How To SURVIVE & THRIVE In The Upcoming Financial Crisis! (PREPARE NOW) | Garrett Gunderson

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 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, 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 a 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 think having been totally broke, spending, even growing up, I mean, 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 growing up. And my father coming from the Great Depression, he just was, you know, he was paranoid about doing anything. So I've had different experiences. And then starting my own company when I was in my 20s and then 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. They're 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 have earned very modest incomes and they just do things very intelligently and they amass quite a bit of wealth and investments and they're safe. And at the same time, they're able to live out their entrepreneurial life. Because if you're going to be an entrepreneur, you're kind of going to trade off security because there are certain levels. David Kekich has that quote, if your purpose in life is security, you'll be a failure. Because security is the lowest form of happiness. And That's a philosophical way to maybe talk about it. But it is nice to not have to be stressed continuously related to money. And the truth is most people are poor and rich. And see, when people have at least the illusion of being successful financially, people think they don't have problems. And you know as well as I do, I spend a lot of time talking with, you know, I mean I run Genius Network. I mean 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 money or their investments or things that 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 is 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 the most strategic advantages for business owners that 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 own 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 matter, is 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. Gotcha. 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, 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 was stored value until, until.

I, until I, until I didn't give you any value whatsoever.

And yeah, I was like, screw this guy. And I think in the world of investing, too many people think it's about a product. And there is no magic product out there. There is no like, oh cool, if I do this investment, then that's going to 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 of the reality.

Interesting. Yeah. So when it comes time for them to have available cash flow, to put in cash, to put 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 you said diversification is the. Say that line again.

Diversification is admission of ignorance.

Admission of ignorance.

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 showed 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. And now when someone pays a large sum of money, their likelihood of doing something with ideas and relationships is greatly.

We pay attention to 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 Kerry, 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 asked me, we're on the flight, hey, you should come speak at my event. Okay. You know, I meet some new people that I still have relationships with that have, you know, that have 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, you'll get no disagreement from me. I'm totally biased on that because that's what my whole world consists of 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 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 could be resourceful and make money. 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.

Yeah, the intelligence of where to spend it and where. 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 it into other things that 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, I'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. No, 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 pauper. And, 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 could 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 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 a 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, certainly entrepreneurs are risk takers. 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. The term risk, I think if you were to go look at Las Vegas as an example, 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. But you don't play chance. I mean, most the risk taking is like, yeah, I'm just going to go out 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'll look at my lessons along the way.

Yeah, 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 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 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 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. Yet in most rooms, the person doing 195 million in 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% in 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 suffering. I'm like, right, because you're focusing on the wrong growth. What about boosting the bottom line? So there's five ways, five things that people can do to create economic independence. 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% of entrepreneurs tip the government because they either don't have a good accountant or, 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 $11,000 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% fee. So let's say you had $100,000, you invest it for 30 years. And this is like, I kind of feel like 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 10%, that 100,000 grows to 1.74 million. But if you have a 0.85% fee, it only grows to 1.4 million. That's a $340,000 cost. Most people think, oh, that's less than 1%. No, it's $340,000. Investment fees, hidden commissions massively impact people's bottom line. The third I is interest. Most people haven't renegotiated their interest rates, haven't looked to make sure their credit score is 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. $2,484 per month if they have more than two loans. If they have 500,000 to a million, the average is $4,117 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 than 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 I is insurance. There's just duplicate coverages, duplicate costs, and those aren't huge numbers. But, you know, like people that you referred me to, I sat down with them. They stayed with the same insurance company. We raised their deductibles. We negotiated a couple things that I felt like they're being overcharged for. We saved them $240 per year, which is minimal, but we got them $10 million more of liability coverage. Same company. So that's another thing is transferring. But those four I's, 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 of what that means. As the journey goes over to their.

Personal side, 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. Conservative is 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 that 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 accountants 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 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 whole lot of advice for what you should do. It's usually like, oh, well, 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 $20,000, gets taxed at 5% higher. The next segment of money, let's say when you're at $80,000, get taxed a little bit higher. But when you earn more money, it never comes back in. 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 $91,000 in tax on $100,000 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 at that time was 91%. Every dollar is going to get taxed at 91%. No, no, no. His first dollars were still taxed at 10 and 15 and 25. So I know that 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 what Would the Rockefellers Do? 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 the 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 to charity last year, and still grew their net worth. So the Rockefellers have a completely different methodology called the rock. I call it the Rockefeller method. And so look, you know, you've been through Lifebook. You've put a bunch of people through Lifebook. One of the things is when I went through Lifebook, my Lifebook, you know, John Butcher's program.

Yeah. It's mylifebook.com if you want to.

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 transfer knowledge 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 and I want my great, great, great grandkids to know who I am, what I stood for, and be kind of 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 Rockefellers 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? I mean, I have my own 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 can 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 it. The mom and dad were wealthy. They got in a plane crash, private plane, 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 even 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 distributes. I think Lee Brower 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 earn the interest rather than the banks so that we can kind of build this situation where we can continue to grow and that they could 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 going to 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 wheels. It actually has to impact someone. But I do want to encourage them to do something that they enjoy. And 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 there was a guy that owned 20% of one of the, 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 where he 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. He didn't 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 that 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 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.

Here's what it means. Unfortunately, people have overemphasized the importance of net worth. Net worth is a function of your balance sheet, assets versus liabilities. When you have more assets than 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 a 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 being an addict and yeah, yeah.

So destructive expenses are 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 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. Because it's a productive expense. CPA might say, oh, you can get cheaper employees. Yeah. But cheaper employees might, you know, be 1/100th of the value of the a teamer that you know you can count on. That takes stuff off your plate and 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 during the testing, right?

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, throw 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 something is?

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, is a fear of running out of money. Because their entire life, let's say, they had a business, they earn 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 gonna be an expert at that? Are interest rates gonna cooperate? Is inflation gonna 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 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 can 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 $5 million with $10,000 of cash flow a year, or 20,000 or 50,000 or even 100,000 for that matter? The game 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 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. Clausen wrote a book in the 1920s.

Oh, the rich man of Heaven.

Richest man of Babylon. 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 as people are being trained, taught and educated, automatically invest, right? You've been probably told that, hey, 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. 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, 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 of 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 1/6 of that and automatically have it pulled out every month and moved into this living wealthy account. So you're really just saving 15%. The other 3% 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 $37,000 figuring out health shit all the time. I don't know who those people are. There's someone I 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, like the lowest price event that I do that I'm at in my company that I run is $10,000 a person. And I hear all the time, well you know, how dare you charge $10,000 for a two day event which I may raise the price to 25,000 just for that event because I personally think the connections alone are worth it and you know, my whole thing as 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 that aspect to it. The second is I know it's a lot of money, I consider it a lot of money and it makes me say, well you step up your game. I have to deliver an event and I target it at people that they, 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 and they're like, I've never been to an event that has more high level people at it. And but all of these things, which of course the message that I want to convey here that you're doing a great job explaining is so much of everything you're saying when it comes to what are you going to invest in is you, it's yourself, it's your own.

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 her 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, etc. So there's kind of this velocity effect to that. But price, cost, value, those are the 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 connection with people. And I don't think people measure that nearly enough, 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, 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 gonna teach me Gambling behaviors. Like at one time in my life I had a hundred real estate doors, you know, so like some were duplexes or fourplexes, some more single units. I had two IPOs I invested in, I had an oil and gas deal, 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 today. 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, 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 Lake. There's one living organism there. It's ugly, it's stinky, 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'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, then all of a sudden you become a reaction machine. Instead of being able to respond and the ability to respond to life with intelligence, with strategy, with being, you know, with having your feet on the ground, it's just happier. It's just a more effective way 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 all day long and you can doll out really great money advice, which you have. I mean, there's enormous gems just in our conversation here. It's. For some reason, people hear it and they still minimize it so much because the, you know, I mean, I think the leading cause of divorce is. Well, the leading cause of divorce is marriage. 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 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.

And look, 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, 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% 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 were the biggest, hardest things either? The biggest kick to the nuts, the hardest investments, losses, stress. 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? Mean, there's probably many things, but if there's any that Stand out.

So it'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, you're double booked the next hour. What do you want to do? And I literally sat down in my chair. 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, let's call and see. Or maybe we just shorten the meetings or let's find out if anyone. I mean, it'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 end 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. 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 10 of the most incredible relationships in the world. You could have a hundred. But it just takes one asshole 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 going to work because it had until that point. And I thought more was always the answer. And I just made decisions based upon 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 this 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?

Alright, 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 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 72T distribution and get it out without a penalty and start creating cash flow. You could take and say 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 cash flow investor? Number four. And this is the huge distinction that really is a game changer. Scale their business revenue. Scaling business revenue is the, the huge leverage point to create 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 a 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 into yourself, into your experiences, into your relationships. Because otherwise you're going to burn out, get exhausted, hurt your health. I know a lot of people that are in Their later years now, not even later years. It should be young in today's world, but in their 60s 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 financial books and programs and seminars and advisors. And yet the masses don't seem to be getting ahead. You've already spoken a little bit to this, but why do you think 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 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. It 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, 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, decisions that are going to avoid that.

And I think the fastest way to be a better investor in those decisions is think more like a Financial institution, not in setting up a bunch of false damn accounts and charging people. But 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 1%. Oh, you can borrow money from us for 3% on this car loan or on this home loan. So they're admitting that they have a 200% return. Because if you buy something for a dollar and sell it for $3, 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 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. And by the way, so 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 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 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 need 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 set up 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, whatever that is, and through their life, not just for themselves, but for their family, that it's not all fucked up. Because people. You know, most people just do not have their shit in order at all. Not like 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. It starts to happen. It starts to get people to think resourcefully.

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