Denzel Rodriguez and Alex discuss how entrepreneurs should manage money differently than employees. They recommend prioritizing cash flow, using tax-advantaged accounts like Roth and HSA as hedges, and investing only a small percent of income while avoiding the trap of betting everything on one thing.
So let's play a little bit in the future. Let's assume, Alex, you're at a point you, you're hitting max or you're at that desired place of producing the amount of active income you wanted to create. In your, in your business, is there any kind of retirement accounts like Roth or solo case, Roth 401? Is there any kind of accounts that interest you? And is there any kind of investments outside of your business that interests you? From the perspective of like, that could. These could be hedges, or these could simply continue to add more value to my business. Because I think the way an entrepreneur really works is they're not really focused on creating a net worth like a, a quote unquote nest egg. They're not really trying to build a nest egg and then live off that nest egg. What they're doing is they're building an actual economy that is the whole monopoly board for their life. And it produces, they have players and the players produce cash flow for the, the whole entire economy. And so now your mentality is pretty much continue to create more and more cash flow over, over net worth. So you have a cash flow over net worth. I'm the same way. For me, it's all about cash flow right now. I don't care what any of my investments that I've done is making. I have no intent to sell. I barely look at the rate of return. If anything, I invest about 1 to 5% of my income. And it's mostly for tax purposes, like I'm getting a deduction by funding my hsa, you know, or having a Roth. Like, it's more so tax, but it's like money that I'm not planning on touching. And it was like, it's a hedge, you know, in case something does happen. I'm perfectly fine with selling those to keep the cash flow machine active and running. So I think we're on the same page there. But let's fast forward. Let's say you're there. What kind of accounts interest you and what types of investments are of your interest or complement what you're already doing.
And that's a great point. And that it's like, yeah, it's not. Because a business most of the time isn't a sellable asset for a small business owner. And a small business can be still making tens of millions of dollars. I think 30 million and under is a small business.
Yeah.
Very few businesses will become a sellable asset that's going to make somebody $100 million. But, but they can be a great cash Flow like machine, like you're saying. But I think with investing, again, I'm not an expert, but I think people fall in love with one thing. Like they, they love Tesla stock, they love Palantir, Nvidia, they, they're oh my gosh, this one fund, like this is all I need. But I've only heard of people failing and not doing well if they just, if they over invest into something that they don't control. Right? If you have a business, you control the outcome to a certain extent. You know, that's your thing. That's why we as entrepreneurs invest in ourself and our business. But I, my main thing is just diversification, right? Whether it's real estate, real estate fund, stocks, money market, bonds, just being diversified so that not one event ideally hopefully could happen that would like knock my portfolio down 50%. So I think people just fall in love with like, oh no, I only do real estate. But real estate is a liquid and it's not easy to sell and there's transaction fees and it's harder to lend against. Whereas stocks, you can get interactive brokers open up your stock account, they'll, they'll lend you money. No income check, no nothing within five minutes. But stocks are more volatile than real estate. They don't produce as much cash flow, they don't have the tax advantages. It's not a real asset. Like people need a place to live. Stocks go up and down sometimes 20, 30% based on a new ad or something, right? Like it's not these days especially it's not based on like what are the practical logistics and logical numbers of this company really? Oh my gosh, this company's going viral on social media, the stock's up 50% or oh my gosh, nevermind, it's down 80%. So nothing is perfect. No investment, no business. Like nothing is perfect. So I mean in life, if I got to that point, got willing, if I do, everything is just like, how can I diversify so that I'm never betting the farm? And one lesson I'll give people, if you hear one person say something or one piece of advice.
It might be bs, right? It's one person. Maybe their opinion is just nonsense. If you hear two people say the same exact thing in different settings, I would, you know, I would keep my ears open. But who knows if three people, three different people in three different podcasts, interviews, whatever, say the same thing? I would say when there's smoke, there's fire. So I have that rule where if I learn something and I, I give it as advice or whatever. Usually I have to hear three people I respect in different settings, all saying the same thing.
Gotcha.
And I've heard that numerous times where people say, don't bet the farm. Like, meaning, like, yeah, don't invest in this one real estate deal. And that deal could put you completely out of whack. Where, like, your. Your family doesn't have food to eat. That's where it's like, I don't know if you should do that. You know? Like, I don't know. That sounds risky. So just diversifying. And again, that's my personal opinion. And not betting everything on one deal that has things outside of my control. And if everything doesn't go perfectly, I'm out of business. That sounds. Again, that doesn't sound great to me.
Perfect. Yeah.
Sa.
