098 How Entrepreneurs Really Build Wealth!

Hey there, real quick, before we jump into the episode, listen, if your earnings treadmill hasn't set you free yet, running faster won't either. Listen, hustle without principles just going to burn you out. So here's what I want for you. I want you to join me for my money machine experience live. It is three free trainings. Deep dive into how to escape the treadmill and build a money machine that actually works for you. All right, grab your spot here by going to moneymachinelive.com and I'll see you in the free training. Hey there. In this episode of the Affluent Entrepreneur Show, I want to talk about one of the biggest mistakes that many entrepreneurs are making when they're trying to build wealth through their business. Question is, are you making? I'll see you in the episode. Let's find out. 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.

Alright, this one's gonna be cool because.

This is a question or a comment that I actually get often as I travel, I travel, I get a chance to travel around and speak around the country and around the world on entrepreneurship, on wealth creation and money and business and thought leadership and different things. And inevitably, when we have the conversation around building wealth as an entrepreneur, I'll get something like this statement. Now, you might have made it, you could make it. I've made it. And I've had to reconcile it. And that is this, Mel, why would I invest in other investments when I can make such a high return by investing in my own business? So let me, let me first say you might be right. Okay. I am a proponent of investing in your business. I invest in my business on a regular basis. And because you're right, if I can make a high return, then why wouldn't I put as much money in it as possible? Well, there is a reason, and this is the thing that we need to understand is that too often when we start to make those statements, what we're looking at was, is that we're looking at one aspect of, of it and that is the money coming out of the business. It's what's called return. However, there's more things that we need to consider when we're starting to try and analyze. What should we be doing with our business? What should we be doing to build wealth, to create wealth? Now, remember this. I truly believe that wealth isn't what we're trying to get at. And this is where this all comes from. The idea of living an affluent life, a liberated life, a financially liberated life under the affluence blueprint is that it is a richer lifestyle. It's how you experience life and not how you fund it. Okay? A richer lifestyle, a deeper impact, and complete freedom. And when we talk about complete freedom, it is financial freedom. That's the most rudimentary freedom. But it is also time freedom and mind freedom. The ability to choose what you're going to do with your time, when you're going to do it, how you're going to do it, and to have control of your time becomes important. Mind freedom. To have the peace of mind that you know you're doing the right thing for the right reasons, for the right people, that everyone's taken care of, everything is taken care of to have that peace. I had that peace when I got diagnosed with the cancer. To know that the loved ones, my wife, my son, my grandchildren, all of it's all taken care of. Peace of mind, okay? So we need to realize that money is only one currency when we start to talk about building wealth, building to financial freedom as an entrepreneur. And also, there's a couple of different things to the equation. You know, one of the things to realize, and I'm going to. I'm going to draw this out for you because I think I have a framework for you, and I think it's important. And you know me. It ain't a training from Mel. Ain't a session from Mel if there's a framework involved. So let's get the framework up here. And here's. Here's what I know. The reality is, is that most often we talk about this idea of return, and the return is all about the money, okay? It's about the dollars. It's about the money. You make the money coming out of this. And they say, hey, Mel, I have money coming out of my business, and I can put a dollar in the business and make $2 out. Why am I going to go do other investments? Why does that matter? Why should I even take that? Because that means that I'm not making as much money on these other investments. Maybe so. Or maybe what you're making from these other investments is A different currency than money. Follow me. Okay, there's one aspect, let me just touch on this before we actually get to. It is, is that when we start to focus just on the money coming out of the business, we are, we are only focusing on one aspect. We cannot look at the return.

The cash flow, the income, the wealth creation without looking at the other part of that coin. And the other part of that coin is risk. Okay. It's, it's about the, the risk that that's involved with, with making that return. And so what happens is that we tend to focus primarily on the return without looking at the risk associated with the return. What do I mean by that? Let's just, let's just talk about just basic investment theory. You have the opportunity to make an investment.

In anything from stocks, bonds, T bills, businesses, alternative investments. And what happens is that they go on a spectrum of risk. So, and this spectrum of risk goes from risk free. Okay, I don't know that there's truly risk free, but let's just say risk free. This could be cash T bills too high risk. This could be, I don't, speculative investments. It could be even crypto, I don't know, it could be startups because they're higher risk. But what happens is that, but what am I going to get on a T bill or let's say a Savings account.5%.

We get very little return because we're taking very little risk. But if I'm going out here and I'm going to fund a startup, what do I expect as a return? It could be 30, 40% or more. Why? Because I'm taking on more risk. So what happens is you start to look at different investments on this spectrum. This could be a long term bond. This could be a large company stock. This, this would be like a Google or a, a Microsoft or, or something. This could be a, then you could have a small company stock, private companies. Okay, I'm, you know, I'm just, I'm just making this up in the sense that we start to see that as we move this way, risk increases, your exposure increases. Which means.

That our expectation is that when we get further down this line that we're going to make more. It also means we could lose more. Okay.

When we're offered a high rate of return, what they're compensating you for is the risk associated with it. So that's just basic risk versus return theory that we need to think about. When we are trying to build wealth, we don't just blindly go in and say I don't care, throw caution to the wind.

And, and I'm just going to go for the highest return possible. Because the highest return possible probably means it's the highest risk possible and it may not be in your best interest. So there's return and there's risk. We need to consider. The other thing that we need to consider in this framework, in this model is this is your time, okay? Your time, your time is a valuable asset. And too often what we're doing is we're not thinking about the time involved with running the business. How much of it does it take? Here's what I mean. If we look at the different currencies, the different ways that we invest in our business, money is only one way.

So we invest with money, we invest with time, we invest with energy, we invest with effort, we invest with expertise. All of that's going into the business. Now, if you've listened to me for any length of time, I believe that our wealth should be measured in time and not money. In other words, the reason we want the money is because we want to control our time. We want to buy our time back when we, when we are rich in time, in the sense that we can control the moments of our life, what we do, when we do it, how we do it, we start to build the richness in life. On the other hand, we could be making a lot of money.

Working 10, 12 hour days, 7 days a week on that treadmill, running like crazy, stressed out like crazy. No control of our time, no time with the family, no time to yourself, none of that. But we got a big bank account.

To me, that's not rich.

To me, that's not rich. I don't know about you, okay? So why I say this is that I think that we need to, when we start to look at why should we invest outside the business, it's because of the other currencies and not just money. And when I hear the statement, Mel, I can make more money by putting it back in my business. Yeah, you might be right. What's it costing you in the other currencies of time in effort, okay? And all of the other stuff that has to be put back into it. Watch what happens with this when we get this right. If we have the risk dialed in, if we have the risk dialed in properly, okay? And we have the return dialed in properly, what you're going to find is that you are know what your tolerance is when it comes to risk. We all are willing to take on some risk. Some are willing to take on More than others. Okay. And our tolerance will change over time. There was a time that I would have considered, you know, doing. Look, When I was 18 years old, when I was 18 years old, for a couple of years, for about three, four years, I did stunt work for the movies. I was doing high falls, jumping off buildings. Not a smart. Okay, but I was doing it. Would I do it today? Nah. You know, I had a close call one time, and that's what got me out of that business, or we wouldn't be having a conversation. I had a really close call from four stories. Now, point being is that my tolerance for risk back then is different than my tolerance for risk today. This will shift and change, but it is the. It is the connection point between risk and return. Okay. Second thing that we need to understand is that depending on how much time we have to. Time to invest and time back from. From that investment will determine the capacity to take on risk. Okay, how much capacity do I have, in other words? And I did a whole video on this. We can hook it up later on on risk. But. But how much capacity? Because if things go south on you, do you have the time to recover? Do you have the wealth to sustain yourself? Capacity starts to come into play. And then the third piece of this that. That hits when we do this, do this right, is this, is that when we have the return, right, and we have time on our side, or we get our time back, we actually have a tremendous amount of potential. And I use the term potential because this is the potential for you to create.

Additional wealth and freedom. Now you might be saying, well, Mel, why is it potential? Because.

Just because you have the money coming in the return, and just because you have time on your side doesn't mean that we're going to use it correctly. Because I know a lot of people that have money coming in like crazy. They have money going out just as crazy. And they're not building anything beyond the business. And what happens is that they're not building wealth other than inside the business. And this is the thing that I think we need to be aware of. And I get it. You can build. You can build wealth in a business. Okay, I'm building my business at one. At some point I might get a chance to sell it. And this is what most entrepreneurs are thinking about, is that. That, hey, my business is my wealth. Well, it's that whole adage of. Of what happens if we put all our eggs in one basket. There is a chance that you could possibly sell your business if you do it correctly. There Is also just as good a chance, if not better, that your business isn't sellable, that no one's going to buy it or they're not going to buy it for what you want for it. So investing 100% of everything into it, I think puts you at more risk. Granted, you might get a great return on the other end, but there's that balance point of saying, how much risk do I want to take on versus how much return do I want to get? That's one piece of it. There's the other part of it is, in order to build the business, how much time and effort do you need to put in daily? The whole reason, the whole reason that I'm trying to build a business and build something outside the business is this. I built my businesses. These were my business machines. I'm putting in my effort, I'm putting in my time. It's all going in here and I'm getting money out. I'm getting cash out of it, out of the business. The. The money's coming out and that's paying for my life.

And my lifestyle. And some of it is going back into the business and growing. Perfect. That's what we want to do. However, personal brand businesses, especially businesses like mine, because I'm not doing it to make it sellable. Once I stop.

This stops. What about you? So what I'm doing on the other side is then building this money machine, a wealth machine from the business. So I'm taking. Taking some of the cash and I'm moving it here to build this. Am I getting the same kind of return as I do in my business? Probably not. Definitely not. However, that's only the return in money. See, this doesn't take the time and effort that this does. Much lower time and effort. That means what the money machine is really doing is it's giving me my time back. It's giving me my effort back, it's giving me my energy back. I'm not solely focused on the business.

As the only method for me to make money or to build wealth. This.

Is what allowed me to navigate the cancer without financial stress. I had the business machine and I had the money machine. The business machine creates the cash flow. The money machine gives me my time and freedom. It gives me the peace of mind because it doesn't require the same level of time and effort and energy to keep the business going. Okay. And so this is the thing that we need to think about. Because if everything is going into the business, well, what happens if you can't do the business Anymore. Could be a pandemic.

Could be your own health, could be your own choice.

If everything's going into it, but you can't do it for whatever reason, then what happens to your financial future? Because often a business, a small business especially, may not be sellable without you. And if you're not capable for whatever reason, then it's not sellable. What happens if legislation puts you out of business? There are things I was watching someone. Now, this is in a. Needed a regulatory approval to get this product to market. I'm not going to say anything about the product or anything just out of confidentiality, but it needed regulatory approval to get it out to market. And they were going through. They're putting all the money in, they're putting all the money in. They're building, they're building, they're building. They had the teams in place, they're ready to hit, and they didn't get regulatory approval. So they put all the, all this effort in, they put all this time in, they put all this money in thinking that at the end of the, of. Of that, that tunnel, there was going to be a pot of gold. And it wasn't. My point being is this. And this isn't about, oh, my God, Mel is just talking. No, this is about being smart. This is about. About reducing your risk so you can have longevity and sustainability in your wealth. And so what I want to do is use the assets that are built outside the business to reduce the dependency on me to create income. If I stop working this minute, our lives wouldn't change.

Financially. That's what I want for you. So the reason you're running your business, the reason you do the things you do, isn't a have to, but a get. That's what we want. And the only way we get there is to start to make sure that we have the business machine alongside with a money machine. And one of the biggest mistakes I think entrepreneurs are making is putting 100% of everything always into the business versus creating something outside of the business. Whether it's a, whether it's a, a stock portfolio, index funds, ET, ETFs, real estate, all those, we can talk about that. But we got to get over this hurdle first. To say, look, we need to diversify a little bit to. It maybe decreases our returns in the short term on the money side, but it increases our time, it. It decreases our effort, it decreases the dependency on us, and it gives us flexibility. So we don't depend on just a single income stream for our lot, for our, for our livelihood. I've got income coming from different places. If one gets shut off, we're cool. If two get shut off, we're cool. That's the thing that I think we need to, to, to consider. So if we look at it from that construct, then you start to see the importance.

Of investing in your business while at the same time investing outside your business. I hope that this makes sense. I hope that this is home for you. It is one of the things that I have watched people struggle with, especially going through the pandemic or they hit health challenges like I did or anything like that. And so it's solvable. We just need to do the work in the business to optimize the cash flows. Optimize the business. This is one of the things that we do in the generate pillar with the affluence blueprint and then move to accumulate where we can accumulate assets outside the business. And now if, if we sell the business somewhere down the road or we keep running it and it's bringing money in, great. But it's not our only path to financial freedom. So the reason we do this is to diversify, not only the risk, but to diversify the income streams and to bring back our time, our effort back into control in our lives. So I hope that this helps. I hope that this makes sense for you and that you get a chance to start looking at things and say, how do I do the business machine and how do I use that to create the money machine? And if I can help you in any of that, please let me know if you've got questions. Let's make it happen. But let's not go down the road putting 10, 20 years into a business and that's all you have. And it's a precarious thing if something happens to you, happens to the business, or we can't sell it. Doesn't need to be that way. We can make that, make that work. So couple things that I have for you. I'll make sure that we hook up the, the, the video for around risk for you. And if you, you want to go through a special money training and a special deeper dive training, I've got a live training that I'm doing for free. Okay. All of it for free. And I want to invite you to that live training called the Affluent Entrepreneur Live Experience. And we're going to start it. It's not for a little bit, it's going to be in September, but I want you to grab your seat now. And if you grab your seat now, I'm going to automatically gift to you my 10 days money momentum training so you don't have to pay for it. I'm going to gift it all to you. You get free access to that and you get free access to to the live training and so go to affluence live.com or click around this video. We'll make sure that we get this in for you and we'll have it in the show notes for you the links and make that happen. The idea here is this. I believe to my core that financial freedom is your birth. I want to give you the pathway to claim it. Okay, let's do it together. And until we get a chance to see each other on another episode on the road to success, always, always strive live a life that outlives you. Cheers. Thank you for being part of the affluent entrepreneur show with me, your host, Mel Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join the affluent entrepreneur Facebook group@melabraham.com forward/group and I'll see you there. Cheers. Bye.

And that's it for this episode of Building your money machine where we help you learn how to master your money, eliminate financial stress, and live a life of choice. If you found this valuable or helpful to you, here's what I'd love for you to do. If you do me a favor, go to Apple, Apple Podcast or wherever you're listening to this podcast and rate and review the show. It helps us tremendously to keep us at the top of the list so we can continue to get this information and this message out to people. Because I truly believe that financial freedom is your birthright and I want to help each and every one of you claim it. Thanks so much.