How To Grow Your Wealth Like The Rich

Hey, fair stranger, welcome to Capitalism tv. I'm Ryan Daniel Moran, and today we're talking about how to invest for passive income and financial freedom. Come on in, grab a seat. We have some seats available up front here. And let's have some fun and talk about money.

Okay, let's jump into how to invest for passive income and financial freedom based on a lot of trial and error of things that have been done over 15 years of my life. Now, before we talk about some strategies that develop passive income, it should be noted that the way I believe you create financial freedom is to first build a business and to second invest the profits. So if you're watching this and you don't have at least some sort of a side hustle in which you're generating income that is not tied to your time, that's the first investment that needs to be made. So all dollars that are outside of you having some reasonable savings, in my opinion, should be going towards developing step one, the business. In fact, someone that I know who has spoken on our panel at the Capitalism Conference in the past, his name is Jay Massey, he's a big real estate investor. He says behind every investment is a business. So really, all investments that we are looking to make to have or generate passive income start by having some sort of a business. If you buy a stock, you're buying into a business. If you buy a house and you rent it out, it's a small business, there's one customer, it's the person who's paying your rent, but it's still a business. So that's step one. Take your money and build a business. And with the profits of that, then invest them into the things that rich people do to set you up for a very long period of time. And that's what we're going to go into right now. There's one thing that should be discussed and it's the economic cycle, because it's really tempting to make your decisions based on is the economy going to go up, is the economy going to go down? And trying to time where we are in the economic cycle, it's been my experience that that is not the optimal way to make money or make your money work for you is not to say that there aren't people who make a ton of money timing the markets. I've just found for 90% of who don't have some sort of very focused skill set that trying to time things is not an optimal strategy. A much better way is to look at things like cash flow, length of time, and people at our Recent event, I asked one of the people that I go to for advice. He's a best selling author on a bunch of different investment strategies. Garrett Gunderson. How he is investing his money and what he recommends. When the market is at a high, a lot of people go, well are we going to have a recession? Is there going to be another downturn? So how does somebody who's really good at this invest when times are really good? Here's what he had to say. We're in year 10 of a big boom.

Yeah.

What are you investing in right now or what? What do you see coming? How are you managing your wealth differently or is it this the same path forward in these economic.

Little different. One is I am stuffing every dollar the government will allow me into my overfunded life insurance plan right now because I want massive liquidity. I could pull that money out at any time. It's I have to do better than 9.9% to put it somewhere else. And that's a pretty amazing storage tank. The second piece is relationship capital, which are people, networks, organizations, mentors, family, friends. And if you want more financial capital, it's you're either an idea or relationship away from that next level of prosperity. So I am bullish and aggressive on investing in quality relationships. I'm bullish on investing in the right mental capital and attending and spending time with the right people. I put a lot of money in that every year because it always pays off in a big way for me. So that never changes, regardless of the economy.

Now in that clip he mentioned two things. Garrett talked about a strategy called overfunded life insurance and he talked about a philosophy, investing in people. So Garrett looks at it as who am I investing in rather than what's the product or what is the open opportunity here I think that's a much wiser way to think about investing because ultimately everything is about people. Now that first strategy that Garrett talked about was might a little bit confusing if you've never heard about it before. But what he's talking about is something that I use as kind of the foundation, the safety net of my investment plan. Once I've made my money in business, the first thing that I'm doing is building up some sort of a savings or emergency fund. But putting money into just a savings account where it's going to be eaten away by taxes and inflation.

Doesn'T make a whole lot of sense. So there's a strategy that he mentioned that is used to be able to create an emergency fund that is tied to the market so it can go up in value, but it doesn't go down in value. That sounds hypey and kind of cheesy. So here's a clip of me working with my advisor on this topic and how he described it and what's so beautiful about this? Like this last year, for example. And that's where you park cash. Park cash. And it's tied to index funds. So it'll go up, but it doesn't go down correct. So it's tied to stock indexes. And when the market goes up, we gather the upside. When the market goes down, you just get a 0% credit. And so there's some mechanisms for how they get that done. But basically what we're doing is we now have a place to store capital. So when you don't, when you don't have the headspace to go figure out exactly what you want to invest in, or you're not positive, you can tie that capital up. You really need a high level of liquidity because you say, I don't think I'll make this capital, but what if. And then if that's your thought, if you. Or what if the right opportunity comes and I can buy, I can buy up wells that produce cash flow. I don't care what your what if is followed by if you think I would like to invest money, but what if, if that is the way your mind works right now, then you need to talk and look at the capital warehouse. So just to sum up the first part of my investment strategy, I put savings account, if you will, I put my emergency fund into a life insurance policy that goes up in value, but doesn't go down in value. And I still have access to the money so that I can use that money to buy other investments, which is what we'll talk about next. If that idea sounds like a good fit for where you are in your investment strategy, there's lots of content available for that by my good friends at Paradigm Life. That's who a lot of my peers use to run this strategy. And I'm friends with the founder and he's a really, really awesome guy. He's been on the podcast a couple of times, so they do a ton of content over@paradigmlife.net I think. Is there fact? Check me on that one in the comments. But Paradigm Life is a good company, at least for the education side of how to use that as part of your strategy. Next, I want to go into how we use the profits to buy more income. How do we create more passive income once we've got money coming in from our business and we have our safety net set up. And there's some things that really anyone can do in order to start generating passive income and building a life of financial freedom. That's what we'll go into now. Now, at this point in the process, it can be tempting to look at, okay, what is the best income producing strategy? Or what is the best investment strategy, or where should I put all of my money? It's unfair to answer that question until you have at least addressed where you want to go in your life and your career and your business. And that feels kind of trite to say, but the truth is, if you don't have a target, then you're just going to be an easy sell on any investment strategy. They'll all sound good. When your buddy calls you and says there's a hot stock pick, you're going to feel tempted to put money into that man. There are so many opportunities for you to lose money. So in order for you to set up the best chance of success, we have to have a target. The target might change depending on where you are in your life. Do you want cash flow? Do you want growth over time? Do you want fewer taxes? Usually the answer is yes, yes and yes. But which one do you want to focus on for where you are in your life right now? I did an interview with Patrick Donahoe where he talked about how without a target, it's really hard to be able to reverse engineer the investment plan. And since he works with a lot of people who are figuring that out, I want to share this quick clip with you. Everything is personal, even money. And it really comes down to, number one, establishing, like what, what you really want. Right. And if money is the solution to what you want. I try to go deeper with people. Why do you want it? What's the reason behind it?

Okay.

And then look at their behaviors up to this point and figure out, you know, are they going to be able to actually achieve that? And this is where I think with, you know, entrepreneurs and smaller, smaller business owners that achieve a certain level of success, I think introspection first and foremost about their business and what they really want in the end is more important than actually figuring out where to invest profits. And then the investment is going to have an objective. The business has an objective. The investments have to have an objective as well. Now let's talk about two important pieces of this. Let's talk about cash flow, and let's talk about taxes. Cash flow is often a good sign of how healthy an Investment is if you are not getting cash flow, then you're just speculating on it going up in value. You might be right. The people who bought bitcoin at a dollar did great. The people who bought bitcoin at 20,000 did not do great. So you're betting on the value going up and you don't really know if you're right or you're wrong. But if you're buying on yield, you have at least more data or a different type of data for you to decide whether or not an investment is good. My friend Jason Hartman goes almost exclusively into real estate investing. And regardless of what the economy is doing, he's buying on how much money that is sending him on a monthly or yearly basis. Here's a clip of him talking about this at one of our recent events.

Saving is a bad deal since 1971, I guess, right? Since we went off the gold standard. Because you just by, by the time you pay for. And you literally pay for taxes and inflation. I mean, you know, now in a savings account, you earn nothing, right? But even if you did in better times, you know, when the yields were higher, you still just, your money just gets stolen by taxes and inflation. So it's a terrible deal. You've got to invest. So it was interesting when you started the panel, Ryan, because there was this kind of common thread, a couple of people said is that they don't really care about the cycle in the economy. And I found that to be interesting. And I don't much care either, because we just buy yield. You know, we just buy if. If the properties appreciate, hey, that's great. It's the icing on the cake. But when you buy yield, the cash flow is pretty reliable. It's not perfect, but it's pretty good. Predicting the cycles, very difficult.

So now this philosophy that Jason is talking about, buying on yield, makes sense regardless of where you're putting your money. So if you are buying real estate, looking at yield is, in some people's opinion, a more thorough or complete picture than buying on. Is this market going to go up? Most people are buying homes or buying stocks hoping that it's going to go up in value. And I think that's a suboptimal strategy. So when I buy stocks, I'm looking at dividend yield. When I buy real estate, I'm looking at cash flow. When I buy a business, I'm looking at how profitable the business is, not what's the potential. Potential is air. It doesn't exist to me. Investing is looking at good businesses. Proven by cash flow and buying those. And that is stocks, real estate, sometimes bonds and other businesses that I buy and put into my portfolio so that it pays me money over time. By the way, quick selfish plug here. If you are looking to buy a business, we have a lesson inside the 1% that goes through how to evaluate businesses and how to get capital so that you can buy businesses. You don't actually have to start a business in order to own a business. The first principle of capitalism to me is ownership. It is, what do you own? And you can own a piece of a business by buying a stock. You can start a business or you can just go buy a business. That's what Warren Buffett does. It's what Jeff Bezos does. Now he just acquires businesses. So if you want to learn about that, click the link below and you can see the lesson that's inside the 1%.

Okay, the next thing we need to cover in order to have a complete view on how to have passive income and financial freedom is taxes. Now, I run a business called capitalism.com. you can probably guess what my opinion on taxes is. But fundamentally, it's not a selfless or giving act to give your money to politicians. It's not. You make more of an impact with your money than any politician can. You by spending money every day, creating money, you're creating a bigger impact in the world than any politician can. So I think it is ethical for you to keep as much money in your pocket versus giving it to the government as possible as legally possible. Now, I go to advisors on this to look at what incentives are there for investors and for entrepreneurs to put their money in a place that eliminates sometimes your total tax bill. One of my friends, Tom Wheelwright, believes that if you're an entrepreneur, there's a good chance that you might not have to pay any taxes at all. Those are his words, not mine. But here's the clip of him saying it.

This last tax law completely changes the landscape of taxes. If you are paying serious taxes, then you are doing it wrong. And I'm talking about legally you are doing it wrong. You can choose. You can pay high taxes and the government's fine with that, or you can do what the government asks us to do, partner with the government and pay low taxes. And they're fine with that too. It works like this. Now.

If you take the money that you make in your business.

And you reinvest it to produce.

More goods and services and build your business, guess what? You will pay zero tax.

If you are in Business. And you reinvest in your business.

Every dollar you reinvest in your business is now deductible. It didn't used to be that way. It's now deductible. We'll give you some very important examples in a minute here. If you invest your money, if you turn it and invest in real estate.

No longer will you have to pay tax because you'll get an immediate deduction for that investment in real estate.

If you invest your money in commodities.

Like oil and gas, I'm not talking about gold and silver, they're not really commodities. So you don't use, I'm not talking about, sorry, gold and silver, you don't use them up. I'm talking about commodities like oil and gas and coal and clean energy and farming and so forth. If you do that, no tax.

If you invest in.

Paper.

It'S kind of over here because you get some, because you're facilitating production. But here's an interesting one. You can still invest in charity.

And you get a full deduction. But if you take your money and over here you use it.

For personal purposes, if you use it for personal purposes, it's taxed. But it's only the money you use for personal purposes that's taxed if you do it the right way.

So just to recap up into this point, my strategy for investing my money is to start businesses, then take some of the profits and build up a bit of an emergency fund that I put into what I call the capital warehouse. From there I'm buying other assets. I am buying cash flow assets like dividend paying stock, real estate and other businesses. And I'm trying to structure them in a way that helps me pay as little taxes as possible. If you really want to have upside, create wealth, have financial freedom for a long time, what you really need to do is understand what one of these ideas very, very well. Because there are plenty of people who only know the stock market who do very well. There are people who only understand real estate. There are some people who only understand cryptocurrency, and they do just fine. And the people who know a little bit about this and a little bit about this and a little bit about this don't have enough depth of understanding to be able to make really good decisions. Tom Wheelwright at our event went on to talk about exactly this. There were all these people who had different expertise in different areas and they were all doing very well. So there's not just one way, there's a lot of ways. Here's what he had to say about it.

Okay, if you look at Warren Buffett, if you look at Bill Gates, you look at Donald Trump, you look at all these professional investors, they do one thing, they don't do a whole lot of things, they do one thing, they.

Do it really, really well.

And that's all they do. And that's why they don't lose, that's why they're successful. If you're a successful business owner, it's because you do one thing, you do it really, really well. So develop that those criteria for investing and make one decision and apply that decision over and over again. It does not matter the asset class. What matters is the investor.

Ultimately, the asset class matters far less than you do. You matter way more. Your education, your understanding, and your strategy in alignment with your goals will determine whether or not you have passive income and have financial freedom. So my recommendation if you don't have a business, is to start there. If you do have that, then it's simply shoring up your financial strategy so that you never have to worry about going hungry so that you can go all in on the business. At least that's how I feel about it. And from there, you get creative about the different ways that you're getting passive income. And that's coming from what you invest in. And there's a myriad of different asset classes that you can choose from. If you want to go deep into any one of these, we have a set of lessons inside the 1% that goes into these various different asset classes. So if you go over to capitalism.com one you can see the different classes that we have that will allow you to be more educated on this topic and be able to choose which asset classes feel like they're a fit for you. You only need to be good at one of them. If you're good at one way of investing, you'll know more than everybody else who is trying to get out there without it. For example, I buy real estate. I invest in real estate, but I no longer try to go out and find houses to buy so that I can fix them up and rent them. I'm not an expert in that. I instead give my money to the experts who do that kind of stuff. So I have my money in a fund that flips houses. I have money in a fund that buys apartment buildings. I have money in a fundamental that buys a specific type of business. So I give my money to people who are experts at a very specific investment strategy. And that way they can focus all in on finding the best deals, the best yield the best options and I don't have to worry about it. That is passive income. Someone has to worry about it. Someone has to build the business, but it does not have to be you. You should be focused on your business and nothing else. Then you can take the profits of that and play a little bit with dividends, with real estate, or partnering with people who are really, really good at what they do. If you want more on this, go over to capitalism.com1 for some of the lessons that we have inside the the 1%. Until then, it's an honor and a privilege to serve entrepreneurs who don't pay taxes and invest with other entrepreneurs who are creating change, who are building businesses, hiring people, changing the lives of their employees. It's such a fun game when you're creating change in the world, isn't it? It's almost like the world has conspired for us to work together, make money, and have a lot of fun. I'd love to stick around with you more. Make sure you're subscribed to the channel for more content like this and I'll see you on the next episode. Thanks for watching.