Podcast – Episode 004 – The Five Finger Strategy



Welcome to another edition of the Option Genius podcast. I’m your host, Allen Sama. Today, I want to be talking about something that I call the Five Finger Theory or the Five Finger Strategy, if you will. Basically, this is something that I think is very, very crucial to your success. Not maybe your trading success, but definitely your overall financial success. I think it’s, super, super important. I call it the Five finger Strategy. That’s my personal twist on it. Now, you might have heard somebody mention something in the past about multiple streams of income, so it’s kind of like that but it’s my own take on it.

This particular strategy will help you overcome the financial pitfalls that happen to everybody. It’s my opinion that you need five fingers in your life, or five separate, distinct sources of income. Now, I don’t care how rich you are. If you only have one or two fingers, it can all be taken away from you very, very quickly, and in some cases over a night.

For example, in my last job, I worked for a company that taught mortgage brokers. It was a training company, a publishing company where we had courses, we had books, we had seminars and stuff like that was all geared for more mortgage brokers. Anybody that wanted to get into the mortgage industry, we would help them out. We would train them, we would go over the loan process and credit applications and credit reports and appraisals and all that stuff, teach them all that stuff.

Then the bulk of the company was spent, and the time and the money came from teaching them, these brokers, how to do marketing, how to generate their leads, how to get referrals, how to do online marketing, all that sort of thing. The company was doing phenomenal, I mean it was awesome. Multi-millions every year in sales, helping thousands and thousands of people. We had all these testimonials from all these people, wonderful people to work with. At that time, while everything was going great, the owner of the company, my boss, my friend, he got multiple offers from other people trying to buy his company. I mean, these are very, very high, lucrative, big dollar amounts where if he had just taken that, he could have gone, ridden off into the sunset, not have to worry about money ever for the rest of his life.

But he didn’t do that because in his mind, he never thought it was gonna end. His thinking was that, “Hey, mortgages are gonna be around forever. People are always gonna need mortgages, nobody’s going to go buy a 200, 300, 400,000 dollar house with cash. People are gonna need to borrow money, and that’s what mortgages come in. With home prices just going up and up and up, there’s no way people are never gonna have mortgages, and if there are mortgages out there, then they’re gonna be mortgage brokers. There’s gonna be somebody out there that getting the loan for these people.” Well, that’s what he thought, but then we had the whole financial crisis and the whole subprime mess, remember that?

Even though the banks and the bankers were behind all of it, they and their lobbyist got the mortgage brokers to take the fall for it. The brokers were turned into the scapegoat. Now, I’m not saying that all the brokers out there were great. There were several guys out there that were just scamming people, but the point of the matter is that the brokers were not the ones lending the money. They were paid by the banks, they were told by the banks, “We need more loans, we need more loans. Just get people in the door and we will fund them.” That’s what people did. I mean, if you give somebody an economic incentive to follow the rules and not do anything illegal, well, of course they’re gonna do that. That’s what these people did, but in the end, somebody had to pay for it.

The banks, they have more money and they got all these big bailouts and all this stuff, so they weren’t going to take the fall for it. They needed somebody to pinpoint the blame on and so the brokers didn’t really have a very good lobbying team on their side, and they were mostly small people. Individually mom-and-pop companies, not really that large, and so they got hit. They got hit the hardest. The laws were changed, new regulations were placed, new trainings were enacted, new tests were made for brokers, and basically the mortgage broker was essentially put out of business.

I mean, at one point, there were, I don’t know, somewhere close to a million mortgage brokers in the country, in the whole country. We had probably close to a million mortgage brokers. Now, this is mortgage companies, people licensed as mortgage brokers, people working at the broker’s companies as well. Now, you’d be lucky if you find 50,000 in the whole country, and while these people were providing a legitimate and very worthy and needed service, they kind of got the shaft. What happened was, my friends, business, basically overnight, went from booming to bust.

I mean, I remember it happening because we were in the office. It was September of, oh, man. I forgot the year. I believe it was September 2007 was the year, and this was actually before Lehman collapsed. We were going fine. Everything was going gangbusters. We had new products coming out and everything, and all of a sudden, in that month, sales dropped considerably. I think it was like 50%, and we couldn’t figure it out.

I mean, I, at that point, was the marketing manager, and so he came to me. He’s like, “Hey, what’s going on?” and I’m like, “I don’t know,” and so we went to our website, and we checked all our order forms, maybe the shopping cart’s not working or maybe something else’s not working, and then we checked, we’re not getting as much traffic. People are not coming to the website. What the heck is going on? We checked all our advertising, all the ads are there. Everything is running the way it’s supposed to be running, but sales dropped.

The next month, sales dropped again and again. They just kept dropping until they were like a tiny fraction of what they were. It was crazy. I mean, I had never seen anything happen that fast, any business go down the tubes that fast. It was crazy. The thing that happened was, in case you’re curious, that the banks got scared. They saw that stuff was happening, and so what they stopped doing was they stopped approving loans. I mean, it was like overnight, boom, no more loans to approve tomorrow, and if there are no loans getting approved, then the brokers are not going to be making any money, so they’re not going to spending it on training, they’re not going to spend it on marketing of their loans are not getting approved because they can’t get any cash. They can’t get any money. That’s what happened. My friend’s business from booming to bust just about overnight.

Now, luckily, my friend had made enough from the business and he had his own other fingers, or else he would’ve been totally broke. Now, at that time, me, I only had two fingers. One was my job, and the other one was my wife’s job, so we had two fingers, and I got laid off, and so one of my fingers got chopped off. Boom, just like that.

At one time, I’m going, “Whoa, this is awesome. I’m putting money away. We’re putting money in our retirement accounts.” At that time, I was, I wouldn’t call it a finger yet. I was trying to trade, trying to learn how to trade because I always had that inclination, but I wasn’t really, like, really, really trading actively. I was just putting money away, putting in the stocks, investing, and hopefully, it’ll grow and grow, so I only had these two fingers.

Overnight one is gone, and now I have my wife’s finger. That’s a lot of pressure on one person to pay for the whole household, and that is why you need to have five. That’s why, I mean, five is a good number. I think it’s a safe number. Everybody that I know of, I’ve talked to this with several people about, and if you can find somebody with five fingers, they are strong financially, and it’s not because they have money that they have the five fingers. I think it’s, they have the five fingers, and that’s why they have more money because you start with one finger, then you build a second one, then you grow a third one. Then, after a while, you make those strong, and then you build a fourth and a fifth because you know that things can change. Things can change in an instant. If you have five fingers, and if one or two gets cut off, you have the resources to grow and to cultivate them so they come back.

I mean, if you only have one or two, you are in dangerous, dangerous waters. Five is the goal. I mean, you can get by on three, you can get by on four. I wouldn’t … If you have one or two, I think you are in seriously dangerous waters. Now, this is not something that you want to be taking lightly. I have seen it enough to know that you need different fingers in different industries, in different investments, in different avenues. They can’t be all tied together, especially if you’re working. I mean, heart attacks happen, car crashes happen. It’s not up to you. You don’t want to be a statistic.

I mean, I do remember in the past when I was trying to have a finger as real estate investing, and I always go around and try to buy houses from people. You know, you see those “we buy houses” signs? I did that for a while, and I remember going to … One of the ways I used to get deals with to contact people who are in foreclosure. It’s heartbreaking when you actually go to somebody’s house that is in foreclosure and you try to talk to them, and all they need is someone to listen and some help. I mean, people who are in foreclosure are not bad people. These are not deadbeats. Most of the time, they are very hardworking people, honest people.

Again and again and again, I would go to these houses, talk to these people, and I would find out that, “What happened?” “Well, I got sick.” I heard that a lot. “I got sick,” or, “My wife got sick,” or, “My kid got sick, and we had to pay the bills. We had all these hospital bills, doctors bills, this and that,” and so when push comes to shove, what do you do? Do you pay the mortgage or do you pay the doctor or do you pay for the medicine? You obviously, life is more important than a house, so you do what you need to do, but then these people got behind

It wasn’t because they wanted to. it was because that they didn’t have any other choice, and most of these people, they got in trouble, well, they didn’t have any other fingers to rely on, and so if they got sick or if they got into an accident, that was their one main finger. That was their job. That was their income. That was their livelihood that’s gone, and now they have bills to pay. Now they can’t afford food. Now they don’t have cell phone service because they can’t afford it. They’re having to sell their house. They’re having to move and sell all their belongings. Why? Because they didn’t have enough fingers.

When times were good, they didn’t prepare, and that’s why I am spending so much on this. That’s why I put a whole podcast episode on this. We’re not talking about trading, we’re talking about preparing.

Personally, I have four fingers right now. I have my personal trading. I have the income from Option Genius. I have my wife’s business, which is doing very well, but again, that’s not mine, it’s my wife’s, and hopefully, everything will be fine, but again, divorce happens. Yes, I’m counting it now, but that could go away. Then I have some real estate investments that I have. Smaller. They’re doing okay. They’re small, but they’re okay, but I need more. I need one more finger. I’ve decided that I wanted to be an investor in private companies, so I want to be like an angel investor or a silent partner. You have to take a look around. You have to see what’s out there. What are the possibilities. Where can you find opportunity and I think one of the areas is in real estate.

I didn’t … When I told you I was, used to be a real investor, I’m thinking about that, but I’m thinking about it in a different way where it’s actually gone into flipping, so buying run-down houses, fixing them up, and then reselling them. I have gotten together with a friend of mine who’s been doing that. He’s been doing it for several years now. I think five or six years now. He’s never lost money on a house. Knock on wood. He’s doing really well, and he wants to expand, and he wants to grow, but in this business, you have to have cash to buy houses. You can’t really lend it and lend the money to buy a broken down house from a bank. You can go to a private lender, but they rip you off.

Anyway, he needs more capital, and right now, we just had Hurricane Harvey. According to the news reports and whatnot, they estimate there are somewhere close to 2,700 homes that have been damaged just in the Houston area, not even the surrounding suburbs and counties. Just inside Houston, 2,700 have been damaged by water.

Now, most of those, people are going to repair, and they’re going to stay there, but a lot of those homes are going to be abandoned. People, if they have insurance, which a lot of people didn’t have flood insurance, but if they had the insurance, they can take the money or laeve, or people would just be moving out because if you can’t live in the house because it’s all moldy or if it doesn’t have carpet and you can’t afford to put all that stuff in, why are you going to pay the mortgage? You’re going to move. You’re going to leave. A lot of people don’t want to stay in the same area where they got flooded. A lot of these areas were flooded two, three times within the past five, six years. Some of these places in 20, 30 years has never been flooded. Those are the areas where we’re actually going to be looking for investments.

I got together with my friend, and we’ve talked about it. We’ve discussed it. We’ve put together a company. We’re going to be taking on investors, and then he’s going to be doing all the work, so I’m going to be a private, not a private, but a silent partner. I’m going to help him get the ball rolling and whatnot and bring other people in, and then he’s going to take it from there.

So far, we’ve gotten about six people already committed. I mean, each unit that we’re selling or each share of the company is $30,000, and so that’s the minimum investment, and then pretty soon, we’re going to be offering it to more people.

Now, is this going to work out? I hope so. I mean, I don’t think I’m going to lose money. I don’t know how much we’re going to make off the bat. My friend has never lost on a house so far, but it is possible because everything has changed. There are going to be more houses on the market. There’s going to be, obviously, more investors and more people pouring into this, but as they see, there’s blood in the water, the sharks come in, and right now, there are “we buy houses” signs all over the place.

That is what I’m hoping to grow. That’s one of my plans. That’s one of the things I want to do. I also want to make other investments in other companies and whatnot and finding other opportunities, and people that are good, hardworking people that need a leg up and say, “Hey, you know what? This guy … Why are you a manager at a company, you should have your own store or you should have your own company. Here, let me help you. Let me support you,” looking for those kinds of opportunities, so that’s what I’m doing. That’s my fifth one because I know that I have my trading and then I have Option Genius.

Now, those are both still reliant on me. I have to do the trades. I have to do the stuff in Option Genius, do the trainings and these podcasts and write the newsletter and all that stuff. Something happens to me physically, I won’t be able to do that, and those two fingers, they go away, and so that’s really, really scary to me.

Yeah, I mean, I could have health insurance, but if someone happens to me, who knows how long I’m going to be out of commission. Could be six months, could be a year. You never know, and that can happen to anybody. What I want you to do right now is I want you to take out your hand, raise your hand, look at it, look at your hand, flex your fingers, and count, right now, how many fingers do you have? How many sources of income, separate, individual sources of income do you have? One? Two? Three? I mean, your primary income is going to be your first finger. Maybe you’re working, it’s a job. Maybe you have a business, that’s your income, that’s where you get your money from, or if you’re tired, maybe you have a pension.

Well, what else do you have? Maybe you a have income from some dividend stocks. You can count that for now, but I’m betting that it’s not that strong a source. You probably don’t have that much dividend income coming in that you can live off of it. If it’s a little bit, hey, that’s great. We always want to make it grow. Our fingers, we want all five fingers to be strong enough to eventually to support us each individually. Now, that might mean that you have to cut down on your expenses and whatnot, your status of living a little bit if you only have the one finger, but each finger should be able to support us. Now, if you’re trading, that’s another finger that you have. Hopefully, it’s doing well and it’s growing, but you do need other fingers that do not rely on you to be there working, spending time on them. Keep that in mind as you’re counting your fingers, as you’re thinking about, “Hey, what other fingers can I have?”

I mean, selling options is a great finger, but don’t let that be your only finger because normally, I sign off these podcasts, and I say, “Hey, put the odds in your favor,” and by that, I am normally talking about making high probability trades. When we’re putting on a condo or a credit spend or whatever, the probability is our favor. That’s what I’m talking about by putting the odds in your favor, but today, I want to put your odds in your favor by really protecting yourself so that when the bad times come, and they always come, that you will be ready.

A friend of mine taught me this. He goes, “Life happens in waves.” There are good times, when you’re at the top, you’re riding the wave, everything is great, and then there’s a valley. The wave, you drop down. Those are the bad times, but then you go, and you get picked up, and you go back up again, and then you go back down again. Then you go back up again. “This, too, shall pass” is one of my favorite sayings. That counts not only for when you’re on the bottom. When things are bad, you can say that, “This, too, shall pass,” to give you motivation, but when you’re on the top and things are awesome and nothing can go wrong, you also need to be reminding yourself that this, too, shall pass. The good times don’t always last.

Get ready. Get some more fingers if you need them, or strengthen the ones that you already have, and if you do need ideas for additional fingers, we have a post on our blog on the website that has dozens and dozens of alternative investment ideas that you can easily put some money into, get a decent return, not really have to worry about it, not put too much time on it because that’s what we want. We want the lifestyle where we’re putting our money to work. Our money’s working for us, not the other way around, and so that’s what we’re looking for. That’s what it is.

We have that post. It has a lot of great ideas of where you can put your money to work as additional fingers. I’ll put the link to that in the show notes for you, and basically, just to sum it up again. The Five Finger Theory or Strategy, you gotta have five fingers. You can have one, two, maybe three strong ones, but you gotta have some other ones so just in case you lose a finger or two, you have enough resources that you don’t have to sell the house, you don’t have to sell the cars and downsize and take the kids out of private school or whatever else.

Those are, as adults, those are our responsibilities to take care of us, to take care of our families, to take care of our kids so that they don’t have to go through that kind of stuff. We have the ability to do that, and now, you have the knowledge that, “Hey, you know what? I need to be diversified,” and this is probably the best way to do it. You have five different avenues. They all work for you. Make sure that they’re all separated and they’re not reliant on one other, so if one or two get cut off, you still have the other three, and things will be fine. You can get by on those three until you grow back the other two. That’s the way it works. That’s how the rich people stay rich. Even after all the tribulations, after trials, they a have other sources of income. They have other fingers.

That’s it for this episode, folks. Remember, put the odds in your favor.


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