Investing Smart: Transforming Surplus into Success

The very first thing you should do, and this is part of increasing your wealth and eliminating your financial stress for everyone, is to understand your personal budget. Then you want to get clear on the money that's going out. And this is a really good exercise for everyone to make sure that you go through your bank accounts and identify some of the maybe wasteful spending that's happened. Eliminate non essential items and get yourself a little bit tighter on your financial spending. Hey guys, Bob Govreau here. Welcome to the wealthy entrepreneur podcast. I'm super excited to have you here today. It seems like it's the right time to talk about how to increase your wealth and eliminate financial stress. But before I jump into that being our topic of the day, I just want to share a quick reminder of what the wealthy entrepreneur podcast is here for, what it's intended for. This is the place where we dissect the elements that contribute to entrepreneurial success, from our mindset and leadership to profits and revenue. And again, this episode is titled how to increase your wealth and eliminate financial stress in your life. And it's going to be a short one today, but I want to walk you through something that is super important and powerful if done right. And again, it's going to be all along the lines of increasing your wealth and eliminating financial stress. I had a client reach out to me, female entrepreneur, very successful, has built up a great business, has got a team supporting her, has got investments happening. But as life gets a little bit more complicated and there's more moving parts, sometimes it gets a little bit stressful. And one of the easiest ways to eliminate stress with all the moving parts that we have going on is to go right down to the fundamentals. And this individual client reached out to me and said, Bob, you know, I've got so many moving pieces right now that is starting to cause me a little bit of stress because I don't have my finger on the pulse of everything that's happening. And there's more money going out everywhere. Yes, there's more money coming in as well, but there's more money going out everywhere and it's starting to cause me a little bit of, you know, financial anxiety in my life. And what I responded to her was, listen, let's get back to the fundamentals. The very first thing you should do, and this is part of increasing your wealth and eliminating your financial stress for everyone, is to understand your personal budget. So understanding the money coming in, you know, whether it's you're an employee, you've got salary, you've got wages, you've got dividends that are coming in, or you're a business owner and you've got self employed income that's coming in, or you're retired, you've got pension income, maybe investment income coming in, whatever that is for you, get very clear on the money coming in and then you want to get clear on the money that's going out. And this is a really good exercise for everyone to make sure that you go through your bank accounts and identify some of the maybe wasteful spending that's happened, eliminate non essential items and get yourself a little bit tighter on your financial spending and maybe even just for the short term, because I want to walk you through how this comes full circle so that you can increase your discretionary spending in the short term after you've started what I like to call building your passive investment empire. So the second item that we want to focus on now that we've got our money coming in and our money going out, is understanding the difference between those, which is essentially your available investment fund. So for example, if you're making $10,000, maybe it's household, maybe it's individual $10,000 a month, you've got $8,000 of expenses, you've got $2,000 of surplus funds that are in there. Now you want to try and create as much of a surplus as possible. Sometimes we don't have any and that's okay. But if, if we don't have any surplus funds, we want to make sure we're definitely not spending more than what we're bringing in because that's the part of our life that we get into incurring debt. And then when we start getting more and more debt going in because we're spending more than we have coming in, that's when liabilities start happening. And not only do we not have a surplus, but we actually continue to build a little bit of a hole where we have loan payments, we have to continue to pay out, which is reducing our available funds in the short term anyway. So we don't want to do that. We want to make sure there's a positive there. And what we want to do in the short term is we want to get those funds invested. And here's why. If instead of buying something discretionary, if you get really disciplined with this, you're going to be able to build passive investment income that you can then use to buy those discretionary items while also still building wealth in your passive investment stream. So here's an example, right, you've got $10,000 family household income. I use that before $8,000 of family expenses that go out, $2,000 surplus. What we want to do is we want to take that $2,000 and we want to get it invested in something. Now, for simplicity, let's say that we're going to get a 10% return rate of return annually. That might be a little high for many investments, but just know that 5%, you can get a 5% GIC right now. That would allow us to essentially get a 5% return on our investment with limited to no risk. So when we're saying 10%, let's say that we have invested our cash in a private mortgage, right, which is secured by property. It's very, very safe and secure because we make sure that our team, for example, our legal team, make sure that that's all locked down and protected and you're preserving all of your equity that you're putting in here. Now, that sort of rate of return, let's say it's going to be 10%. It could be higher. Right now, private mortgage lending rates are higher than 10%. But let's go with, with 10% for now, $2,000, you're going to contribute to this investment. You're going to get a $10,000 return on and, or a 10,000, a 10% return on investment. And that $2,000 now is generating annually $200. Okay, so $200 is going to be coming in annually related to that investment. That's month one. We then go to month two. We contribute the same thing, $2,000 in there. We've now got $4,000. $4,000 at a 10% return on investment is now $400 of income. Again, we do it for another month. That's three months, four months, five months. Okay, let's, let's stop at five months for a moment. Five months of just putting our surplus in has got us to $10,000 of investments in passive investment income. This $10,000 is yours. In the future, you're going to be able to get access to it. You're going to be able to use it in the future. But that's not really the main focus of our short term. Our short term is to create that passive investment stream. So with that $10,000 that we've got in there, we now have an extra, at 10% annually, an extra thousand dollars in discretionary spending a year. Now, you could put that back into your investments and earn more. But you could also take that and say, well, now our income annually is. Or we'll say it's monthly for the moment, $10,000 a month plus an extra $100 monthly related to our passive investment stream. This is now increasing our passive investment so that we can start spending money on things we want. You can increase your spending while also continue reinvesting that $2,000 back into your investment portfolio every single month. It then increases your monthly spending by 100. You see the drift, right? We're investing now. We're earning passive investment income. We can use that income to buy things like watches or clothing or whatever we're looking for. But if you can be disciplined in the short term, you invest that $2,000 a month. That's our surplus, our available funds. You get that in, you get it earning income and all of a sudden you're going to be able to pull out that earnings and it's going to increase your discretionary spending. Now I'm going to, I'm going to fill you in on one thing. When you start to see how this process works and you can start to fill, feel yourself being disciplined and investing and then you could start to watch the income that's being earned, you all of a sudden get a little bit hooked on the idea of, of how effective this is. And you'll likely take that thousand dollars a year and reinvest it back in. So now you've got $10,000, remember, $2,000 a month for five months. You've now got an extra thousand dollars of income. You probably put that, that extra thousand dollars back into your investments because you can see how quickly it's going to grow for you. So the idea is here, understand your budget. Money coming in, money going out. If there's no surplus, I need to fill you in on a secret. All of us have the ability to increase our income or decrease our expenses. Now a lot of you might be saying, well, Bob, you know, I'm on a fixed pension. I can't really afford to, to go and generate more income. I'm on fixed income now. It's untrue. Someone like Gary Vee, he is a professional yard sale now. He does it, he makes lots of money doing his things. But he talks about this as a really good example of saying, you know, you can go out and yard sale, buy something for $2 and sell it for $20 on eBay. There's opportunities like that for you to increase your income. If you want to increase your income, to make sure that you're putting it back into your investments or even if you want it for discretionary spending. Everyone has the ability to go out work more hours, right? If you're retired, you're working more hours. If you're an employee starting something on the side, buying garage sale items, unless you're working all of the hours, but you have the ability to influence how much money you make. You can also talk to your employer about, you know, if I get these certain results, can I get this increased income that's on the income side? On the expense side, again, once you review it, you're going to identify wasteful spending. You can reduce your spending on unnecessary items to make sure that you do have a surplus. Now one of the things that we're going to be able to do is influence both of those sides. The more you can create that gap, the more you can start investing in the short term, the quicker you're going to start to realize passive investment income. So now that we've got that understood, the idea is, is that we want to build passive investment income to buy your non essentials. I actually watched Grant Cardone do a video about this and he had this souped up summer Hummer that he was driving and he said, in essence, I'm going to paraphrase, he said, if you don't have the income to spend on dumb things, don't spend money on dumb things. And he was referring to the Hummer that he had that he was driving. He drove it around the front yard, he backed it in, he said, this is a dumb thing. You know, this costs him. Let's say it's $2,000 a month. If he doesn't have $2,000 a month in passive investment income, he shouldn't be buying something that's dumb like this. What he should do is take the $2,000 a month, invest it, get earning passive investment income again annually. That's $200 extra a year. Well, you do that for 10 months, all of a sudden you've got $2,000 of passive investment income that's coming in because you've contributed to these investments. You now have $2,000 of investment income plus $20,000 of investments that are in there that you then take the $2,000 and then you buy the dumb things. And he's bang on with this, guys. If we can make sure that we focus on the short term, just being disciplined for the short term to increase our income, decrease our expenses, maximize that surplus that's available, get it invested, start earning passive investment income and then if you really want, you can take that passive investment income and you can add that to your discretionary spending. What this will do is it will increase your wealth, it will eliminate your financial stress because now you're living on passive investment income for that extra spending. It will eliminate all of the deficit that you possibly have and it will start you down a path of realizing extraordinary wealth in your life. You know, we go back to the $2,000 a month. If we're able to do that, we've got $24,000 a year at 10%, $2,400. Right? Right. We now have 26,000 plus dollars that's available for our investment. And if we use that, you know, $2,400 towards passive investment income or towards discretionary spending. We've also increased our availability to spend and enjoy life while also building wealth along the way. Guys, this is how to increase your wealth and eliminate financial success. Hopefully this was super valuable to you. It's a quick tip on how to eliminate that financial stress. But remember to focus back on the essentials and the basics, which is your personal budgeting. When you go back in, you're going to be able to eliminate non essential purchases. You're going to be able to look at how much money you have coming in. Maybe you're a little disappointed with it, but come up with an action plan on how you can create more income into your personal life. Get a surplus started, get it invested earning passive investment income. Then you're going to start on your wealth journey, eliminate your financial success and really start towards what we call financial freedom, which to me is the opportunity to just live off your passive investment income. When our passive investment income surpasses our $10,000 of income a month. Right. It's not going to take that long. It might take you five years in order to do this. It might take you 10 years, it might take you 20. But once you start building up your wealth portfolio, your passive investment income will eventually surpass what you've been making right now. That allows you to live off your wealth for the rest of your life. Financial freedom. And ultimately it would be my goal to try and help everyone achieve that. If you like this episode, make sure to give me a like a share a comment. Also make sure that you are following this podcast every single week. We are going to be releasing a new episode you don't want to miss at what's coming next. We've had some incredible guests like Chris Bumstead on there, we've had Alex Charfen on there, Dan Martel, so many incredible guests and a lot more to come. Make sure that you're following us. We will always continue to be invested in bringing you valuable insights. If you know somebody that you feel would benefit from this, make sure you share it with them. We want to help all people, but specifically focusing on helping business owners ultimately eliminate their financial stress. But be empowered with good financial information so that they can change the world in supporting and impacting more people in their lives. It's been a pleasure to have you here. I can't wait to see you guys next week. Have a fantastic day and I look forward to seeing you again soon.