004 The Simple Way to Build Wealth

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This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an affluent entrepreneur.

Hey there, Mel Abraham here. Welcome to this episode of the affluent entrepreneur show. And in this episode, we're going to talk about the simple way to create and build wealth. And it was kind of an interesting thing because I think people think from talking to them over the years and, you know, some. All the speaking that I do, people think that building wealth, it's complex, but it isn't, okay? It truly isn't. People look for the secret, if you will, but there isn't one. Actually, it isn't a secret. You know, how to build wealth is. Is public domain. It is out there. People also think that they have money problems. There's some people out there that are sitting there saying, I'm living check to check. In fact, 78% of people today are living check to check. And they think they have money problems. They don't. They don't. Here's how I look at this, is that money problems are a result of your behaviors. Now, some people might have some money issues, but by and large, the money problems that you're experiencing right now are a result of your behaviors, not the money itself. The behaviors. You have a behavior problem that's causing a money problem, which really means that you have a thinking problem, because it's your thinking that causes the behavior. The thinking causes the behavior. Your habits will create the money problems. So that's why I say you don't have money problems. We just got to look at the behaviors. And the key is this, is that if you understand wealth principles. And wealth principles are fundamental truths. Fundamental truths. Principles are fundamental truths that apply all the time. They're laws, universal laws. A principle is also a system of behavior. And so if you have the right system of behaviors, then we can start to build wealth. Here's the way I've seen it, is that one of the behaviors, for instance, I'll give you a for instance that I see is what we call the wealth priority pathway, is that when you look at most people in the world today, what they do is they go and they earn money, they, they make money, they spend money, and then whatever they have left over, they might invest it. And so what they're doing is they're saying, here's my income, here's my lifestyle, and then here's my investments. But the wealthy, if you look at the wealthy, here's what they do, here's what they do. They say, here's my income, here's my investments, then I'll figure out the lifestyle. In other words, what they do is they say, I'm going to make money, I'm going to make investing the priority a different behavior. And then from that, we'll see what's left to create the lifestyle. Now you might say, mel, if I did that, I wouldn't be able to live the lifestyle I want. Well, I get that, okay, I get that. But you always have the ability, one, change your lifestyle, Two, change the way you're living your lifestyle. In other words, managing your money and managing your expenses better, or three, change your income. Side gigs, side hustles, additional businesses, additional income streams, a lot of different ways to do that. But the bottom line is this. Your level of wealth is a product of your behaviors, which is a product of your thinking. And so when we shift this, you'll get different results. And that's why I'm saying that most of the time, it's not money issues that you have, it's behavior issues that you have. And I get that sometimes that's hard to accept. I know that when it was told to me, it was hard for me to accept, no, I don't have behavior problems. Well, that in there, that and lies one of my behavior problems. The denial was a behavior problem in and of itself. And once I got past that, things shift shifted, things changed. If I finally accepted it and said, you know, you might be right, I'm running up credit cards, I'm spending more here, and I probably shouldn't, and it's not necessary, it's not needed, it's wanted, and I'M spending tomorrow, tomorrow's future for today's lifestyle on stuff that really doesn't matter. So what do you need to do to build wealth simply? There's a couple things I'm going to tell you. The first, the three basic laws. And then I'm going to take you through six steps and there's more things and more layers to it. But this is the starting point. If we can at least get this dialed in, we can start to move through some things. So the first basic law is this. Spend less than you make. I get it, I get it. You know, we want to have the nice things, we want to do the fun things, we want to do that. But spend less than you make. If we're constantly putting things on credit cards, I what that's telling me or telling us is that you can't afford to buy it right now. If I cannot live my life at the speed of cash, then I am overextending myself. Hopefully that makes sense. Now, on long term purchases like a car, I will tell people, hey, go out three years, but you're not going into a car deal for seven years. That's ridiculous. On a depreciating asset. Are you kidding me? No. But if you want to go three years and you're going to keep the car long term, I'm cool with it. But other than that, you're not financing a lifestyle and living beyond your means on credit cards. That's where we're going to get ourselves in trouble. And so we want to make sure that we live. Spend less than we make. That means you better track what you're spending and you want to track what you're making, which then goes to the same basic. The basic law number two, which is, which is what I just talked about is that don't go to go into debt for your lifestyle. I don't care. I don't care what your neighbor's driving. You don't have to drive something better. This isn't about comparing to the Joneses. This isn't about keeping up with the jones. The Joneses are freaking broke, okay? So let's not keep up with them. And you know what if the neighbor just bought a brand new Tahoe, you don't know if they did it all on debt. You don't know what their financial situation is. You don't know any of that. And it's a facade. And you certainly don't decide what you're going to do and what you're going to spend on by looking at social media or looking at the media and what the advertisers are doing for you and all of this stuff. So the bottom line is this. We do not finance our lifestyle with debt. And the basic law number three is we invest.

The difference consistently over time. Now, my suggestion is you follow the wealth priority pathway and you and you make sure that you generate the income you invest first and you work on the lifestyle third. That's the priority and that's the way the wealthy do it. So spend less than you make, don't debt, finance your lifestyle and make sure you're investing consistently over time. Those are the three basic laws. Let me give you six steps, six things to do. And the first is this. I know you may not like it, but I want you to track everything. Now, some people will call this a budget. I don't. I call this a cash resource plan. I want you to be able to look at your credit card statements, your checking statements, and I want you to track where every single dollar goes at the beginning. Here's why. I see every dollar that's coming in as a worker, as a foot soldier, that's going to go to work for you. And so what happens is that I want to make sure that that foot soldier knows exactly what I want them to do. In other words, I want to give them an assignment. And that's what budgeting does. When we turn around and look at it and say $10 is going to here and $100 is going to there, we're giving it an assignment. Think about it this way. If you have a business and you hire like 10 employees, you hire 10 employees and you give none of the 10 a job description, and you give none of the 10 tasks and you give none of the 10 goals, and you give none of the ten outcomes, you give none of the ten any strategies or tactics to use. How effective do you think they're going to be at achieving the goals that you want? Yeah, not at all. So it's the same thing with your money. The money is coming in. They are your employees. They will work for you seven days a week, 365 days a year, 24 hours a day, if you tell them what to do. So we need to track everything and make sure that we know where every dollar is going and we are intentional with it. So that's step number one. And that will make a huge difference at the beginning. Might be painful because you're going, wait a second, I didn't know I was spending that much. That's okay, that's okay. Awareness will be your first step to correction. All right, Step number two is to set a savings and investing rate. Okay? It's fine if you know where everything's going, but let's set a percentage to go into a savings account for future investing. In other words, it might be at the very beginning, it might be just a couple percentage points because that's all you can afford until you fix the lifestyle and the overspending. Maybe not. It could be 10%. I want the people that I work with, we're actually operating at 15 to 25% until we have a certain amount of wealth built up where that we set an existing rate that automatically 5%, 10%, 15% is going into a savings account and we set that. Now, if you're looking at it and say, mel, I can't afford to do that, I get it. Start somewhere. I don't care if it's 1%, I don't care if it's 2%. Start somewhere. And here's what I'd suggest for you to do. Start it wherever you can. Let's say it's 5%. Then over time, say the next month, go from 5% to 6%. It's 1 percentage point. Believe me, you won't miss it. Then over time, another month, month and a half, you're going to move from 6% to 7%. You're going to do these small little incremental ratchet up until you get up to that higher level. Now, the other way to do it is this. Let's assume you're working at a job and they decide that they're going to give you a 3% raise. Take 1 1/2% of that raise and put it directly in the investment. It's something you weren't going to get anyways. Let's put it towards your future and then take the other 1.5% and use that for your current living. Okay? So those are a couple ways to reset your savings rate. So track everything and make sure that you set a savings and investing rate and continue to increase it as much as possible until you get to 15 to 20% minimum over time. Number three has to do with number two. I want you to set the savings and investing on automatic, on autopilot. In other words, I want that that transfer to the savings account. Don't leave it in your checking out. I want it to transfer the savings account out of sight, out of mind, on automatically. So if you get paid, if you're taking a paycheck every month, on the first of the month, on the second, a Month. I want that money transferred out without you having to go online and do the transfer or go on your app and do the transfer. It's automatic. Take the friction out of your savings and take the friction out of your investing. And what will happen is in, in five years, you go, oh my God, look at what I got. Number four, look for ways to incrementally increase your savings rate. Okay? I talked about this ratcheting up of 1% or splitting your increases or your raises and that type of thing. So that's, that's one, increasing your savings rate. But the other way to look at it is looking for ways to increase your income. Is there a side gig, a side hustle that you can start to get some additional income? Here's why this is important. 200 extra a month invested at 8% over 30 years turns into over $300,000. Okay? $800,000 will turn into a million dollars. I mean, $800 will turn into a million dollars. Okay? So the bottom line is this. It's not going to take a lot to make a lot over time if you start. So if I could get a side hustle that can bring in 200 to $500 a month, $800 a month, and I move that directly into the savings, I'm going to incrementally increase my wealth dramatically over time. So number four is incrementally increase your savings rate. And at the same time, part of that is finding a way to increase your income. Step five, do not abdicate your financial shift to someone. This is huge. It's too often I hear people say, well, I got a financial advisor for this. I've got a CPA for this. I've got an attorney for this. Here's the deal. You are the captain of your ship. Stay the captain of your ship. Do not give it up. Then they are your advisors. They are to be your to your right and your left. They are your deckhands. They are your navigators. But you are the one with the hands on the, on the wheel of the ship. You are the one that's controlling the ship. The do not relegate or advocate to them and give them all the power. It's you. They are there to serve you, serve your dream, serve your financial future. They are there to inform you and educate you. If they're not willing to take the time to inform you and educate you, they're the wrong individuals in your life, get rid of them. I know that's strong to say, but your financial future, your financial future depends on It. So it's important. I'm not expecting you to be some financial guru and go through all the testing and certifications, but I expect you to understand what they're doing and for you to be the decision maker based on what you want. Not to allow them, not to give it to them and say they've taken care of it. Nope. Check the pulse on the patient. Make sure that the patient is alive and thriving. Make sure you know what they're doing and what investments are working, when they're working, how they're working. Do not, do not abdicate it to anyone else. And number six, play the long game, okay? Wealth building is a long game game, okay? This isn't about hitting it out of the park. Now, you might hit it out of the park once, but it's those that are trying to hit home runs all the time that will make it and lose it quickly. So I want you to play the long game. Consistent, persistent investing based upon sound fundamental principles. The fundamental truths over time will build your wealth. There's a book out there by Chris Hogan called everyday millionaires. 10,000 millionaires they interviewed in this book. And you will see that most of them aren't some big entrepreneurs that build businesses and made tens of millions of dollars. Most of them are W2 wage earners that consistently invested money into their 401k, into their retirement accounts, into their investment accounts over time. They just did it regularly. You follow these six steps. It's a simple path to wealth. Now, there's a lot more that we can do and we're going to talk more about it. But if you just start with this, let's just track everything, let's figure that out. Let's set up a savings investing rate. Let's automate the savings and investing so we get that done and it's out of our hair and it's no friction. Let's figure out how I can incrementally increase the savings rate or my income so I can move that into investing. And let's not abdicate our financial ship, the captaining of our financial ship to anyone else and play the long game. That's the key. So hopefully this helps you in trying to figure this out. This is a simple path. There's more to it that we're going to get into. Here's the deal. If you want to have conversations, more conversations around wealth investing, money, business, business building, all of that type of stuff, to become that affluent entrepreneur you want to become, to live that affluent life that is a richer lifestyle, deeper impact and Complete freedom. Here's what I want you to do. I want you to go and join our private community called the Affluent Entrepreneur Group on Facebook. I'll put the link in the show notes and this is a place that we can have conversations. It's a place that you can be safe to have those conversations. It's a place that you can ask questions. It's a place that we can have a dialogue. It's a place that when you ask the questions, I may bring those questions on a show and start doing Q and A and that type of stuff. And it's a place that I might ask, if you're willing to. To come on the show and join me so we can do some coaching and mentoring right there on the spot. So click that link, join the group. Let's keep in this conversation and let's keep moving you forward towards that affluence and financial liberation that you dream of and deserve. All right, I look forward to seeing the next episode of the Affluent Entrepreneur Show. Talk soon. Cheers. Bye. Thank you for listening to the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the Affluent entrepreneur Facebook group now by going to melabraham.com group and I'll see you there.

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