4. False
5. False
Fill in the blank key for Part I – Investment Policy:
INVESTMENT POLICY, VALUE INVESTING, HABIT, HARDER,
LIGHTER, FEDERAL RESERVE, REGULATION, ADVICE, FEE-BASED
FIDUCIARY, LIQUIDITY, SWINGING, BLEACHERS, FINANCIAL RISK

SIX
Assets Explained – Part I
The Left Side of the Risk Meter
“Most investors pay way, way too much to middlemen
who suck the lifeblood out of portfolios.”
—Russell Wild
The best ____________________ you can ever make is the one over which
you retain the most control.
____________________ are pretty much the only investment vehicle that can
completely guarantee you will not run out of money at the end of your life.
“The __________________ can remain irrational much longer than you can
remain solvent.”
__________________ __________________ is the money that flows into a
new enterprise once a basic level of viability (using angel/seed funds first) has
been established.
When should you only start to invest above the fourth level of the YOU, Inc.
Investment Hierarchy?

What does this chart tell you about the relationship between the price of gold
and the US dollar (and other currencies)?
How much gold or silver do you currently have?
How much cash savings do you have on hand?
How much cash savings do you have in an FDIC insured bank?
What are the pros and cons of having your money in a Regular Savings account

vs. a CD (certificate of deposit)?
What are the pros and cons of having your money in a CD (certificate of
deposit) vs. Money Market account?
Complete the table by filling in the blank squares.
What are the three main types of annuities?
True/False
1. You should stay away from any type of life insurance that also develops a
cash value and only buy term life insurance.
What’s the benefit of a investing in cash value life insurance?
What are the two risks of owning bonds?

True/False
2. If interest rates go up, the price of bonds goes down.
True/False
3. Junk bonds are issued from waste management companies.
What are the two main reasons people buy stocks?
What’s the advantage of buying shares of a REIT?

SEVEN
Assets Explained – Part Two
The Right Side of the Risk Meter
“The intelligent investor will minimize to the bare bones the costs of
financial intermediation. That’s what common sense tells us. That’s what
indexing is all about.”
—John C. Bogle
In the investment field, ____________ doesn’t heal all wounds. It makes them
worse. Where returns are concerned, ____________ is your friend. But where
costs are concerned, ____________ is your enemy.
In short, it would be a shame to fight your way out of the Financial Matrix only
to fall prey to an __________________ Matrix!
Never forget that even small ____________ can be a killer when compounded
over time.
“The point is that it is highly unlikely you can ____________ the market. It is
so rare that it’s like looking for a needle in a haystack. A strategy far more
likely to be optimal is to buy the haystack itself: that is, buy an ____________
fund.”
What’s the benefit of a passive management mutual fund vs. an active
management mutual fund?
Out of the twelve advantages of an ETF, which ones are most attractive to you?

True/False 4.
ETFs will almost always be a better choice than mutual funds in the long run.
In the United States, what’s the difference between a 401(k) type plan and an
IRA type plan?
In the United States, what does the “Roth” mean in a Roth 401(k) or a Roth
IRA?
What makes more sense to your situation: a pre or post taxed retirement plan?
Do you plan to be at a higher or lower income tax rate when you are older?

EIGHT
Diversification and Asset Allocation
“Markets are not always or even usually correct. But no one person or
institution consistently knows more than the market.”
—Burton G. Malkiel
You should never _________________ to invest more into what you do if it
can in any way advance your results.
The interesting paradox is this: when it comes to _________________ your
wealth, a narrow focus is the key. But when it comes to _________________
your wealth, a wide diversification is necessary.
Ultimately, there are so many investors and information is so abundant that
there is no “_________________” in the market.
By ____________________ your holdings into both bonds and stocks, you
smooth out the volatility of your portfolio but still capture the upward potential
of both asset classes.
Always keep an eye on your own ______________, and never let it get too far
out of your sight. No one will ever care about it as much as you.
Where should you pour in every dime, before investing in the top three tiers of
the You, Inc. Investment Hierarchy? __________________________
True/False
5. If you blend many securities with high volatility, your overall portfolio will
become more volatile.

What does this graph tell you about blending different individual high volatility
securities within your portfolio?
The list below may be a handy guide to keep in mind when seeking to
maximize your diversification:
1. stocks
a. large cap
b. mid cap
c. small cap
d. growth
e. value
f. domestic
g. international
i. mature market
ii. emerging market
iii. frontier
2. bonds
a. short term

. intermediate term
c. long term
d. corporate
i. investment grade
ii. junk
e. inflation protected
f. municipal
g. foreign sovereign
h. foreign corporate
3. commodities
4. precious metals
5. real estate (through REITs)
Investment researcher Burton Malkiel recommends the following investment
allocations. Circle your age class:
Age: Mid-Twenties
Cash = 5%
Bonds = 15%
Stocks = 70%
Real Estate = 10%
Age: Late Thirties to Early Forties
Cash = 5%
Bonds = 20%
Stocks = 65%
Real Estate = 10%
Age: Mid-Fifties
Cash = 5%
Bonds = 27.5%
Stocks = 55%
Real Estate = 12.5%
Age: Late Sixties and Beyond
Cash = 10%

Bonds = 35%
Stocks = 40%
Real Estate = 15%
Legendary value investor Benjamin Graham recommends the following
investment allocations:
Never have less than 25% or more than 75% of his funds in common stocks,
with a consequent inverse range of between 75% and 25% in bonds.
The manager of the world’s largest hedge fund, Ray Dalio of Bridgewater
Associates recommends the following investment allocations:
Long-Term US Bonds = 40%
Intermediate US Bonds = 15%
Stocks = 30%
Commodities = 7.5%
Gold = 7.5%
Out of the three examples of investment allocations, which one do you lean
more towards?
Do you have another allocation plan that you like better? If so, what?
True/False
6. There are ETFs that represent the entire bond market, holding in proportion
pretty much all the major bond offerings in the whole bond market.

NINE
Putting It All Together
“There are two times in a man’s life when he should not speculate:
when he can’t afford it, and when he can.”
—Mark Twain
Let’s review where we are. First of all, you’re going to utilize the many
tools from the defense of personal finance that we taught in the Financial
Fitness book and eliminate your consumer debt (and stay out of it for the rest of
your life)! Next you are going to establish your emergency savings account, do
some basic survival preparation, and all the while funnel as much money as
you can into yourself and your primary method of earning money. By doing this
latter part, you are feeding the goose that lays the proverbial golden eggs and
playing offense. Perhaps this is a business or a career, but you realize that
maximizing the investment in yourself is the best investment you will ever
make.
Then, with any excess money beyond that you will begin investing in the
various assets listed on the left side of the Risk Meter, in general working from
the bottom up. This includes getting your tax and legal advisers in place,
getting your will and powers of attorney prepared, and making sure you and
your family are properly insured in all the necessary areas. Further, you have
selected the asset allocation plan that suits you best and will begin buying
index ETFs in proportion to that allocation in a brokerage account you will
open yourself or through a full service provider you will pay to do it for you.
You will also max out any contributions into the tax-advantaged accounts such
as 401(k)s and IRAs for which you are eligible (and will consider these when
looking at your overall asset allocation). Then, on a monthly basis you will
continue to buy into your portfolio of assets in the exact proportion you have
determined through the process of dollar-cost averaging. Finally, you will do
all of this for the long-term.
“The psychology of ________________________ is a veritable theater of the
absurd.”

“Trust in time rather than ________________.”
Your _______ _________ ____ ________________ is your actual percentage
gain after paying expenses.
________________________ will automatically, unemotionally, consistently,
and periodically lock in your winnings and force you to buy other assets while
they are on sale.
True/False
7. Unless you are going to be a professional who pursues finances as a fulltime
occupation, investing is supposed to be a sideline venture.
What are some different insights you may get from this graph?
How long will it take for your investment to double? Use the “rule of 72”. Take

the real rate of return and divide it into the number 72. Calculate the different
examples to see when your investments will double:
True/False
8. Rebalancing your portfolio at least once a month is good idea.
One way to help set things up in a way that allows them to roll on
automatically and without sabotaging them is to sign a contract with yourself. A
personal contract compels you to make a commitment out of your good
intentions.
I, ____________________ ___________________________, hereby state
that I am an investor seeking to accumulate wealth for the long term.
I realize there will be times when I am tempted to get caught up in speculation
because a particular stock or bond has “gone up” or is a “hot tip” or “sure
thing.” I may also get panicked like everyone else and be tempted to sell out on
good investments merely because they have “gone down.”
I hereby declare my refusal to allow a mob or herd of strangers to have input
into my financial future. I don’t run with mobs or herds anyway.
I also promise myself not to invest simply because the market itself has “gone
up” or sell because it has “gone down.” Instead, I will be methodical and
mature about my investing, killing consumer debt like a cancer, pouring all I
can into myself and my primary income source and/or business, consistently
using the surplus to accumulate assets over time.
I will invest $____________.00 per month into my education, self, primary
income source and/or business.
I will then invest $ ___________.00 per month, each and every month, no
matter what, through an automatic investment plan or Dollar Cost Averaging
program, into the following overall asset allocation:
____________________________________%

____________________________________%
____________________________________%
____________________________________%
____________________________________%
____________________________________%
____________________________________%
I will also invest additional amounts whenever I can.
I hereby declare that I will hold each of these investments continually until at
least the following date (a minimum of 10 years from the date of this contract):
______________________________ ________, 20______. (I will allow
exceptions to this for an emergency over which I otherwise would have no
control, such as a major accident, loss of primary income, or something
equally devastating.)
By signing below, I am stating to myself my intention to abide by these terms
and to reread this document each month when I am reviewing my dollar-cost
averaging purchases or whenever I am tempted to follow the herd and sell or
buy merely because of mob sentiment.
This contract is valid only once signed by me (and spouse, if jointly declared)
and by at least one witness.
Signed (spouse #1) - Date:
Signed (spouse #2)
Witness

TEN
The Future
“Bubbles channel money to managers who don’t know how to manage. They
finance business plans that nobody wants. And when they eventually burst,
they leave ordinary savers with losses.”
—Sebastian Mallaby
Investing, by its very nature, is a “_____________ thing.”
_________________________ is the condition in which inflation runs out of
control and advances quickly.
_______________________ is the condition in which money gains in value
because the amount in circulation is becoming more and more scarce.
_______________________ is a general movement sideways in the markets,
with no real growth or expansion of the economy.
We are not wired to be ________________ when we seek to directly make
ourselves so.
What are some investments that do well during inflation?
What are some investments that do well during deflation?
True/False
9. Stocks, bonds, and many of the other paper instruments do well during
stagflation.

True/False
10. Those who sufficiently and properly accumulate cash flow–producing
assets will find that they weather almost any coming storms quite nicely.
After going this book, how do see money is supposed to be used?
True/False
11. By periodically investing in an index fund, the know-nothing investor can
actually out-perform most investment professionals.
When you are able to establish an ongoing cash flow from assets, you are then
not required to labor at something for which your heart doesn’t yearn. What
will you do when your assets grow enough to allow you to chase after things
for which your heart does yearn?
True/False Answers
1. False
2. True
3. False
4. True
5. False
6. True
7. True
8. False
9. False
10. True
11. True
Fill in the blank key for Part III – Asset Allocation Plan:

INVESTMENT, ANNUITIES, MARKET, VENTURE CAPITAL, TIME,
TIME, TIME, INVESTMENT, COSTS, BEAT, INDEX, HESITATE,
EARNING, KEEPING, INEFFICIENCY, DIVERSIFYING, MONEY,
SPECULATION, TIMING, NET RATE OF RETURN, REBALANCING,
FUTURE, HYPERINFLATION, DEFLATION, STAGNATION, HAPPY