14 Hidden Expenses That Silently Destroy Your 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. One of the biggest threat to your wealth isn't what you're spending, but what's quietly leaking out without you even knowing it. If you ever felt like you're doing everything right with your money, but you somehow just seem to at the edge of the checks each and every month and you're not sure where it's going and you don't feel like you're getting ahead, well, this episode's for you because I'm going to break it down for you. I'm going to walk you through and uncover 14 silent leaks, the silent expenses that are quietly destroying your wealth every single day. And more importantly, how do you stop them? What do you do before they drain your future?

This is going to be a fun one because it's different. We're going to start to break down the places where maybe we're leaking wealth, maybe our money's escaping. Many of these I experienced. So some of this is from my clients, some of this is from experience, but all of it is going to help you plug the leaks so you can build wealth faster and not have your future erode without you even knowing about it. All right, so we're going to talk about the 14 biggest leaks that I see. And the first one, we're going to break it down into three categories. We're going to talk about investing leaks, protection leaks, and lifestyle leaks. So when we talk about investing leaks, it's about the things that might erode your investment returns or delay your ability to build growth. I'm going to start with those first because I think these things can be insidious if we're not careful. And the very first investing leak that we have is the I word, inflation. Okay? Our money loses purchasing power every day. Now, we just went through a high inflation period where inflation peaked at 9%. There was times in my life where I remember inflation in the teens and everything. And what that means is this, is that you're not necessarily losing money. You're losing what's called purchasing power, meaning that the dollar that you used a decade ago would buy more than the dollar today. I mean, think about it. $100 today is only $74 worth of purchasing power in 10 years at 3% inflation. So one of the challenges is that, well, I see people that say, I just want to save. I want to save, I want to save. Well, imagine that historically our, our average inflation rate's somewhere between 2 and 3%. And we've had bouts of high inflation during different periods in our history. But by and large, they're trying to keep it in that 2 to 3% range. And we're still up a bit from that right now. But the fact of the matter is, is that if you're putting money, if you're just saving, saving, saving, because you're not, you're afraid to invest, savings isn't going to get you there. Because if I'm saving in a regular savings account, that's getting me less than 1%. But inflation is at 3%. I'm losing 2% while I'm sitting on the money. So inflation is a big leak. And the one, and the things to do to beat inflation is we have to invest in things that will outpace inflation. Okay? That means investments, equities, real estate, hard assets, those kinds of things to outpace the inflation. Because inflation is here. It happens. It's going to happen. So that's the first leak. The second leak is investment fees. So paying advisor fees and that kind of thing. Now, let me be really, really clear. I pay an advisor, and I pay them well. They make a fair amount of money on, on me because of all the assets they have under management. Now, do I need, could I possibly do it on my own? Yeah, I can, but I need the second set of eyes. I want the second set of eyes. So, so I'm not saying not to use an advisor, but I think that there's a time in place to use them where that fee actually makes sense. But I want you to understand something that if you're. The reason you're going to an advisor is because I just want to be hands off. I don't want to worry about it. I don't want to worry about learning about investing and funds and all that stuff. And I'm just going to relinquish responsibility. That's a problem. Okay. A 1% annual fee can cost you $1 million over 30 years. Okay. On, on, on 500,000 invested. It just, it's a small percentage when you say 1%. But, but what you're doing is you're carving out that percent.

Every single year. And not only are you carving out that percent every year, the growth on it. So small fees compound, like negative interest. It's huge. And so one of the things I would do is, is we want people in low cost, low fee index funds, ETFs, so we minimize the expenses there. At the beginning of your investing journey, I don't believe you need an investment advisor, okay? There isn't the complexity and the needs associated with it. Because in today's world you can go through a robo advisor, you can do a risk tolerance assessment to figure out the proper portfolio structures. I help people with their portfolio structures, all that stuff. And then you can actually execute the trade. You can go buy a total stock market index fund, an international fund and build the portfolio or just buy a target date fund like I talk about in my book. I break it down for you.

So you don't need to be giving someone one, one and a quarter, one, one and a half percent when you begin. But you'll get a critical mass to your portfolio and at some point it makes sense. See, my investment advisors, they're not there to just pick the funds. I can do that. I do do that. They're there to analyze the plan, to stress test the plan that I've created and do that. But also that there's some nuances as you grow in your wealth, complexity finds you. It comes, it comes chasing after you. Don't make it, don't make it come after you prematurely. Because let's just look at me, I'm 63, going to be 64.

At 64, I got to start thinking about Medicare insurance. Well, Medicare insurance, and there's.

Premium surcharges based on income. And we got all, all that stuff planning around Social Security, around all that stuff is really important. And there's some nuances there where having an additional set of eyes makes sense. Okay? So I want you to understand that I want to minimize the investment fees, I want to minimize the expenses on my investments until complexity is at a level that maybe I get more benefit from it. I get a lot of benefit from my team, okay? But historically I didn't have a team, not like this.

That leads me to the third leak, which is also an investing leak. And that is the opportunity cost of not investing early enough. Listen, delaying your investing just 10 years starting at age 35 versus 25, you'll miss a million dollars in growth, okay? Time is the most expensive asset. The earlier you start, the more it Compounds can't tell you how many people think, well, I'm young, I have time. Think about it this way. Every dollar invested at 20 years old goes up at 8%. It goes up about 80 times. 88 times. Hey, if you wait five years, if you wait five years, it only goes up 44 times. If you wait another five years, so from 20 to 25 and then 25 to 30, it only goes up 23 times. Still, 23 times is really good. But look what you gave up by not getting in the game early. This is why I say it doesn't matter how much you put in, it matters that you are in. Okay? We don't want to lose the opportunity cost of not investing early enough, no matter what that is. Okay? It leads me to number four, and this is tax inefficiency. Now I know no one wants, they don't want to go to the dentist, they don't want to deal with taxes. Okay?

But when taxes can cost you 20, 30, 40, sometimes 50%.

And, and you're giving it away to the government, you'll never see it again. It's important to understand what the tax law puts on your side and take advantage of everything that available to you to make sure that you put as much in your pocket and your financial futures pocket versus the government. So people not using tax advantaged accounts, if, if you're not using HSAs, Roth IRAs, 401ks, you're, you're paying more tax than you need to, versus if you start to use those accounts to get the tax deductions, then all of a sudden you're saving the tax and the money's working harder for you and on your benefit, not the government's benefit. I get it. You know, when you take money out of an IRA down the road, you're going to have to pay tax. I know, we'll deal with that and there's ways to plan around it, but the fact of the matter is, is that I want to keep as much working for you as possible as early as possible. Remember last lost opportunity cost in, in the leak number three, same thing. Okay? So it's important for us to try and get as much money from tax advantage perspective, working for us as possible. All right, so those are the investing leaks that I see. Now let's look at lifestyle leaks. Lifestyle leaks are daily behavior spending patterns that really quietly raise your, your cash out and reduce your savings. The first one, and this is leak number five. But the first one of the lifestyle leaks is lifestyle creep, y'. All. I get it income goes up, you want to live a better life. So spending increases. I'm fine with that. As long as you're investing and savings increases proportionately to the mistake that happens is this. I'm investing $500 a month. I'm making $50,000 a year, and I'm investing $500 a month. Now all of a sudden, I'm making a hundred thousand dollars a year, and I'm still investing $500 a month. But I have a hell of a lifestyle. I got a bigger home, I got a better car, I got some toys, all that stuff. So what's happening is that lifestyle gets away from us, and our investing in our savings doesn't go with us. And there's two problems with that. One is we are living in a consumer mode and not a creator mode. Okay, I want you to create wealth and consume. That's fine, but not at, at the point of jeopardizing your financial future. But, but two, what you're doing is you're increasing your lifestyle costs without building a machine at the same rate and the same level to support those lifestyle costs when you decide you want to stop working. So remember, the idea of building a money machine is to have that money machine throw off enough cash flow where you can continue to live your life without having to earn the money from active efforts. That's the key. Okay, so lifestyle creep is an important one. Six or the second. The second one in lifestyle leaks is interest on debt, y'. All. Same thing. It's really hard to get ahead if you're carrying a balance on a credit card that you're paying 20, 28% on. Okay, literally what happens is that, that 20%. If you've got a 20% balance on a credit card and it's not you're paying just the interest on it, you can't get ahead. And just as much as compound interest and compounding works to our benefit when we're investing, it can destroy us when we're spending. So this is, this is a place where we need to look at, am I carrying balances? What are the interest rates on them? Do I need a debt payment plan? And how do I get myself out of debt? Leads me to number seven, car depreciation. Oh, my God, this one's a big one. And I was.

In my early years, this was an important one for me because I would buy cars and I would lease cars and I would do things and I would rotate my cars every couple years. But the reality is that new cars lose 20% of their value immediately and within five years they lose 60%.

So you think about it and you go, I bought a car for $40,000 in five years, it's only worth 16. Depreciation is this silent, inevitable expense of ownership. It's a problem. Okay, but let's couple that problem with what's really going on out there. Cars aren't $40,000. Now you're looking at cars that are 50, 60, $70,000. And when you do that, in order to make it make sense so you can do it, what else do they do? They say, well, you, you only have to put like 5% down and we'll finance it over 7, 8 years.

So now you've got a depreciating asset financed over a long term.

And you're upside down in it, so it's losing value. You're not paying down the loan fast enough. Now you can't get out of it. And what people will do is they'll roll it into the next vehicle and the next vehicle and they're playing a vehicle Ponzi scheme because sooner or later it's coming home to roost. Full transparency. Did I buy my car new? Yes, I did. Did I finance it? No. I paid for it in cash and I keep my cars for seven, eight years. Okay. So I know that going in and I don't overspend and I don't finance it in doing that. All right, that leads me to number eight, last minute purchases. Meaning that unplanned, you know, rush, last minute not being organized. So rush orders. I need this tomorrow kind of thing. The surcharges you get for some, some of that is astronomical. I do a lot of speaking around, around the country, around the world. And sometimes what happens is that the promoters are surprised at how early I book my airline tickets. I do that because I don't want to get last minute, last minute flights. One, they're way too expensive. Last minute hotels, rush orders, they typically will cost 40 to 60% more in. It's, in most cases it's a result of lack of planning, procrastination and everything else that translates into these higher prices. So I try to avoid these last minute rush orders as best I can. That leads me to number nine, this is huge guilt or emotional spending or it could be peer spending, if you will. There's so many different ways to look at it. This is like keeping up with the Joneses. It's seeing what's on social media. It's feeling an obligation that someone is going out and maybe they have a different Income structure than you. And you think that you got to keep up with them, or you feel that peer pressure, or there's fomo fear of missing out because someone wants to. If. Listen, if you can't. If it's not in the plan. This is why we plan up front. So anything you're spending, you know that is already planned for. If it's not in the plan, we don't spend it. Okay? But when we start to make emotional financial decisions, we make emotional spending decisions. It's a problem. Typically. That's why when I tell people, I want you to track your spending for six months, if you can start with one week, two weeks, one month, 30 days, start tracking your spending. But here's what I want you to do. I want you to track the amount, journal the amount journal what it was for.

Journal what you were feeling in the moment you spent it. Because when we start to understand the emotions around the spending, we start to see the emotional spending triggers that might be there. Okay? That gets you to say, I, you know, I'm bored, I'm stressed, and I'm gonna go buy something. Okay? So this is. This is something that you want to put boundaries around to protect your relationship, protect your finances, to protect all of that and not fall prey to people that say, oh, you know, come on, you only live once, and they pressure you into doing something that you didn't want to do, and you spend something that you didn't, didn't need to spend, didn't want to spend, and shouldn't have spent. Okay? Leads me to number 10, time procrastination.

Delaying the things that you know you should be doing from a financial standpoint can cost us tremendously. Okay? It could be anything from insurance, estate plan investing, retirement contributions. Every day that goes by when you have not taken care of those things are.

Lost opportunities or potential for increased costs because it reduces your options over time. When mom got sick, we needed to make sure that everything was taken over. When I got diagnosed with cancer, I literally, within hours, I was in my attorney's office, going back through my trust, making sure that it was done right, to make sure that everything was in place, because I didn't want to get into a position where I couldn't make financial decisions and it was too late. And it cost us things that we could have saved, whether it was in taxes, estate taxes, or other costs. This is important to sit back and say, what financial decisions have I been delaying procrastinating on because of lack of information, lack of understanding, lack of direction, and let's get them done, let's get them fixed. Let's get the questions answered, let's get you direction, let's get you insights, let's get you support, and let's get it done so we don't lose, so we can plug that leak. That leads me to the last category of leaks, protection leaks. Okay? These are leaks and costs that, that come from not optimizing your financial safety nets, the benefits and the contracts. Okay, number 11, and the first one here is this not negotiating major expenses. All right, y', all, I truly believe that everything's negotiable. So I am, I am one that negotiates in a fun way. And maybe I'll do an episode on how to negotiate pretty much everything. You know, when we did remodels on the house or we do anything, whether it's negotiating salary, even medical bills, even negotiated the mortgage on this house, I think that when you're making major purchases, when you're making big expenses, it's important for you to sit back and look at it and say, hey, let me negotiate. For what I think it's worth, negotiation is one of the fastest ways to increase your ROI on your wealth actions. So whether it's a purchase, whether it's an income stream, you want to make sure that you are negotiating. And so I know a lot of people will say negotiating. They give it a bad rap. No, part of it is, is to sit back and just make sure that we're on the same page. Here's, here's another for instance when, when we start to, to look at this is that when it comes to these expenses, start asking yourself, do you really need the expense? So not only negotiating the amount of, but negotiating whether it's actually done or not. For instance, this just recently happened. We have.

A hot tub Jacuzzi in the back. And for some reason, the wireless control panel was not working. And the person that was working on it said, well, you need to upgrade the whole system and it's going to cost you, you know, a bunch of money. And I go, yeah, this doesn't sound right. This doesn't sound right. And I was going back and forth, going back forth, and I almost, I almost just said, all right, let's just get it done, because I want it fixed. I want it done. But then I literally yesterday picked up the phone and I called the company that, the manufacturer, I said, hey, this doesn't sound razor. And they got, no, let me walk through the things that you need to do to make it work. There was just some different technology that wasn't communicating properly. You had to change the settings, Literally change the settings. Everything works fine. And I would have had. I just relented. It just, just kind of gave up. I would have ended up spending, you know, thousands of dollars to fix something that didn't need to be fixed. And so I think it's really important for us to, to start to, to really look at things when we're starting to spend money to do things, to say, have I negotiated the best price? Have I searched for the best price? And. And is it something that I really need? That leads me to number 12, unclaimed employer benefits. This was a big one, y'. All. If you are in an employment that has a 401k that is matching and you are not contributing enough to get the match, you're leaving money on the table. You know, whether it's tuition reimbursements, whether it's 401k match, whether it's an HSA. I mean, there's companies that actually contribute to an HSA. If you contribute, there are some things to do that. There's wellness perks that get forfeited that are thousands of dollars of free money. Spend some time with your employer and your employment benefits package to say, what can I do? What makes sense? Because if, if there is a think about this, the 401k, a $3,000 annual match over 30 years at 8% is over $340,000. Now, it's not going to be like, it may not be millions, but 340,000 is nothing to sneeze at. And you're leaving it on the table. Got to get it, get the free money. It's one of the reasons in the wealth priority ladder when we start to build that one of the first stages is making sure that we got access to money. The free money and the discount money. Hey, leads me to number 13, low deductible choices on insurance. I know that sometimes we don't want to pay out deductibles on insurance, but sometimes you got to, you got to look at things and say, what's the likelihood of loss? And does it make sense to have a low deductible of $500 or am I willing to go $1,500? So if you go from $500 to $1,500 on a car, an auto plan, it could save you hundreds of dollars a year in premiums. And so when you look at medical insurance, car insurance, things like that, you got to look at the deductibles and Say, where's the deductibles? Yeah, I'd love to have the lowest deductible possible, but you're paying for it. And if you by and large, don't use it and you have an emergency fund and a peace of mind fund in place, your deductibles are covered. So even if your deductible went to $1,500 or $2,000 and you had that in the peace of mind fund, save the premium dollars so you can invest it in your future.

Pay for the protection you need, not the unnecessary guarantees that you don't. Leaves me the last one, and I think this one's a big one. Health neglect. This was something that was a realization for me. So when I got diagnosed with a cancer, I had not seen a doctor in seven years. Not because I didn't like doctors, but I had moved my wife and I moved down to the beach. I left, you know, we're 100 miles from where we used to live, so all my doctors were 100 miles away. I felt fine. I was working out. I was eating. I was eating well. You know, I didn't see any problems. Then all of a sudden, I had the symptoms of the cancer, and I realized I hadn't seen a doctor seven years. Now, had I seen the doctors before that, would it have prevented the cancer? Likely not. But would it have prevented the tumor from getting to seven and a half centimeters and jeopardizing my prostate, my kidney, my bladder, and my life? Yeah, probably so. Okay. And so that woke me up to this whole perspective of I am aggressively proactive in preventative care and making sure that I'm going to stay vibrant and healthy for as long as I possibly can. And the other side of that is that when you're not, the level of costs for care and medical costs for chronic conditions goes up, which wastes the wealth. My mom, six and a half years on dialysis, that six years cost over $850,000.

Now, the reason her kidneys failed was because she had unchecked blood pressure, high blood pressure. It could have been managed had she gone to a doctor. So skipping preventative care, neglecting your health because I'm working too much, because of that. This not only erodes your wealth, but erodes the quality of your life, because now, all of a sudden, you can't even enjoy the wealth that you have. I got two young granddaughters, and I want to run with them for. For many, many years. Okay? I want to chase them around and. And have fun with them and play with them and all that stuff. And, and so I look at it and say, investing in your health today reduces your health care expenses tomorrow and increases the quality of your life tomorrow. So Those are the 14. Those are the leaks that, that I think are, are very silent, very quiet, but slowly eroding our wealth if we're not careful. So here's what I'd love for you to do now is I want you to go through the 14 and say which ones apply to me? Not because you're going to beat yourself up, but because you're going to correct them. Because you're going to go back and say, wait a second, now that I'm aware of it, let me plug the leaks and let's take that other money and let's put it to work for me to build the Money Machine so you can live free, so you can live a life by choice, a freedom based life. All right, I hope that this helps. Do me a favor, let me know in the comments which One of the 14.

Might be in your life and what you're doing to fix it. Love to hear from you. Love to have that conversation. And at the same time, if you haven't subscribed, smack that subscribe button. Share this with a friend. All right, can't wait to see you in the next one. And on the road to your financial freedom. Until I do, always, always strive to live a life that Bless you.

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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