How the Wealthy Take Cashflow From Their Business for Their Personal Life

I've watched entrepreneurs build business worth millions of dollars while almost all of their wealth, it remained inside the same company. Now, they had a valuable business, they had great income, but almost everything still depends on that one business and them continuing to work. Now, your business should produce more than just income. And over time, it should be converting business success into assets that you own independently of that business. So in today's video, I want to break down how I decide what stays inside the business, what comes out of the business, and how profits get systematically converted into personal wealth. Ready? Let's go. Let's go. Now, before I get into the 3 things that you should do in order to think about how much money to get out and build wealth outside the business, let me just tell you a story. One of my really good friends has built a really successful business, but he's in a business that's sort of shaky right now. He's in the peptide business. The FDA is sort of going back and forth on if it's going to be legal or not. And at any given time, the business could be shut down. And he's in this situation where there's a lot of revenue coming in monthly and annually right now. But he's like, Man, should I be reinvesting this into the business, in a business that could get shut down at any time, and I can take advantage of and grow? Or should I be extracting the wealth? What should I do? And he's sort of in this analysis paralysis state. And so I work with a lot of business owners just like this example, my friend that I'm talking about. And if you're in the coaching consulting space, you're a sales rep, high net worth, things like that, like you can make a lot of income, but it's not this long-term sustainable business. So I want to extract most of that wealth. So how much should that be? How do I think through this? I do have some businesses like that. And the way that I approach it is, number one, I want to only leave the money in the business that the business is going to need. So typically, I'm going to have about a 90-day sort of cash flow forecast. Most people do about 13 weeks is what it's called, 13 forward week cash flow statement. And what is the cash flow I'm going to need over the next 13 weeks, over the next 90 days, that's going to take to run the business with my payroll, my staff, my overhead, and things like that. And that amount of money stays in the business. And so I pay myself monthly. That's my own personal income. And of course, I'm building wealth with that money. But on top of it, Once a quarter, I look at the money that's in there. And if it's over the amount, the threshold that I need to keep in that operating account, then I extract that wealth. And the key piece here is that if I'm running one of these businesses, and I have some of these businesses that are high income, they're lifestyle businesses, they're throwing off income, but I don't believe it's— it's not forever. It may not be sustainable. It could shut off at any moment. Then I want to be taking as much wealth out of that as I can and building wealth outside of the business. So, if and when, more likely when, the spigot gets turned off on that business, it doesn't matter. I've taken that high income, and I've built up the assets that can now pay for my life. Now, that's the broad rule. But what do we do about it specifically, tactically? So, you can do this low-tech. You can do it high-tech. You can literally write down the bank accounts that you want, go to your banker, and say, open these accounts for me. And then you can set up transfer rules within them. More high-tech, I use a software program called GetSequence, and I can build this out like a drag-and-drop builder. But either way, I want to have a set of rules that my money My money flows through on its own. So number 1, I have the money coming into one account, but we never spend from that account. All the money comes into one account and it automatically goes out to other accounts. So number 1, it goes into a tax account. Make sure you're setting money aside for your taxes. Now, hopefully, you've got tax strategy going and that money is, or that amount is minimal. But either way, you want to plan for that. You want to put that money aside. So what percentage, if you've mapped this out with your tax strategist, what percentage should you be setting aside 10%, 15%, 20%. So in the income account, some goes to the tax account. Then some of that money goes into operations. You should know how much it's going to cost you to run your business every single month, your operating account, and that money should flow in to pay from there. Then I have another account that's my reserve account. It's like my profit account. And that's where once a quarter, I'm going to look, sit down and look at the amount in there, and I'll pull out more money if it's over the amount that I want to keep in there. But we never spend from the income account. The income account only distributes to the other accounts that we need. And then we pull from those accounts. Now, a couple of things about this. Number one, this is a system that I learned from a book called Profit First. Profit First, if you want to read it, they talk about 5 accounts. I like to set up 10 accounts. I'm not going to go into all 10 on this video. But when that money is being automatically transferred, it's sitting there and it's money that I need available to me. I'm not going to go put it into an investment like real estate or Bitcoin because I need the money available. But what I can do is I can put that money to work in cash equivalents. So for example, I could put it into money market accounts, I could put it into short-term treasury bills, I could make 3%, 4%, or 5% on that money while it's sitting there. I could put it into some higher leverage things if I can let it sit a little bit longer, maybe some of the Bitcoin, like digital credit things like Stretch or Sata, maybe it's making 11%, 12%, 13%. But they're cash-like equivalents. So that money, even though it's sitting there, Waiting, it's not doing nothing, it's waiting. It can also be earning at the same time. Okay, so now you have money coming in, it's automatically being distributed out to your accounts, but we still haven't solved the core problem. The core problem being that I'm in a high-income business today, but that could get shut off at any moment. So how do I take that wealth? Now it's being distributed, but how do I take that wealth and turn it into a system that can replace my need for income? So if and when the spigot does get turned off, I'm ready to go. So we want to put that into what I call this wealth operating system, which is 3 engines that work together. And so we're taking that high income And we're building assets with it. We don't need to buy cash flow assets because we don't need the cash flow. We have cash flow coming in. Now, why do I say that? I say high growth assets versus cash flow assets. So typically, if I'm buying cash flow assets, so that could be dividend stock, that could be, you know, rental real estate, the return that I'm making is the cash flow, but I'm not expecting a lot of capital appreciation on that asset. So for example, the median return on US real estate is about 5% a year. All right. So it's given me a little bit of cash flow, maybe 4 or 5% of my money, and it's growing at about 5% a year for the US medium. If I'm buying a dividend stock, an AT&T stock, for example, the dividend's pretty low and that stock is not going to grow a lot. But I don't need the income today because I have a high cash flow business. So I'm taking that money and I'm putting it into high growth assets. That could be the NASDAQ index that's growing at about 17% a year. It could be individual Mag 7 or AI stocks. It could be Bitcoin that has a 4-year rolling average of about 30% CAGR. And I'm putting into high-growth assets because I don't need the income from that. And so I'm taking all of that money every single month as much as I can and stacking into assets. Now, of course, I need to understand how much assets do I need to be able to pull liquidity against those assets to replace or to pay for my lifestyle. So if you're making, you know, $100,000 a month or $200,000 a month, You don't need that much to live. Maybe you need $30,000. Maybe you need $40,000 to live. So that is the number that you're trying to achieve. So I'm taking all that money, I'm minimizing the taxes so I can keep the majority of it. And I'm putting it into a system that starts compounding their wealth. Now, what most people do is they would take that money and they would put it into a well-diversified portfolio. That's what Ray Dalio said, 17 assets, right? Or your financial advisor, 60/40, put some into stocks, put some into bonds. But what that does is that creates a horizontal investing structure where I'm taking a dollar and I'm splitting it. And the problem with that is that I'm averaging out the returns. And what I'm building with a well-diversified portfolio is I'm minimizing my risk. But by minimizing my risk, I'm also capping my upside at the same time. And so we want to take the wealth that we're extracting, we're putting into high-growth assets, and then we're putting it into a velocity stack where each dollar I move over is buying 2 assets or 3 assets or 4 assets or 5 assets together. And when you put a system like this together, most high-income earners could replace their need for earned income In years, not decades. All right. Now, this is usually where entrepreneurs realize that they don't actually have any rules for this. Like they're making high income, but they're not even sure what they're doing. And when I say rules, we need rules because it takes away our emotion. Now, they know they have a business, they know it's making money, but nobody has mapped how that business actually builds their own personal balance sheet. Now, if that's you, I'm going to put a QR code on the screen right now that you can just scan real quick. My team can help you look at how the pieces all fit together, where the money's actually getting stuck. Go ahead and scan that code right now and hop on a call with my team. Now, while that sounds like desirable, it's mechanical. It's like, man, I'd love to have the income. I'd love to see my wealth grow faster. But like, let's think about this from a different angle. Because, you know, I find people operate from 2 different mental mindsets, right? We have the scarcity mindset where we're operating from a place of reaction. And we're always afraid, we're anxious. And that changes the way that we think about things. It changes the decisions that we make. I make short-term decisions because I need to think about getting paid this week or this month. When you get to a place where your assets are there, where your assets could fund your life if they needed to, you move to a state of abundance, a mindset of abundance. And when you think about abundance, you're able to start thinking longer term, you're able to start making bigger swings, you're able to start making moves that may not materialize or pay off for years, maybe even sometimes decades. Now, Warren Buffett's partner, Charlie Munger, I quote him all the time. One of my favorite quotes is that the big money is not made in the buying and the selling, the big money is made in the waiting. And so only when you're able to wait for the big things to pay off are when things fully change. And so You know, a lot of people think about this dream of retirement and having enough money to not do anything. But I don't, I don't really believe that's what most people want. Most people want to just sleep good at night. And most people just want to know their future is set. And most people just want to spend more time with their kids or their parents before they're gone. And when I operate from a place of abundance, and I realize that I'm making long-term moves, and I have the wealth to back it up, we start operating at a whole different level. And that's the real benefit of building a system like this. Now, I know this goes against what most people have been trained to believe, right? I build up assets throughout most of my life, and then I have to start selling them off. In order to pay for my life. But you see, a wealth operating system is completely different. You shouldn't have to sell your assets to pay for your lifestyle. So now I just want to make sure you're not hearing me where it's like, hey, just go buy a bunch of assets and then eventually you start selling those assets to pay for your life. You see, that's the traditional retirement plan, that every time you need cash, then you just sell whatever investments have gone up. Buy low, sell high, right? But you're dismantling your wealth that you spent your life building up. And so the question is, which assets can pay for my lifestyle without having to sell them? Now, I break down exactly how the Wealth Operating System works step by step in the next video. The video's on the screen right now, and I'll see you over there.