Your Growth Plan for the Future
The first problem for an entrepreneur is that they focus too much on revenue because it’s bragging rights revenue is seductive it’s sexy we just had someone at our workshop did 195 million dollars of revenue and i found out their net that they took home was 1 million to me that scares the hell out of me because i’m like they’re one small mistake away from that being completely gone but i’m not like a wall street guy i’m more of like all about cash flow keeping more of what you make i’m not really like an investment guy telling people where to invest their money i’m more like what’s their investor dna what aligns with who they are how do they manage risk all that kind of stuff but i think that i bring simplicity and a little bit of fun to a boring ass topic of finance that most people never confront and i’m solving the entrepreneur’s dilemma where they’re always saying i’ll just earn more money they think that’s the solution to everything and it’s great to earn more money but biggie says more money more problems and i think that’s what actually happens to a lot of people is they just don’t know how to handle that yeah yeah i mean i i think uh having been totally broke uh you know spending even growing up i mean half of my half my childhood we lived in trailers and stuff i mean we weren’t completely dirt poor but we certainly never had you know i never lived any sort of extravagant life uh growing up and my father coming from the great depression he just was you know he was paranoid about doing anything so uh you know i’ve had different experiences and then starting my own company you know when i was in my 20s and then you know literally having a multi-million dollar business by the time i was even 30 years old i’ve seen extremes and what i’ve learned is that there’s a big difference between making money and managing it i mean two completely different skill sets because i know people that have had millions of dollars come through their hands that are broke and other people that you know have earned very modest you know incomes and they just do things very intelligently and they amass uh quite a bit of of wealth and investments and and they’re safe and at the same time they’re able to live out their entrepreneurial you know life uh because if you’re going to be an entrepreneur you’re kind of going to trade off security because there are certain levels you know david keckich has that quote if if your purpose in life is security you’ll you’ll be a failure because security is the lowest form of happiness and there that’s a philosophical way to maybe talk about it but there is it is nice to not have to be stressed continuously related to money and the truth is most people are uh poor and and rich and see when people have uh at least the illusion of being successful financially people think they don’t have problems and you know as well as i do i talk i spend a lot of time talking with you know i mean i run genius network i mean i’m i’m dealing with people that are running multi-million dollar companies i mean most of my clients are millionaires and there is a lot of stress and a lot of angst so that’s one of the reasons i want to talk with you about all this stuff and so the bottom line is the greatest asset anyone has is them their ability to earn money it’s not a stock it’s not a bond it’s not a piece of real estate and if people start getting distracted by their by their money or their investments or things they don’t know about because they’re speculative or they’re exhausted because they’re worried about is this handled when it’s not they’re not sleeping well or they don’t have peace of mind or financial clarity it starts to drain their actual productivity so if someone gets their financial house in order first it takes some courage to confront that but second if they do that i see a year later 20 increase in their revenues and if we use some of the things we teach today 25 increase in their net profits simply because of what the distraction is when that pressure’s on like i get sometimes there’s positive pressure of okay i need to produce but a lot of times it destroys creativity it creates adrenal fatigue it hurts relationships it has people like making chasing what i call bad profits like okay i need to make this money and so they take on a project or they take on a customer that really isn’t a good fit just in the name of a short-term profit so they miss a lot of the foundational like financial principles that i’ll keep them i just don’t want people to discount them because they’re so damn simple but if people implement this it is going to push them so much further ahead and i think that one of one of the most strategic advantages for business owners is they can create economic independence which is just simply how do you create enough investment in entrepreneurial income and there’s no such thing as passive income that’s just a big lie i mean passive income if someone’s owned real estate it’s not passive you have to manage it right what i like to call it just to be really clear because i think semantics matters recurring revenue how can you create enough recurring revenue that comes in even if you don’t show up the next day but you still have to be a steward over you still have to be responsible for so entrepreneurial income is income that would show up to your firm if you didn’t show up the next day you know but if we look when you started genius network a lot of that was probably very driven by you that now you have kind of an organization that can handle a lot of that right or investment income that comes in every single month and the problem is there’s this big fault where everybody thinks that investing is about setting money aside waiting for that to develop over time and i believe investing first and foremost and safest is about cash flow that covers your expenses because as soon as that happens when you have recurring income to cover that you can swing for the fences in your business you lower your stress level and every dollar you earn is unencumbered to your lifestyle and can go to create exponential growth inside of building more cash flowing assets so anyway that’s a little bit of the framework what is money so money is simply a receipt right so i think that money is a receipt of two other things the first thing is how effective we are at taking our mental capital which is our ideas our knowledge our wisdom and business is the bridge between what we know and people and that’s the that bridge is business so it’s how effective do we serve other people and then money is just the receipt to show how effective we are at it okay so if you were so some people call it energy some people call it you know but it’s it’s just a representation of value it’s not value in and of itself it’s a representation of value that we can store that value because if i if we’re not bartering and i do something for you or like when i joined genius network right then all of a sudden i paid before i came to all the sessions you know and all that kind of stuff but it it was stored value until until until i did until i didn’t give you any value whatsoever and i was like and i think in the world of investing too many people think it’s about a product and there’s no magic product out there there is no like oh cool if i do this investment then that’s gonna be the game changer if that happened we’d all call the 800 number we’d all line up to buy that investment but the bottom line is it’s basically building your foundation it’s making sure that your money’s safe so it can be sustainable and then keeping your growth totally aligned with where you have expertise where you have knowledge and staying more in cash than almost anyone will tell you because real investors pounce when there’s opportunity and stay in cash rookie investors constantly stay invested because they’re indoctrinated to do that by the entire investment world which is because of the system the compensation not because the reality interesting yeah so they they when it comes time for them to have you know available cash flow to put in a cash to put into an into any opportunity it’s just not there right a market they don’t control starts to go down now they’re going well i don’t want to take those losses or they get burned by that loss and then they don’t want to invest and then everyone else like mcdonald’s goes it’s time to buy real estate apple goes it’s time to start acquiring businesses everyone else goes now’s the time and then the other people were going oh the market’s going up i better jump in and get into this and look i believe real wealth is built through focus not diversification diversification is admission that we don’t know what we’re doing i don’t know diversify maybe this will work maybe that’ll work and it actually spreads us thin and moves us further away from understanding the outcomes so i believe diversification creates risk in some sense even though it might create more stability to your money it creates more risk in it because you’re further removed from the outcomes and the knowledge so so you said diversification is the say that line again yes diversification is admission of ignorance the mission of ignorance yeah i don’t know what i’m doing let’s diversify you see andrew carnegie said put all your eggs in one basket and watch it like a hawk look at the wealthiest people in the world did they get there from diversification or did they get there from ultra focus with ideas with business with you know something that made an impact and most people think investing is about roi and numbers but investing is actually about how what kind of mental capital do you have that actually impacts other people and the more people it impacts the more wealth that could come about or the deeper it impacts people the more the wealth could come about so when people wake up in the morning and want to know how they can make more money that’s not a good question right it’s not powerful the better question is what mental capital do i have that’s unique that i can actually do something with and marketing is one of the accelerators to business because it helps that bridge become more effective to reach more people right so i think that people just have a faulty equation because genius network proved this for me you’re either one idea or one relationship away from the next level of prosperity right so i show you you were that relationship that had an exponential growth for me patrick was another relationship exponential growth we can kind of you know tie that down the road and my book brought a bunch of great relationships because i shared mental capital that the marketplace hadn’t seen yet so when people read it they resonated and they wanted to talk putting ideas out to the world like this is a way of just anyone literally tens of thousands hundreds of thousands of people will end up listening to this and there’s a small percentage that will actually do something with it you know and now when someone pays a large sum of money their likelihood of doing something with ideas and relationships is greatly we pay attention that which we pay for exactly exactly you you know you taught me hey the quickest way to build a relationship is write a check the other thing is i think people get so enamored like leaders visionaries people that are up to something they get caught in the details too often instead of the vision so i have a kind of a philosophy of people over projects so for example when you’re like dude come to vietnam i was in the middle of a pretty big project at the time i was like man this is kind of bad timing but i went home told carrie and she’s like you gotta go that’s gonna be a good group of people you know you’re gonna like build something out of that right so you immediately ask me we’re on the flight hey you should come speak at my event okay you know i i meet some new people that i still have relationships with that have you know become valuable but i think a lot of people they want to build relationships without putting in the work but they get that it takes work to build a company they get that it takes work to finish a project but they don’t get the work that it takes to build a relationship and that’s where they miss most of the wealth i think most wealth in the world right now that’s under capitalized is relationship capital right right well look look you’re getting no you’ll get no disagreement for me i’m totally biased on that because that’s what my whole world consists of is is curating the right relationships and putting them together what kind of advice are people following that actually hurt them rather than help them when it comes to money so the the main advice that hurts people is this kind of scarcity driven accumulation philosophy that you know we could hear things like start early dollar cost average the market goes up the market goes down but long haul you know all that is actually really damaging because it doesn’t have people look and say is this working how’s it working how am i benefiting so that whole notion of compound interest being a miracle the only miracle is that people have actually bought into it because people don’t get rich from compound interest banks get rich from compound interest and so if people think that the formula for wealth by the financial planning standards is put in money and it takes money to make money is the notion which i don’t believe in i believe you can have your money make money but it takes human ingenuity innovation value you know service it takes solving problems to make money so you can be resourceful and make money don’t you don’t have to have every financial resource i mean money you know look at our health care system in the united states we’re the sickest nation for the most part that’s a first world country but we spend more on health than anywhere else so money doesn’t you know it doesn’t take money to make money it takes actual human ingenuity and solutions the yeah the intelligence of where to spend it and where right yeah so then the second part of that equation is people believe oh yeah i got to take high risk to get high return because it’s money times rate of return but risk is actually your chance of loss and from the outside in the poor middle class and the people not in the know think that entrepreneurs take a lot of risk but entrepreneurs don’t believe that they’re actually taking a lot of risk they think that they’re taking calculations of how they can really make money and they are willing to do things that everyone else can’t understand but the entrepreneur sees the world a different way so if all of a sudden you have a financial person that doesn’t understand what you are like as an entrepreneur and they see what you’re doing is risky they’re actually convincing you to take money out of what you know and put into other things in the name of future wealth growth and retirement and then the third piece is it’s all about how long you can wait because time is what needs to make that work and if all that fails they’ll just tell you to move to ecuador it’s a really flawed model and it creates a restriction mindset and no one shrinks their way to wealth you know you don’t scrimp sacrifice delay and defer and then all of a sudden wake up one day and be like wow i’m so wealthy now you wake up with maybe a lot of money that your heirs are going to spend in three years after you die because they didn’t even know that you had money because you live like a popper and that transfers and translates to a mindset and that keeps people small-minded because they’re thinking only about what they can save versus what they can give what they can contribute how they can grow and this whole notion of living within your means gets people to think immediately about budgeting and cutting back but the reality is if we think about continually expanding our means that’s the real solution live within your means but expand your means how can you expand your means how can you impact more people how can you make more through doing something that actually you know translates to value in the marketplace how do you serve how do you create leverage how do you scale those are much more powerful situations than setting money aside and businesses prematurely diversify like pulling money out of business to throw it into something that people don’t understand that’s locked up that’s government controlled and calling that a financial plan is actually harming the entrepreneur it hurts them because they don’t have liquidity because financial advisors aren’t paid to build liquidity when you’re talking about risk it makes i don’t even know what the stats are but i started thinking so many people like certainly entrepreneurs are risk takers you know what from from what i mean by that is they’re willing to step out of the time and effort economy into the results economy for a period of time but they’re not stupid risk takers so you know i mean i right they don’t yeah yeah and so what the term risk i think if you were to go look at las vegas as an example uh i bet the vast majority of money that is made in vegas is not coming from very smart strategic entrepreneurs because they would look at that level of risk as being completely idiotic i mean you’re just going to lose unless you are a professional gambler that has learned how to game the system you know but you don’t play chance i mean most the risk taking is like yeah i’m just going to go out and and and make it up and make it real but i’m going to read a lot of books i’m going to talk to a lot of people i’m going to look at my minds along the way i’m going to i’m going to learn what it is i’m doing and then i’m going to take a level of responsibility on myself that most people are simply which actually reduces risk yeah yeah and and knowledge i think is the key strategic factor to reduce risk i think our own capabilities our own drivers our own values and if we stay aligned with those things that reduces risk but also i think that entrepreneurs where they have risk is when they follow that model that they always have to stay invested like what reduces risk for an entrepreneur is having liquidity and if you have a lot of cash on hand you have staying power you also could have peace of mind right because you say okay if i’m sick and don’t feel well i’m not forced to go earn something or you know or if i need to take some time off for a family member or friend or i need to go rejuvenate you have that but if people constantly are redlining which is the risk of an entrepreneur redlining like getting an airplane and they’re always redlining that plane’s gonna break down faster and the entrepreneur tends to break down because of those situations how many entrepreneurs could we have get up on a stage and talk about the time where they had a health crisis the time where they just burned out all that kind of stuff and part of it is this isn’t the total solution but they’ve got to get off the treadmill so the first problem for an entrepreneur is that they focus too much on revenue because it’s bragging rights revenue is seductive it’s sexy we just had someone at our workshop did 195 million dollars of revenue and i found out their net that they took home was 1 million to me that scares the hell out of me because i’m like they’re one small mistake away from that being completely gone right yet in most rooms the person doing 195 million of revenue is going to be more interesting than the person that’s doing two and a half net off of five million but i’ll tell you what which business has a lot less risk which business has a lot more you know control mechanism i mean it’s just like and i also knew immediately when they told me that they grew 40 the last three years i said but you didn’t take any more home i just knew and they said no i said and you’re starting to have things break down in your business that never happened before they’re like yeah our reputation’s suffering i’m like right because you’re focusing on the wrong growth what about boosting the bottom line so there’s five ways that five things that people can do to create economic independence the the first one is boost your profits so look at your bottom line here’s the four easiest things to boost the bottom line number one stop overpaying the government legally and ethically pay them what you owe but stop overpaying 93 percent of entrepreneurs tip the government because they either don’t have a good accountant or because they just don’t take the time to address this and i’m talking about four 20-minute meetings per year could be the difference of eleven thousand dollars per half a million of revenue in their pocket that’s pretty high return even for some of the most successful entrepreneurs right that’s a really good hourly second i is investment fees investment fees have become exponential over the years and if you only had a 0.85 percent fee so let’s say you had a hundred thousand dollars you invest it for 30 years and this is like i kind of feel like uh office space where the bob’s going this is a hypothetical you know because there’s no way this is actually reality but if you could earn ten percent that hundred thousand goes to one point seven four million but if you have a point eight five percent fee it only grows to 1.4 million that’s a 340 000 cost most people think oh that’s less than one percent no it’s 340 000 investment fees hidden commissions massively impact people’s bottom line the third eye is interest most people haven’t renegotiated their interest rates haven’t looked to make sure their credit score’s over 780 but you know people that you and i both know we’ve saved them a ton of money by simply making one phone call getting the right person and renegotiating an interest rate so that average for an entrepreneur doing a half a million dollars of revenue so not a big number two thousand four hundred eighty four dollars per month if they have more than two loans if they have five hundred thousand to a million the average is four thousand one hundred seventeen dollars per month by restructuring loans paying off inefficient loans which we have a formula for that like if someone’s earning less in their interest then they’re paying on interest it’s pretty logical just to pay that off 95 of people don’t because the financial advisor would never tell them to because they’d have to be saying cash out what makes me money to pay off what’s better for you then the fourth is insurance there’s just duplicate coverages duplicate costs and those aren’t huge numbers but uh you know my people that you referred me to i sat down with them they stayed with the same insurance company we raised their deductibles we we negotiated a couple things that i thought felt like they’re being overcharged for we saved them 240 per year which is minimal but we got them 10 million dollars more viability coverage right same company so that’s another thing is transformers but those four eyes irs insurance investments and interest that’s one way that people can immediately boost their profits and keep more of every dollar they make but everyone’s so focused on the business they don’t translate what that means as the journey goes over to their personal side right how can people tell if they’re overpaying on tax versus just doing what they’re legally required to do there’s several ways that you could tell number one you have an accountant that tells you they’re conservative conservatives code word for i’m missing a shitload of deductions for you that’s what that means interesting because think about it if you ever if you’re scared of the irs which most business owners have some degree of fear of that and an accountant says hey my number one job is to save you from an audit well guess what the irs’s intention is to audit you at least once during your lifetime how are they going to save you from an audit what i want is good documentation and that the audit goes smooth and that they actually save me more money if i’m audited because they know the formula we use with auditors where we save our clients if they ever get audited typically not every time but most of the time because now i can get permission what about this deduction that we didn’t take and can we take this more so if they say conservative if you’re not being proactive like if you simply aren’t talking to your tax team or if you’re doing multi millions of revenue and you don’t have a tax attorney i assure you you’re overpaying taxes a cpa can’t do it all well most cpas not all the best cpas usually get gobbled up by family offices which are offices that work for people that have maybe 30 million 50 million 100 million or more so they get access to some of the best accounts in the world other accountants become unfortunately heavily reliant upon just filing tax returns and that’s usually what they focus on they’re not necessarily the most proactive human beings in the world a lot of them are introverts a lot of them like to you know work and crunch numbers so by that nature you find out okay cool so what should i do and they don’t usually have a lot of advice for what you should do it’s usually like oh well um yeah let’s talk about that most people have to prompt they have to ask hey i heard about this tax strategy so if you have an account like that you’re definitely overpaying but look we’re in the financial business finding good accountants is our number one difficult thing that we do if you only had 60 seconds to do a public service announcement what would you say okay so this is super simple but every time i teach this there’s majorly successful people that go i didn’t get that i didn’t know that so there’s something called marginal tax rate and average tax rate so let’s just say that you earned 100 grand 17 000 paid to tax that’s 17 average tax i grew up in town where people say i can’t make any more money i’m gonna get killed with taxes you probably heard people say this right gotta stop making it’s gonna kill me from a tax bill what they believe is if they make more money all their dollars are taxed at a higher level but that’s not true there’s corridors or margins so the first dollars that you make i make bill gates anyone it’s all taxed at a lower rate some people just get there faster than others the next segment of money let’s say above twenty thousand dollars gets taxed at five percent higher the next segment of money let’s say when you’re eighty thousand dollars get taxed a little bit higher but when you earn more money it never comes back and increases the tax on the previous dollars so what that means is the greatest tax shelter in the world is to earn another dollar because you still keep more and when you save on tax it’s always off the highest tax dollar not the lowest tax dollar so a lot of people think they have to stop earning because of taxes but even when ronald reagan paid 91 thousand dollars in tax on a hundred thousand dollar check when he was an actor that was still 9 000 more than he would have made if he didn’t earn that money and people thought well the highest bracket that time was 91 percent every dollar is going to get taxed at 91 no no his first dollars were still taxed at 10 and 15 and 25 so i know that’s so simplistic but you’d be amazed how many people don’t know that exists so you’ve written a bunch of books your latest one is uh what would the rockefellers do yep so what would they do and why should anyone care about it yeah so first of all what not to do is what the vanderbilts did so cornelius vanderbilt had more money than the us treasury after he died 54 years later the first vanderbilt died broke wow so there was still money in the family but they were buying mansions they were just you know there was no real kind of methodology and the worst part is they didn’t really have a financial team so the rockefellers the first thing that they did was they created a family office concept where they had that financial team that worked just for them now most people don’t have that kind of wealth but just thinking about having a cohesive financial team is a huge aspect but they’re now six generations strong donated 50 million dollars to charity last year and still grew their net worth so the rockefellers have a completely different methodology called the i call the rockefeller method and so look you know you’ve you’ve been through life book you put a bunch of people through life book one of the things is when i went through life book my life book you know john butcher’s program yeah mylifebook.com if you wanna so i took where you go through premise vision purpose and strategy and i narrowed that down to 51 pages of the most important success formula that the gunderson family could abide by utilize learn from added that to my trust so now my estate plan has 51 pages of common language instead of legalese and then i created a board of directors of who are the five people that if i’m not here i want to try you know transfer knowledge and and guide my kids when it comes to money business and all those kind of things and then i created a family bank so they could borrow from it but they’re not entitled to it but i put together that board because that’s one of the things and then i have this kind of dynamic language that i’d say i look at my family like an ongoing concern like a business right not like that cold but i want it to go from generation to generation i want my great great great grandkids to know who i am what i stood for and be kind of the the i want to change my family’s financial future and financial destiny with the choices i make now so they’re not born into financial bondage in price utah like i was but instead they can actually cultivate the best of who they are but if they choose they want to be bums they just don’t get access to it interesting but if they do they could they could benefit from it and then what the rockville did is they bought life insurance on everyone so that after they die it replenishes the trust that way if they make mistakes which happens right or the economy takes it down they found a way to perpetuate it but not just anyone’s entitled to it because there’s a lot of trust fund babies out of it out there right and trust fund babies are some of the least happy people that i’ve met they feel guilt they feel all this why do you think that is um i mean i i i have my own i thoughts and i well actually i know in a lot of ways why they are the way they are but you know i want to look money is just a magnifying glass first and foremost but second if we didn’t have any relationship to the money or if someone wanted the money more than they wanted the parent then when the parents gone all of a sudden there’s a lot of guilt that could happen but it’s kind of like when you earn something you get a sense of satisfaction and when people have no incentive to go out there and figure out who they are what they could do we had these people that were their family was really wealthy but they didn’t know the mom and dad were wealthy they got in a plane crash private plane um and all of a sudden one dropped out of medical school the other one stopped being an attorney and the other one you know just forgot about college altogether they didn’t know but all three of them just oh now we have money and it just was dumped into their lap because a lot of attorneys go okay at 30 35 and 40 it just distribute distributes i think lee brauer says divide distribute and destroy but i’m all about you know perpetuate protect and provide with stewardship so i want to make sure that my kids have access to it and that we are in the interest rather than the banks so that we can kind of build this situation where we can continue to grow and that they can follow their passions as long as they’re not like i don’t believe in passion from a standpoint of like follow your passion and life’s gonna get good there are people passionately broke right now because it takes real ability too and it takes actual stewardship and you can’t just you know spin your wills it actually has to impact someone but i do want to encourage them to do something that they enjoy and i i look at those words in the trust as signposts not as forceful things like here’s the lessons we learned here’s what’s important here’s how we got here here’s how you can grow this and so um there’s a there was a guy that owned 20 of one of uh one of carnegie’s businesses and when he died he set up a trust and he just wrote one page letter it’s in my book that we’re just like hey we want to grow this wealth and it turned in from i think it was 10 million originally and now it’s 2 billion 100 years later wow so i like that he challenged his heirs he said let’s grow this vanderbilt just said let’s keep the money together and even say let’s keep the family together the rockefellers were like hey let’s make sure that we treat this like a business and it can perpetuate so look i get some people don’t have that money yet but we can make choices right now financially that would set up the future to be the next generation to actually grow it and have something but most people get wiped out because they don’t have a financial team they go throw their money into speculative investments they know nothing about in the hopes of gaining a high return because they saw some magazine where someone was an angel investor where someone bought in early to a company and it hit big but they didn’t talk about the 999 that actually went bankrupt and didn’t make anything and the person that hit it big had plenty of cash on hand had their financial structure in place and all they’re seeing is the end result without seeing what the inner workings were or how it really worked and that’s where most people are missing in money is they don’t know what it took to get there and so there’s just certain fundamentals that the rockefellers have used to sustain and transfer wealth and six generations is pretty damn good because most of it’s gone in the third generation on the long term and sometimes three years after the person dies if they never have conversations about money with their family let’s talk about cash flow do you do you think of it in terms of formulas percentages or like what does that even mean like how would a business owner someone watching this listening to this be like well like how much what does that even mean like have the right amount of cash unfortunately people have over emphasized the importance of net worth net worth is a function of your balance sheet assets versus liabilities when you have more assets and liabilities that’s net worth but net worth is relatively worthless if it doesn’t translate into cash flow cash flow is your income statement your income versus your expenses measured on a daily weekly monthly basis depending on what your kind of frequency is so it’s just income versus expenses so that’s what is going to pay the bills so you can have big net worth by owning a lot of equity inside of a piece of real estate or inside of a business but that doesn’t mean anything if there’s no cash flow coming from that because you could lose that overnight right so accumulation over emphasizes the balance sheet where i want to emphasize the income statement so here’s how i help people do that i look at their expenses and categorize it in four ways number one is it a destructive expense a destructive expense you know a lot about destructive expenses if we go back in the day oh back at me i’m yeah so destructive expenses or anything that doesn’t have an asset attached to it and lead you further into debt lifestyle expenses are those types of expenses that you go out and you spend because you enjoy life but you pay cash for lifestyle expenses you never borrow to consume the third type of expense that the rockefellers totally understood that most entrepreneurs neglect is protective expenses asset protection estate planning insurance liquidity they make sure to have those things so that we’re all in store for financial surprises in the future 90 of them can be handled with proper planning which means when most people are derailed or destroyed it could have been prevented with just adequate amounts of planning that isn’t a huge amount it’s something i could show someone in our three-day workshop or i could do three phone calls and get them 90 of their stuff protected but people just don’t deal with that because when you build you know you have this great home how many times you show people your foundation when you go there i mean the only time people throw some of their foundation is if it’s cracked or not working right right but if we don’t have a foundation financially we’re at risk so the the last type of expense is a productive expense and this is where cpas miss the boat a lot of times cpa might tell you why do you need a front desk person like just have an automated machine but in a high touch service business that’s a stupid idea right because it’s a productive expense a cpa might say oh you can get cheaper employees yeah but cheaper employees might you know be 1 100th of the value as the a teamer that you know you can count on that takes stuff off your plate and totally you don’t have to delegate a task because they take on that role and own it so productive expenses marketing is a productive expense when done properly right correct you put in a dollar more than a dollar shows up what should be the budget for that people ask me that i’m like there isn’t a budget does it work keep doing it tell it’s not working anymore budgeting for those kind of things budgeting is such a destructive mindset budgeting is so much about what we eliminate instead of what we produce and anytime you have a productive expense as long as you can handle it you keep putting money in it yeah no that’s a great way because i’ve told people for years teaching marketing yeah we have a 10 marketing budget and it’s like the only time you would ever put a percentage of what you can put into something is when it’s not working you want to protect yourself from going bankrupt and the testing right but yeah yeah well i mean in most people that have a 10 marketing budget wouldn’t even know what the word testing means they’re just like whatever just get through this against the wall see if it sticks right exactly and so yeah why would you ever put a ceiling on productivity unless you just want to limit how useful and something is yeah yeah so our entire game is this we look at people’s assets and we say are there ways to accelerate cash flow with your assets any asset not producing cash flow meaning the assets not producing income is a dead or lazy asset then we help them manage liabilities liabilities are what create your expenses most people think you have to eliminate liabilities but liabilities employees or liabilities on your balance sheet but the reality is if you have a good employee they’re actually an asset yes so it has to be training the eye to see the unseen to measure the greater productive nature so if people are only focused on accumulation they’re just looking at is their balance sheet going up but if that balance sheet is going up but they never learn how to turn it into cash flow this is why retirement sucks for so many people the number one fear of retirees according to usa today is the fear of running out of money because their entire life they let’s say they had a business they earned money with that business now they sell the business they don’t know how the hell to manage that money that was never a skill that they figured out as an entrepreneur now they have to go put it in something other than their business are they going to be an expert at that is our interest rates going to cooperate is inflation going to do what they hope it does and the whole time they were saving money in a retirement plan it was never cash flowing so that’s that’s backwards i want people to cash flow with every asset that they possibly can and so they can measure how effective it is versus the expense that’s against it and if it’s providing cash flow i call that turning on velocity where you’re keeping your money in motion so i think of like the balance sheet like muscles they’re critical you know net worth is important but if you have no blood flow in your body what good does your muscle do right and so cash flow is like the blood flow and that’s why they say cash flow is king because you can die and go bankrupt without cash flow but net worth you could have zero net worth but if you had a licensing agreement that paid you a million dollars a year would you rather have that or would you rather have five million dollars with ten thousand dollars a cash flow a year or twenty thousand or fifty thousand or even a hundred thousand for that matter the gain is cash flow and once you get where you have your expenses covered from that cash flow that’s coming in from your assets every dollar you earn can build more assets and create more cash flow which is the most unfair advantage i know in finance hey i hope you’re enjoying this video and i want to let you know that i have a new book that’s come out and if you’d like to get it absolutely free there’s a link below in the description or you can wait till the end of this video or you can simply go to joesfreebook.com and you can get a copy there budgeting sucks and what do you recommend people do instead so i’ll say exactly what to do instead george s claussen wrote a book in the 1920s oh the uh yeah super simple easy concept pay yourself first so this is how you do it you go to the bank you set up a separate account i call it a wealth capture account so every time your business pays you you take a percentage off the top and have it automatically go in this account the first purpose is to get six months of expenses saved up in that account and where investing has bastardized the system is people are being trained taught and educated automatically invest right have you been probably told that i just always want to put money away every month into whatever no no automatically save deliberately invest think of investing like marketing if you’re going to put money into your marketing you should see if the marketing is working or not yeah you don’t just put it in every month no matter what you make tweaks so that’s the same thing automatically save and i believe you should pay at least 18 to yourself first and if you don’t know how to get there we go back to the four i’s irs investment fees you know insurance rates insurance interest insurance investments and irs so there’s the four so find the money it doesn’t mean because i think most people have 10 or more of their money just leaking out the back door because they haven’t paid attention to plugging the leaks so now you pay yourself first right it goes in this account you start saving up then you can say do i want to use that to pay off a loan do i want to use that to invest and if i don’t know where to invest i can just leave it there people are petrified to stay in cash but cash is so powerful because you can pounce on a deal as soon as it’s available right and just that alone if you’re buying a business if you’re buying an asset typically is going to get you a discount or let you get the deal when no one else can get it because you have the ability to write the check it also gives you that peace of mind it also gives you all those kind of things so you pay yourself first that way and instead of budgeting as long as you’re doing that pay yourself first just once a month you look did i go out of bounds on the rest of my money simply i didn’t borrow anything did i as long as i didn’t borrow i could spend all the rest the money however i want because i now have that 18 paying myself first but out of that 18 i recommend setting up one more account and call it your living wealthy account and so you take one sixth of that and automatically have it pulled out every month and moved into this living wealthy account so you’re really just saving 15 percent the other three percent is used for guilt-free spending because people don’t celebrate enough people don’t enjoy life enough and so that challenges a lot of people to think hey if i hit a benchmark why don’t i go buy whatever i want maybe some people like expensive wine maybe some people like you know going to great hotels or going on great trips some people like buying clothes some people like buying you know gym equipment whatever it is it’s like just go use that money some people like to spend thirty seven thousand dollars figuring out health all the time i don’t know who those people are there’s someone i’ve once heard did that right so it’s like go ahead and reward yourself on value-based spending because unfortunately people get so caught up in the price of things if they’re budgeting that they miss out the cost cost is the economic impact you know is is 25k group expensive depends how you look at it right high price for me low cost considering well you know people people like like the lowest price event that i do uh that that i’m at in my company that i run is ten thousand dollars a person and i hear all the time well you know what you know how dare you charge ten thousand dollars for a two-day event or which i may raise the price of 25 000 just for that event because i i personally think the connections alone are worth it and you know my whole thing is well because when i for one i can sell it and i’ve sold it out every year for the last five years duh so there’s there’s that aspect to it the second is i know it’s a lot of money uh you know i i consider it a lot of money and it makes me say well i have to deliver an event and i target it at people that they you know a lot of people will pay the checks to come to my events for who’s not going to be in the room not just for who’s going to be in the room and so that’s why people will come to my event they’re like i’ve never been to an event that has more high level people at it but you know all of these things which of course the message that i want to you know convey here that you’re doing a great job explaining is you know so much of everything you’re saying when it comes to what are you going to invest in is is you it’s yourself you know it’s your own yeah yeah and and so price is what you pay cost is the economic impact and value is the feeling of satisfaction or what it does for you personally and so you could have something be low price but be no value or something be low price and be high value depends on the person when my wife was teaching she could buy like little things for a classroom it had so much value and so much joy out of these little expenditures right but a luxury once enjoyed becomes a necessity our tastes have gotten a little bit more expensive since those days which is you know part of why i like making more and more money because i get to experience more and more richness that life has to offer and it also challenges me to say what can i do to create more value and part of that richness is spending time with good people that expand my thinking et cetera so there’s kind of this velocity effect to that but price cost value those are three measures of worth pay yourself first to the wealth capture account take a certain percentage spend it however you want on what i call value-based spending other people might think you’re crazy for spending it doesn’t matter it’s what do you want what makes you feel good because you’re your greatest asset your ability to produce is significant and if all of a sudden you’re exhausted you’re not taking care of yourself you’re working too hard you’re not rewarding yourself for that work you’re going to suffer with creativity with innovation with mental capital with business models with with connection with people and i don’t think people measure that nearly enough right but it’s where most of the wealth really just starts to kind of spin out and that’s why i would never invest in something that creates a scarcity mindset for me even if it means i miss out on a good deal give me an example so let’s say that let’s say some really smart people i know say hey there’s this investment and we can get you in on the ipo do you want to be in my answer is almost always no because even if i think it has a good chance of working i usually don’t know a lot about those companies i don’t want to research those companies i’m in love with my business and doing everything i can to learn about personal finance so if it’s not related to that it’s just a distraction yeah even even if it could be a potentially giant return yeah i mean like i had access to you know facebook stock before it was so you know before it came out and it took a while to turn around but i just like now that’s that’s just going to teach me gambling behaviors like at one time in my life i had 100 real estate doors you know so like some more duplexes or four plexes some more single units i had two ipo’s i invested in i had an oil and gas deal i had a hard money lending fund and it was like that was a full-time job and i had no real interest in any of those investments it was simply oh this is what you should do to invest and that’s why i discovered investor unit because it just took one of those things to start going wrong that i was like this sucks because i’m no longer focused on something that’s actually productive i’m focused on patching something that i don’t even care about other than i don’t want to lose money and i’ve seen people lose their businesses over those situations get totally distracted get totally derailed and so that’s why i think focus is the most important thing i mean people that are hyper focused on one idea and they just keep running with that as hard as they can they’re usually the ones that end up making a lot more money people that are distracted with 30 things at once they lose so much of their power because they don’t give it enough attention so i kind of think of it like the amazon river cash flow is like the amazon river too anyway but the amazon river is so powerful it puts fresh water into the ocean there’s life all around it it’s so lush but you think about accumulation think about like the dead sea or the great salt lake there’s nothing there’s not life in the great salt like there’s one living organism there it’s ugly it’s stinky no there’s no houses around it that’s accumulation cash flows amazon river but some people fragment their cash flow by building multiple streams of income well that’s the problem is they’re not powerful streams and they can easily dry up and now the other streams get neglected trying to fix the one that’s dried up and then all of a sudden someone gets bitter frustrated in scarcity exhausted and negative and i mean i know i’ve seen people when they’re losing money they’re different people when you have all that stuff going on or you do something that puts you in that scarcity state you then all of a sudden you become a reaction machine right instead of being able to respond and the ability to respond to life with intelligence with strategy with being you know with with having your feet on the ground it’s just you it’s just happier it’s just a more effective way to to live and so many people just do this to themselves because they don’t even think about it and so much more than we could ever realize because we can sit and talk about money you know all day long and you can doll out really great money advice which you have i mean there’s there’s enormous you know gems uh just in our conversation here it’s it’s for some reason people hear it and they still minimize it so much because the you know i mean i think the the leading cause of divorce uh is well it’s the leading cause of divorce is marriage anyway no but the the the leading cause of divorce i think is financial i think it’s money it’s the number one reason that they say it and and that’s the symptom but here’s what happens when money becomes so stressful they lose focus on an exciting future and they’re only dealing with the problems of the present and that becomes overwhelming to them in that and look i’m i’m not just saying that in relation it’s like this is life i mean people murder people for money people do all kinds of stuff related to money and getting the money thing handled is so crucial to living a productive life every show every book every almost everything is teaching people that money is complicated and because it’s complicated it has people afraid to face their money situation i know a lot of entrepreneurs that just don’t want to know they’re avoiders yeah that’s the i’ll just make more yeah but if all they did was simply pay themselves first build a bunch of liquidity get some basic protections that transfer risk just some of those basic things and then find out where they’re losing and leaking money so it will boost their bottom line so they keep more of every dollar they make they’re going to be 80 percent of the way ahead and then here’s the good news when you figure out your investor dna which isn’t like the most complicated thing to figure out you simply know what to say no to and you don’t entertain dumb investments that distract you or that take time ten years ago i listened to so many investments all the time i even did a bunch of investments now that noise has gone away people know not to even bring it to me they’re not even concerned they know that that’s not what i do what what what were the biggest hardest things either the the biggest kick to the nuts the hardest investments losses stress what what was it that you think had the biggest impact what was the lesson that you had to learn in order to even take your knowledge and your capabilities to another level i mean there’s probably many things but is there any that stand out so what’s crazy is i’ve got this book killing sacred cows that was coming out financial book but i just had two business partners died two years before and i made four months of horrendously bad financial decisions after they died didn’t consult my financial team didn’t do anything that i taught because i was just so spread thin i mean i remember four months after they died my assistant came to me and said hey your double book the next hour what do you want to do and i literally sat down my chair i’m like i don’t even know like how easy is that if someone said joe you’re double booked it’s like well who are the two people oh i think joe will be more flexible than so let’s call and see or maybe we just shorten the meetings or let’s find out if any one i mean there’s like an infinite number of solutions but i was so exhausted so then all of a sudden those decisions started to haunt me by neglecting it and so i ended up with a lot of stuff that i wasn’t being responsible for that i wasn’t handling and the problem is the choices i made to get into in the financial world were easier than to get out of when it came to like real estate and stuff like that and probably the hardest thing about the whole deal that could be said about many things relationships so i and i think like everyone’s heard over and over you know who are the top five people you hang out with that’ll determine your network but here’s what they don’t say enough of you could have ten of the most incredible relationships in the world you could have a hundred but it just takes one to ruin the whole thing and i got involved with people that this is my biggest lesson they do something nice for me and they leverage that for the rest of my life and i remember that one thing and all of a sudden i feel in you know indebted to them enslaved to them and i got manipulated by that and i ended up holding the bag on almost all the real estate when everybody else walked away because i didn’t i thought i was midas i thought everything i did was gonna work because it had until that point and i thought more was always the answer and i just made decisions based on how much money i could make not based upon what my vision was for life what was important to me because i just wanted to have more than anyone else and i think when we’re stuck in that concept of more it’s really hard to be happy and so even when i go to genius network and i’m hearing you know all the stuff about all these things people are doing i just make sure to go that’s awesome for them i want to support and be excited about that and if at any point i feel any level of i’m not doing enough or i’m not enough because of what they say i just go back and think about all the things that are good in my life and i pull out this little scorecard that’s all my non-monetary scorecard everything from my marriage to my health like and i just have to remind myself of that that money is a critical piece of life but it’s not the only thing in life what are three to five things that you can answer relatively quickly that people can do immediately to improve their finances all right so boost their bottom line so focus on keeping more of what you make right and setting up that wealth capture account number two i call it strategically engineering wealth they should go through find out if they have their foundation handled then have the measures of safety then focus on their growth so foundation would be estate planning in place asset protection trust if they’re wealthy you know making sure that they have umbrella policies to transfer risk like just all those kind of basic protective expenses really handled so that whatever financial predator comes along the way or you know sees that someone has money that they can’t get to it because you’ve protected yourself then the third thing is take any non-cash flowing asset and turn it into cash flowing asset so if you have a retirement plan you can do a 72 t distribution and get it out without a penalty and start creating cash flow you could take and say if you’re not investing if you’re investing somewhere you don’t understand or how it works put it in cash and then just look say how can i be a better cashflow investor number four and this is the huge distinction that really is a game changer scale their business revenue scaling business revenue is the huge leverage point to creating economic independence if you scale your business revenue i mean look strategic coach taught me how to do it initially genius network then from there simply give up the things of lower value to do the things of higher value and start to build the team around you is the most rudimentary way of saying it and then the fifth thing is make life count enjoy life along the way invest back in yourself into your experiences into your relationships because otherwise you’re gonna burn out get exhausted hurt your health i know a lot of people that are in their you know later years now and they’re not even later years that should be young in today’s world but in their 60s that are that look 20 years older than that that feel 20 years older than that because they sacrificed all this in the name of having a better future not taking care of themselves along the way there is an abundance of uh financial books and programs and seminars and advisors and yet the masses don’t seem to be getting ahead um i mean you’ve already spoken a little bit to this but why do you think the the biggest reason is almost every financial book you read is about saving setting money aside budgeting putting money in the stock market and they’re not talking about the number one thing if you don’t own a business it’s going to be slow going it’s the only way to get there fast not easy gotta have some guts you gotta have some you know ability to stomach some things but if you don’t own a business like even so i thought it was ironic because i’m reading you know money master the game a few years ago yeah that all the billionaires interviewed in there for the most part when you asked charles schwab what to do oh yeah just uh put your money in discount brokerage account it’s not how he made his money he made money inventing them and selling them you know oh what do you do oh you put your money in index funds no no no you invented index funds it was mark farber the boom doom and gloom guy that said hey the real way the real advantage in this world is find out what you’re really good at that’s your insider advantage and build a business around that and i thought that that was the most truth that was spoken by all those billionaires of how to really get ahead because 91 of people john bowen has a book out where he has a stat in it who’s a genius network member says 91 of people worth 5 million or more own a business yeah so that’s quite revealing setting your money in a retirement plan is a 99 98 failure rate if that’s your entire plan 98 of people at age 65 are not economically independent in the us today which is you know that’s that’s why i like doing um i like having conversations like this because there’s a lot of people that will listen to this and they’ll make a decision that they have to make some decisions that are going to avoid that you know and i think the fastest way to be a better investor in those decisions is like think more like a financial institution not in like setting up a bunch of false damn accounts and charging people but like if you put your money in a bank they don’t put their money in retirement plan they take your money and show it on the wall hey we’re paying you one percent oh you can borrow money from us for three percent on this car loan or on this home loan so they’re admitting that they have a 200 percent return because if you buy something for a dollar and sell it for three dollars that’s a 200 markup right so all they’re in the business of is cash flow and if you want to get a loan from a bank to get good interest rates the first thing they’re looking at is how much did you make the second thing is what’s your credit score which is what’s your likelihood of paying us back the third thing is what collateral do you have because we’ll charge you less if you have collateral if we don’t like the collateral like real estate they’re not good at real estate we want a down payment if you don’t give me enough a down payment i’m going to make you pay mortgage insurance called pmi and by the way we want you to pay for an appraisal so they manage and mitigate their risk and focus on cash flow yet everyone else is taught set money aside scrimp save sacrifice take risk and then one day someday hopefully it’ll be there for you it is a completely different set of rules so think cash flow first accumulation should be a distant thought yeah that’s good and and by the way so i you know one of my questions is where should people invest so is there anything else that you would say to that i mean i get this question all the time and if you if you ask that question then it should always be in becoming a better investor in getting more knowledge and in things you understand so is real estate a good investment depends on who it is is the stock market investment not for most people even though most people do it it’s only for a few select people and why is it a good investment for warren buffett he doesn’t invest in the stock market he buys a company that is not the same that is absolutely not the same and so i think that people should just focus instead of diversify and go for cash flow instead of accumulate and only invest in what they know and if they don’t know what to invest in stay in cash and figure out what you’re going what you know your investor dna and only invest in alignment with that yeah what i would recommend after listening to me and garrett is make a list of three areas that needs solved that this conversation and what garrett had to say really has caused your brain to hone in on what those are and then take the steps to to set up the what needs to be set up in order for you to have the conditions that you want the conditions that i would hope that we can help people with is at the end of their life where whatever that is and through their life not just for themselves but for their family uh that that it’s not all up because people you know most people just do not have their in order at all not like a a little bit like at all and so we need to have like a version of the christmas carol the ghost of future you know the ghost of the future because if people saw the decisions they neglect to make now and the impact that has on them in the future that they may have major regret for because a lot of what i’m talking about paying yourself first is actually like we had a this woman melinda who just got divorced was really kind of taking her this new business and trying to incubate it and for the last year and a half she paid herself the full 18 day one and everything’s worked out she’s got stability she feels better she’s more productive i mean there’s nothing mystical or magical in finance but the closest thing is paying yourself first because it seems like well i’m taking money away from me but for some reason the rest of that money starts to show up yeah it starts to happen it starts to get people who think resourcefully okay i hope you found that video awesome and useful so if you want to get a free copy of my book i want you to click here and if you want to watch some more videos that’ll be useful and awesome click here go ahead they’re over here do it now come on thank you watch
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