Start Here: The 10 Core Concepts of the Safe Haven Strategy

Start Here: The 10 Core Concepts of the Safe Haven Strategy Ludlow Castle with Dinham Weir, from the South-West, by Samuel Scott.

Here are the core 10 concepts of the Safe Haven Strategy. If you follow them, your life will change.

This website is filled with articles about building wealth, finding freedom, and retiring early. While all of the articles are worth reading, some are foundational, providing the context for understanding and pursuing financial freedom and security.

This article is a foundational article.

On this page, I’ll explain what our “Safe Haven Strategy” is, how it can work for you, and the 10 core principles you need to follow to make it work in your life.

These aren’t theoretical concepts that “might” work. I have personally used these concepts to become a multi-millionaire in my 20s – and to enjoy a level of financial freedom and security most don’t realize is possible.

Here’s a clickable outline of the content on this page so it’s easier to read the sections most relevant to you:

The 10 Core Concepts of the Safe Haven Strategy:

Explained: What Is the Safe Haven Strategy?
Core Concept #1: Income Investing
Core Concept #2: Taking Ownership
Core Concept #3: Starting a Side Hustle
Core Concept #4: Building a Financial System
Core Concept #5: Maxing Out Insurance
Core Concept #6: Rejecting Consumerism
Core Concept #7: Managing Debt
Core Concept #8: Practicing Strategic Frugality
Core Concept #9: Investing Automatically
Core Concept #10: Accepting Leadership.

What Is the Safe Haven Strategy?

Our foundational strategy at Conservative Finance is called the Safe Haven Strategy. The strategy is simple. You break your financial goals and life into three basic phases.

  • Phase 1. Financial Security. Build multiple income opportunities (job and side hustle), minimize your chances of being unemployed (learn skills, get a degree, network), get enough insurance, minimize your expenses, max out retirement accounts, view debt suspiciously.
  • Phase 2. Financial Freedom. Shift all of your efforts towards maximizing your income, invest every penny of your side hustle into income-producing assets, look for a second side hustle, work to get a raise, set up investment benchmarks, invest, invest, invest.
  • Phase 3. Financial Legacy. After your assets are effectively running themselves and making you wealthier every year, start focusing on what you want to leave behind. Charity, non-profits, donations, a novel – you’ll have the time you need to leave behind something that’s lasting. Money is just a vehicle – you have to drive it somewhere that matters.

The fundamental concept of the Safe Haven Strategy is that you can’t achieve financial freedom until you have financial security. Most people approach it backwards – and it doesn’t work. We focus on security first – and then focus on freedom.

This is a simple application of the 2 rules of wealth building:

  1. Minimize downside, then…
  2. Maximize upside.

In that order.

The Safe Haven Strategy uses behavioral finance to force ourselves to perpetually make good decisions – without trying to worry about the abstract future. Most people feel like retirement is vague, unachievable, or “so far away.” This strategy ignores the need to plan for the extreme future by focusing on the three phases directly. That’s why we constantly talk about safety when it applies to retirement planning, even listing out the 6 safest retirement sources of income.

Core Concept #1: Income Investing.

Many investors – as well as economists – believe the purpose of making an investment decision is to maximize your total risk-adjusted return. It’s kind of true, but there’s more to it than that.

Behavioral finance shows us that there’s a difference between what is theoretically best and what is realistically best. Considering we live in the real world and not a theoretical one, we choose realistic strategies every time.

That’s why income investing is our preferred investing strategy. Income investing doesn’t just mean dividend stocks and bonds, it simply means any situation where you trade cash for additional income.

The goal with income investing isn’t to beat the market; the goal of income investing is to focus on income growth. It’s extremely different than just trying to “maximize long-term returns.”

Real estate, starting a business, buying whole-life insurance, investing in pipelines, investing in bank-loan funds, P2P lending, investing in BDCs – these are all some examples of the endless options that exist for income investing.

Why invest for income rather than hope for rising prices? Several reasons:

  • Income is something you can budget. That means planning is at least possible. With speculations, you don’t know where you stand sometimes for decades. If you’re an immortal corporate vehicle, that’s great. If you’re a human being with financial needs, that’s bad.
  • Income and budgeting are results and strategies you see immediately – the more you can make your finances real and less theoretical, the more likely you are to do what you know you should do.
  • Income allows you to know what portion of your investment you can spend, assuming your investments are relatively solid. Solid dividend-paying income sources provide a level of certainty that speculative investors don’t experience.
  • Income allows you to not be blinded by public market changes. There’s a massive private market that exists as well, and only a fool would ignore it. We talk about private investments a lot here. There’s a reason: they can be lucrative.

There are other reasons to invest for income, of course. But these are the core reasons.

There are different types of income, as well. Some are active, some are passive – all should be approached with much research and caution.

Understanding the differences of the types of income is a fundamental step in unleashing income growth and security in your life. Here are the fundamental types:

  • Employment Income. This is the most traditional source. Becoming a software developer, an engineer, a doctor, or an accountant, and then receiving a set salary.
  • Contract Income. Contract income is where you work for another person, business, or organization, and do a clearly defined amount of work for a clearly defined compensation. This is less stable, sometimes more lucrative, and often more flexible income source.
  • Business Income. This is when you start a business and provide a service or sell a product. This is the income source that has the highest probability of giving you financial freedom. This is where the vast majority of my wealth and income have come from.
  • Private Investment Income. A private investment would be like taking equity in a friend’s business for a lump some of money or labor, buying rental properties to rent out, or investing directly in oil wells. Private Investment Income can be very volatile and very lucrative – or dangerous. I broke investment income into two parts because private investing and public investing are extremely different.
  • Public Investment Income. This is simple. It’s any income you receive from publicly-traded securities, like REITs, stocks, or bonds. This is a critical element of any income-paying portfolio.

There are other sources, but for most people, this covers the bases and is enough to build an extremely comfortable life with financial freedom and security over time.

Core Concept #2: Taking Ownership.

If you’re looking for a ‘legitimate’ reason to fail, you’ll find one. You’re almost certainly part of some sort of disadvantaged group. Maybe your parents mistreated you, maybe you didn’t have a dad, maybe you have some sort of personality disorder, maybe you struggle with anxiety. There are tons of potential reasons to fail that are completely legitimate.

I grew up largely isolated, didn’t understand how to prepare for college, graduated a year late, dropped out of college, built a business only to watch it implode because a major corporation decided to wipe me out, had several major health issues… and I still became a multi-millionaire in my 20s. I qualified for food stamps, spent years without being able to afford insurance or even a car, and still ended up fine.

It wasn’t luck.

It wasn’t privilege.

It wasn’t a random gift.

It wasn’t inheritance.

It was the fact that no matter what happens to me, I’ll own my decisions, I won’t stop looking around for ways to leverage my position to something better, and I refuse to identify as a victim no matter what. Period.

Want to succeed? Then take ownership of your situation. It’s not about life being fair. It’s about life being yours because you choose it to be so. Do this and nobody can stop you.

Core Concept #3: Starting a Side Hustle.

If you don’t start a side hustle, you’re at a drastic disadvantage. Most people need a side hustle if they ever hope to retire comfortably or achieve financial freedom. It’s that simple.

Starting a side hustle can look a lot like this:

  • Freelancing your skills on the Internet.
  • Selling a private-label product on Amazon.
  • Starting a weekend service-based business.
  • Fixing up houses to flip rather than rent out.
  • Buying collectibles and selling them in a flea-market booth.
  • Buying and selling underpriced used cars.
  • Teaching people something you know.

The side hustles I’ve personally tried range from digital marketing consulting, buying and selling baseball cards, starting dozens of websites, affiliate marketing, freelance writing, and probably a dozen other side projects.

The best side hustle is one that you can scale and continue to improve over time. The income can keep increasing, allowing you a stronger and stronger income source to help achieve financial freedom.

Core Concept #4: Building a Financial System.

Very few people actually build a financial system. Most business owners are unsure of what’s going on financially in their business. I’ve hired contractors who didn’t keep any records – their “books” was a folder stuffed with random receipts.

The financial repercussions of this level of chaos are hard to overemphasize. A lot of people will stay lower middle class for the rest of their lives because they didn’t build a system.

Don’t make the same mistake.

  • Use Personal Capital – a free software – to keep track of your net worth. Set up an account right now if you don’t have one.
  • Use bookkeeping software – like QuickBooks Online – to keep track of every transaction you have. Period. Track everything. Try to even keep track of cash payments.
  • Set up a rules-based approach to investing. For example, set aside a certain amount of every paycheck for expenses, a certain amount for savings, a certain amount for end-of-year taxes… and invest the rest.
  • Create a set portfolio so that when you have investment money you know exactly where to invest it without having to think about it. Investing should be automatic. I’ll explain more down below on this page.
  • Come up with a system for your debt. Consumer debt is understandable early in life – but as time goes on, you should move away from it. Write up a debt-eradication plan. Then follow it.

Just remember: whatever doesn’t become a system doesn’t become a habit. And whatever doesn’t become a habit doesn’t happen.

Ignoring this core concept could literally be the difference between wealth and poverty.

Core Concept #5: Maxing Out Insurance.

Insurance is one of the greatest innovations in the history of civilization. We’re spoiled because we’re so used to relatively risk-free lives it can be easy to forget just how crazy of a concept insurance is.

For a small fee, you can have a multi-billion dollar company agree to eradicate almost any financial risk you face.

Insurance means:

  • Widows don’t have to be poor.
  • Health needs can always be taken care of.
  • Bankruptcy chances can be minimized.
  • Car accidents don’t have to set you back 5 years.
  • You can even become your own bank with some insurance products.

Of course, this assumes you can afford insurance payments. That’s why our first phase in life is about making as much money as possible through a career and side hustles. One of the reasons is so you can pay for insurance as soon as possible.

This is controversial, but I strongly believe it: you should probably focus on insurance before even saving for retirement. Not that you shouldn’t save for retirement. Just that insurance is the most important thing to have in your financial armory.

What’s more important:

  1. Focusing on having a comfortable life in 50 years, or
  2. Making sure your spouse doesn’t lose their home if you die.

Insurance isn’t just a nice luxury. It should be seen as a critical part of any family’s finances.

If you don’t have life insurance and you’re the family’s main provider, stop what you’re doing right now and get life insurance. Get rid of your cable, downgrade your car – do whatever you have to do and make sure your family is provided for.

Core Concept #6: Rejecting Consumerism.

The purpose of making money isn’t to maximize your consumption. That’s a horrible, shallow approach to life that just leads to anxiety and emptiness.

The purpose of making money is to fulfill your duties to family and society. You can benefit as well, of course.

I say this as someone who enjoys expensive cigars and drives a Cadillac. But there’s a big difference between making money and enjoying a sports car and making money to enjoy the sportscar.

Building wealth requires focusing on more than spending money. In fact, it’s almost impossible to build wealth if you can’t control your consumerist instincts.

There’s a reason Jeff Bezos and Warren Buffett don’t spend their time sitting around thinking about how to spend their cash. They’re motivated by bigger ideas than buying fancy stuff. You should be too.

Core Concept #7: Managing Debt.

Debt will either liberate or enslave you, depending on how you approach it. It’s not inherently good or bad. Debt is just an extremely powerful amplifier and makes the results of good and bad news much more extreme.

Examples of bad debt:

  • Paying for a useless college degree instead of a useful one
  • Concerts, vacations, nightlife
  • More house than you can afford
  • A new car
  • New electronics
  • New apparel

Examples of good debt:

  • A mortgage
  • Extremely high ROI career education (medical degree, trade certificate, etc)
  • Extremely reliable used vehicle
  • Rental properties

Debt should only be used to magnify your financial growth. Debt should never be used to magnify your consumption.

And yes, sometimes college and even your house are just forms of consumption.

Core Concept #8: Practicing Strategic Frugality.

This concept isn’t rocket science. The less money is spent on concerts and vacations, the more money is available for investing in stocks and real estate. The less money is spent on expensive restaurants, the more money is available for career education, networking events, and extra mortgage payments.

But there’s a little more to it than just the obvious. For example:

  • Frugality allows you to be more secure. If you need $4,000 per month to survive, then you can absorb more bad news (like a pay cut) than someone who needs $8,000 per month to survive.
  • Frugality forces you to live efficiently. You don’t have to forgo living – but maybe you figure out a more efficient way to achieve your consumption goals. Road trip vacations instead of the Bahamas, for example.
  • Frugality encourages good philosophy. Consumerism is one of the most destructive cultural forces in the world. It blinds us so we no longer see opportunity and only see consumption and entitlement. Frugality is oriented towards production over consumption which is inherently more slanted towards good philosophy.

Strategic frugality shouldn’t be confused with extreme frugality. Strategic frugality is replacing your cable with Netflix and Amazon Prime while putting the extra money towards wealth-enhancing options like education, books, extra mortgage payments, or traditional investments. Extreme frugality is focused entirely on cutting costs – rather than diverting the money to productive places.

Someone who earns 30k per year and obsesses over coupons but not investing will still be relatively broke over time. Frugality must be mixed with strategic wealth building to be worthwhile.

Core Concept #9: Investing Automatically.

Your investments should be automatic.

For example, when it comes to your publicly-traded portfolio of stocks, bonds, and REITs:

  • Every month, a set amount should be added to your portfolio.
  • Every part of your portfolio should have a set amount in certain assets.
  • Every quarter you should rebalance your portfolio.
  • Every penny of your side hustle’s profit should be put into your portfolio.

The more automatic you make your investments, the fewer times you’ll “forget” to invest. The more automatic your investments, the less likely you are to make a mistake. The more automatic your investments, the less you have to consciously think – or worry – about money.

Automatic investing is a critical step towards financial success.

If something can be automated, then automate it.

Core Concept #10: Accepting Leadership.

If you follow these strategies, your position in life will improve. Becoming wealthy changes nearly every part of your life and your role in society.

Yes, achieving financial freedom has plenty of selfish implications. But there’s also something most people don’t realize: you’ll have a duty to make sure that you don’t squander your wealth on empty pursuits.

To whom much is given, much is expected. That’s a core concept around here because we’re not in the business of helping people focus on material consumption. We want to help craft a framework to help people produce more, create value, and achieve goals that are good for everyone – not just the person who happens to own the investment account.

If you follow the Safe Haven Strategy, do it with the knowledge that you’ll use the wealth, freedom, and security for good – and not just to spend time at the beach. It’s nice to consume, but a life of empty consumption will lead to unhappiness no matter the size of your bank account. Never lose focus on what really matters.

So What Should You Do First?

The first thing you should do is sign up for our newsletter. We send all important updates to our email subscribers first. If you’re going to read something in your inbox, make sure it’s something that will make you wealthier.

The next thing you should do is create a Personal Capital account and begin looking at your financial picture with wide-open eyes. You have to know what you have now before you can start planning for the future.

The next step is to start moving forward on Phase 1: Financial Security. Remember, the fundamental concept of the Safe Haven Strategy is that you can’t achieve financial freedom until you have financial security. Minimize downside, then maximize upside — in that order.

Follow the Safe Haven Strategy and you will be safer, wealthier and far more free than your friends and acquaintances.

The legacy that you build with that security, wealth and freedom is your final proof of success.

Shaun Connell

Shaun Connell is the founder of Conservative Institute, Conservative Finance, and the Strong Society.