Ep 60 | Wealth Building Through Passive Income with Brian Gubernick

Thank you for joining me today. It's Brian Gubernick, and welcome to the No Days Off Podcast, where we believe that every single day brings a new opportunity to get better. Let's get into today's topic. Today I want to talk about wealth building Specifically, I'd like to discuss passive income. So as we get into this, let's start by defining, or at least my definition around what is wealth, because I think that this is the foundation for everything that we're going to discuss today around wealth building. We've got to get on the same page around what we, what we believe wealth to be. My definition, I believe that wealth is abundance and prosperity in all areas of life. So financial wealth is a specific area of life, financial being that area, right? But when I think about wealth, I think more broadly. I think wealth, uh, if you have— if you're wealthy with respect to your health, if you're wealthy with respect to your relationships, what it essentially means is that you have abundance and prosperity. So wealth to me is definition number 1, abundance and prosperity in all areas of life. Definition number 2 though, which is more specific to financial wealth, that definition, that my definition is to do what I want, when I want, with who I want, wherever I want. So when I think around financial wealth, I ask myself, am I able to do whatever I want when I want, with whoever I want, and do it wherever I'd like to do it. So let's get clear that that's where I'm coming from when I talk around wealth. So as we dig into the wealth equation, I want you to know my vantage point. My guess is yours is probably not too different. Now wealth for me, financial wealth specifically, is a rather simple equation. And that equation is that my passive income must be greater than the amount that I want to save, the expenses that I have to pay, and the taxes that I, that I ultimately have to pay. So the, so the equation is passive income is greater than savings plus expenses plus taxes. Here's what I know. The financially wealthy individuals that I know and that I don't know, the financial wealth— financially wealthy, uh, people of the world, they save money first, then they spend, and then they pay taxes. Maybe a better way to put this, the not wealthy of the world, those that have not had the financial success yet that they desire, The not wealthy, what they tend to do is pay taxes first, then they spend, and then if there's anything left over, they save. So I want you to think real quick. You're likely all by yourself as you're listening to this, uh, so it shouldn't be too awkward, but I want you to ask yourself the question: am I saving money first and then maybe spending some and paying taxes last, or am I actually paying my taxes out first, spending money, creating expenses, then if there's anything left over, I save? Where do you think you fall? No disrespect, but if you fall in that second category, could that potentially be why you're not reaching the desired wealth that, that you're aiming for? When I think around the not wealthy paying taxes first, I can't help but default to W-2, right? Like, that's a very clean, clear way in explaining what I mean. If you're a W-2, if you're a payroll employee, it doesn't mean you can't be massively, massively wealthy, let's be clear. But you are forced to pay taxes first. They're coming out of your check. Then you have the opportunity, if you choose not to save, you may default to spending, spending on necessities, food, electricity, housing, but also maybe spending on things that are optional expenses like movies, dinners out, or coffee at Starbucks. Keep in mind, the not wealthy pay their taxes first, then they spend, then they save what's left. The wealthy are saving money, then they spend, then they pay taxes. Why do they have the ability to pay taxes? Because they've spent in a conservative way relative to the income they're bringing in. So let's get the passive income though. I want to go back to this equation. If wealth is passive income being greater than all outflows, what do we have to be thinking about? We got to be thinking, what exactly is passive income? And passive income is an income that I do not trade my time for. It's income that I do not trade my time for. And that income is likely being generated by the assets I own. So a really clear example: if I own a rental house and I have tenants paying, and those tenants, what they're paying exceeds all of my expenses including my mortgage, the dollars left over after the expenses being the mortgage and whatever else comes along with that rental The dollars left over after all of that is income to me. It is passive. Why? Because I'm not actually trading my time for that income. If you were trading your time for that income, then it would be considered job income. This is one reason— and not to go off on a total tangent— but this is one reason why I challenge some individuals that flip homes. I challenge them in saying that I don't believe flipping a home is an investment. I believe flipping homes, if you're, if you're a flipper, buy a home at a low price, fix it up, and sell it at a higher price, that's not investment to me. That's a job. That's job income. Owning a rental property where maybe you do some repairs on the front end, but ultimately you're getting a check every single month, that's passive income. I want enough passive income so that all of my bills are paid, I can save, and I could pay taxes without having to trade my time for money. So goal number 1, as it pertains to passive income, is to create independence, which means all bills are paid and you have the ability to save and cover any other expenses that you have, including taxes. The set necessary expenses, they're all paid by passive income you're generating. So a key in wealth building, probably, you know, in an earlier wealth building episode that I did a month or two ago around step number 1 in creating wealth, a key here is creating awareness around where you're at today, creating awareness around where you stand. Now, since we're talking passive income, I'd like you to reflect right now on how many dollars, how much, how much money you have coming in. Right now? What are the dollars you have coming in right now that you would define as passive? Where are you at today? Great. Now that you've done that, where would you like to go? What is your current reality and how does it compare to where you want to go, your envisioned future? Now, your envisioned future, it's as big as you want it to be. At a minimum though, where I want you to start, what I'm— what I'd encourage everybody to do is start with what you need passively to cover the expenses we just described, savings being part of those outflows. So how much do you want to save? How much does it cost to live? What's it cost to pay your taxes? At a minimum, once you have the passive income that covers that, you're living. You have all— you have time now. You do not have to trade your time for dollars. Now, as you want to have more experiences, as you want to— call it what it is— buy more things, and that's up to you, what do you have to do? Well, you have to create more passive income. So maybe tapping into those savings and maybe strategically allocating them towards assets that generate cash flow might be the play. But today is not about investment strategy per se. I just want you thinking, and I'm encouraging you, I'm pushing you to think about wealth in terms of how much passive income do I have? How much passive income am I generating? Where am I at today and where do I want to go? Now the key here is once you know where you're currently sitting with respect to your passive income and you know where you want to go, now you get to connect the dots. What I mean is, Now you get to decide what strategies you're going to deploy to create the passive income to get you to your freedom number. So if you presently have $0 in passive income, but you know that $5,000 is your freedom number, the number that covers all of your expenses and your taxes and your savings, if I'm in your shoes, I'm saying, what's the simplest, most efficient path to me getting to $5,000 passively, meaning I'm not trading my time at all. If you're at zero, forget about the $5,000. I'd ask you, how do you get to the first $100? Once you get to the first $100, how do you get to the second $100? Once you get to the second $100, how do you maybe get to $1,000? Now that you're at $1,000, you're chipping away, you're 20% of the way there. How do you get to $3,000? And that's going to be a combination of maybe real estate acquisitions. Maybe it's businesses that you own that you don't trade your time around— time for. Maybe it's other assets. Maybe it's doing a loan for somebody and they're paying you interest. These are passive investments that generate passive income. Now, that's not to say that you shouldn't go and invest in the stock market. I'm not an expert in the stock market. I am not necessarily discouraging you from investing in the stock market, but please understand that when you buy a stock, the vast majority of stocks today do not pay dividends, meaning that there's no cash flow being generated by that ownership in that stock. So what are you really banking on? You're banking on the appreciation in value of that stock. So if I buy Google at, I don't know what it's trading at today, $400 a share, I'm hoping Google goes to $500 or $600 or $700, but until I resell that stock, Until I sell that stock and recognize that gain, I do not have any sort of liquid liquidity. I do not have any sort of income. I don't have any dollars landing in my account. So stock, while a great asset to potentially own, does not necessarily generate passive income. So as we wrap up here today, and I went a little longer, but I want— I haven't, I haven't talked around wealth in a little while. I wanted to make sure we tackle it. As, uh, we wrap up here today, what I want you thinking about is, where am I at with respect to my passive income? Where do I want to go? And how do I start to chip away and close that gap so that I reach my desired degree of wealth? That's all I have for you today, the No Days Off Podcast. Thank you so much for listening, and remember, every single day brings a new opportunity to get better. So let's get after it.