Accountant Explains: The 4 Financial Freedom Zones - How close are you?

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. You ever wonder why your bank account sometimes looks like it's practicing for a disappearing act? Or why maybe getting ahead financially can feel a bit like running on a treadmill? You're sweating, you're exhausted, and somehow you're still standing in the same place, but with less hair and more worry lines. Listen, if you've ever felt like you're working way too hard to just keep your head above water, you're not broken, and you're definitely not alone. There's a reason that most people feel stuck. And it's not just because, you know of Netflix or late night Amazon binges. Today, I'm going to flip the lights on for you to show you exactly where you are on your journey in financial freedom and what it really takes to get from where you are to the affluence zone, as I call it, and where your money does your heavy lifting for you. Let's buckle up. Let's find out which zone you're in and what to do next for you. All right, let's do this.

You ever look at your bank account and think, well, dang it, that escalated quickly. Or maybe you check your balance with one eye closed, like you're peeking at a horror movie? Listen. Except that the monster is your grocery bill or that one subscription that you swore you canceled six months ago. Listen, I get it. I've been there. And just so you know, you're not alone. 78% of folks are living paycheck to paycheck, and nearly one in five say they can't cover any emergency. So here's the thing. It's not because you're bad with money or they're bad with money, or that you're destined to live off of ramen noodles forever. Sometimes it's just not knowing what you don't know. I remember that reminds me of a time when I was growing up. Now, I grew up in a ranch style house and we had this one bathroom that was in the hallway and it had Frosted glass on it. And when the moon would shine through, it would make this, like, figure on the ground. And my twin brother and I, we swore it was a ghost. We literally said, it's a ghost. And so at nighttime, when that moon was shining in and the ghost was alive, the only way we would pass that bathroom door was literally, we would sprint. I mean, we were like Olympic sprinters just flying past the door, flying past the door, every door, every night. And, like, my. My dad finally says, what are you doing? What is going on? And. And I said. I said, the ghost. They had the ghost. We don't want the ghost to get us. And he said, what ghost? I said, the ghost in the bathroom. Look at it. He's there. He's staring at us. And he laughed. And he says, that's not a ghost. He walks into the bathroom and he flips the light switch on, and all of a sudden, the ghost was gone. See how we end up in this? We didn't know. It's like we don't know what we don't know. And we created this demon in our mind. And sometimes we do that with money. Sometimes we do that because we just don't understand it. So I want to make sure that I flip the light switch on and I shine the light on it. So there aren't any money ghosts or anything that are haunting you. So today we're going to talk about the four financial freedom zones, okay? It's the journey to financial freedom that you're going to be on. And I'm going to show you exactly where you might be on this map. Now, mind you, when I do this, this isn't about judgment. This is about. This is about your awareness. Because I don't care where you are on the map. I care that you know where you are and what to do next to move you and that you're continually making progress. Okay? And so this is. This is where we're going to go. I'm going to jump to my iPad. I'm going to draw this out for you. So. So you know what we're talking about. But here's the other side of this. Once you go through this, I also have a Freedom Zone quiz, a financial Freedom Zone quiz that you can go take and get a full report on where you are and what your next steps are and the things that you do. You can go to your financialfreedomquiz.com to get it. But wait till you're done with this episode. This will be a primer for it. And then you can jump into the quiz and do it from there. So let's jump down and let's look at it. The, the first zone. As I, as I look at this, the zone that we're looking at is something that we call the drowning point. And, and when, when you look at this, this is, this is kind of, this is kind of known as like, how long can I hold my breath to, to get through this as I'm financially underwater. This is, this is the place where ah, you, you're just going check to check the bills are coming in. You're, you're just hoping that the grocery, the grocery store bill doesn't come in before the, the, the paycheck comes in. You're, it's, it's, it's, it's tough. This is a challenge. Okay? Your money's coming in and you got money coming in up and down, but there's more, more downs than up. Okay? It feels like your money comes in waves hello and then just leaves before you go, before you can even ask where it went. Okay? The money out is going towards bills. It's groceries, it's car payments, it's rent. And you feel like you're one subscription away from bouncing a bunch of checks. You know, the, the thing here is that every dollar is spoken for. You can't get ahead and you don't feel like there's a light at the end of the tunnel. And part of this is.

There'S a challenge here because most of it is self imposed. And here's what I mean by this, is that in this zone, when we talk about this zone, okay, the trait is that most people are living in what I call evasion. Not that they're avoiding things, but they don't know how to face it. They don't know what they don't know. And there's this line here that comes into play that I call the fear or ignorance line. And when I say ignorance, it's more about not knowing, okay? And what happens is that I don't know anything. I'm afraid to make the wrong decision. And so they do nothing and they don't move forward. And so now you end up in this trap of avoidance, sticking your hand in the sand. Like, okay, if I stick my head in the sand, then I just won't know what's happening. But the bottom line is this heads in the sand. When the train hits you, it still hurts. It still hurts. The real issue here is there's no real plan. You're just hoping that next month will be better. It doesn't change without you changing. Okay, so what do you need to do? Well, this is like my dad turning on the light. Okay, You've got to turn the light on. It's going to take a little bit of. Of kind of. Well, what it really takes is a little bit of informed judgment and guidance and awareness to get you to move from there to there to the next zone. So here's what I want you to do. I want you to get the steps in this zone, if you feel like you're here, is to turn the light on. Meaning you gotta get brutally honest with your numbers. You gotta write down every dollar that is going out so you understand it. You know, this is, this is kind of you pretending that you're starring in your own reality show. I don't know, real budgets of Main street, whatever you want to call it. But the bottom line is, until you face it, we can't fix it. Now, I'm not telling you to cut anything. I just want you to have the awareness of where all the money's going. Okay? Number two, this is a time for you to find the leaks. Look for the money. Drains are the subscriptions, impulse buys, $7 coffees, all the things that maybe you're benefit of or you don't enjoy it, or there's no joy there that you could sit back or you're not using it, then just cut it. Cut it for now, you can start it up later, but cancel it, cut it back. And just do one thing. Just find one thing right now to do that, okay? And number three in this zone is to focus on building what I call a mini emergency fund. We call it, in my book, building your money machine. We call it a comfort fund. Start out, I want to get, ultimately I want fifteen hundred dollars to one month's expenses here. This is not your emergency fund. This is your comfort fund, as we call it. But I want you to get yourself at a place where if a transmission goes out or you have a problem with, you know, a health problem, and you need to pay a deductible that you have that covered beyond the emergency fund, so, so you don't panic if the battery, car battery dies and everything. This won't solve everything. But what it does do is it gives you breathing room, it gives you oxygen, so you're not making money decisions from a place of panic, okay? And it gives you the place to move from, and it allows you to start to build the financial literacy and move yourself beyond the fear and ignorance line to the next, the next stage and the next zone. And that next zone is called the breakthrough zone. If you look at it, this is. This is a big zone. There's a lot going on here, and there's a lot of things that can be done here when, when we really dial it in. Here's the thing, is that at this point, you can sit back and you go, I can breathe and I'm paying my bills. That's what's happening. That all of a sudden, instead of all the ups and downs, your income and everything has leveled off. It's evened off. It's. It's flat, but it's evened off. You've dodged. You've dodged the financial bullet. You've made it into the break breakthrough zone. This is where the magic starts. This is where you. You're not necessarily rolling in cash, but you're not rolling and agonizing in panic either. The bills are paid on time. You know, and sometimes, sometimes there's. There's struggle. But you. You're in a better place, and you usually have more money than you have month. The money that's coming in is. It's still mostly spoken for, but now you have a plan. It's not arbitrary. The money that's going out is part of a plan, part of a budget. You're telling your money where to go instead of wondering where it went.

So now what happens when you are in this zone is you actually have some surpluses, you have small savings, and you have that first taste of, I got this. I'm going to be okay. This is where we call it. You go from evasion to activation. Because what's happening here is those micro successes. All of a sudden you're going, wow.

This can really work. I'm getting a hold of it. I'm getting ahead. This is a great place to be because we've moved from the drowning point, okay, into a place where all of a sudden we're starting to get the reins back. But now there's some traps here we have to be careful about. And the first trap is this idea of lifestyle creep. You think about it and you go, oh, I got a raise. Time for a nicer takeout. Time for a nicer car. Time for a nicer. This lifestyle creep is a big trap here because you feel that you have more freedom and you may increase your lifestyle a little bit, put some things on credit cards, and that pushes you back into the drowning point. So we have to be really careful about lifestyle creep and control that. The second trap here is this, is that you get Impatient, you go, oh, I got it, I got it. And you start to push and say, I want to get this all done in the next 20 days, the next 30 days. Your financial journey is a life, a lifelong journey. Let's stay on it, let's give the patience, let's have the discipline, let's have the behaviors and the habits that you need to, to navigate through all these zones and keep you there. All right? So watch the impatience. Okay, so what are the two or three things that you should be doing when you are in this zone? And the first is, is to automate your savings, Even if it's $50 a month, to set up a high yield savings account. Pay yourself first, make it automatic. Every time a dollar comes in, every time you get paid, that's the first money that goes, okay? It's the way for you to start to create automatic wealth. Okay? But it starts with whatever you have. $50 a month, $100 a month, you know, $200 a month, whatever it is, automatic savings. Number two in this zone, in all likelihood, you still have debt and you had debt coming from the drowning point. And if that's the case, I want to make sure that we put you on a debt payment plan. Let's crush the high interest debt, let's cut, crush the consumer debt, what I call destructive debt. Anything that is paying for lifestyle is destructive debt. Okay? The only debt that we will carry is the debt that increases cash flows or increases wealth. That's it. Now that means that you gotta be on a debt payment plan to get yourself out of debt. At the same time though, that also means that you can't keep going into debt because if I'm paying it on one end and going into it on the other end, I'm not going to get ahead. So I got to stop using the credit cards and carrying balances and I got to start paying those balances down, okay? This is going to allow you to put more money in your pocket instead of the banks, okay? And, and over time you'll, you'll eliminate that burden. Now the third thing I want you to do here is this is the time for you to start tracking your net worth. This is a measure of your financial progress. Now you're going to go that some of you might say, hey, I don't want to look at my net worth, okay? My, your net worth. For those that don't know, this is everything you own minus everything you owe. So your assets minus your liabilities. And I like to, to refine that net worth number so it's everything that I own that is. That is something that can produce cash flow. So it's my investments, my 401ks, my pension plans, my rental, real estate, all that stuff, minus all the debts, credit cards included. I don't carry any credit card balances, but any debts that might include. Want you to track your net worth, because this is a measure of financial progress. By measuring it, as much as you look at it, you go, well, wait a second, I'm starting out. I got a negative net worth. That's not going to be fun. Listen, I had a negative net worth also, all right? But if we don't track it, we don't know what our progress is, and we don't know where we're at. So the key is to track it. Now. You can track it, you can track it quarterly, you can track it annually. I think when you first start out, I want you to start looking at it monthly, okay? I want you to start looking at it monthly. Track it. Celebrate your big wins, okay? Celebrate your little wins. Just make sure that you're. Because if I'm tracking it, I'm measuring it now. I can manage it, all right? And so now that's the breakthrough zone. And that leads me into the third zone. And the third zone, this third zone is called the independence. And this is a whole different ballgame. And this is an interesting place for. For you. For you to be. This is a place where now, as much as you're building because you're no longer just surviving, you're stable and you're growing, and you're seeing that you're growing faster because you have your income, but now it's moving up at a steeper rate than it was before. This is where you can look around and say, hey, it's not so bad. I'm starting to be able to do other things. I can go golfing, I can do gardening. I can do some traveling. I'm paying my bills, I'm saving, I'm investing. Things are going well. Life is going well. This is a great place to be. This is where we talk about and say, this is going from activation to evolution. Why? Because you are becoming a different person. You are becoming that person that you need to be to command the wealth and the financial freedom you deserve. Okay? And this is the thing that happens, is that the money coming in at this stage is predictable. It's steady. It may be. And you have more than you can spend. The money going out, you have your needs covered, you have your wants covered, your investments are happening. You may maybe not aggressive, but they're happening. You're more comfortable. You are feeling good about it. Now here's the challenge. This leads to a trap, a potential trap. And one of the first traps is this idea of set it and forget it. Okay, I'm done. In fact, there's a line here, if you look at it, that I'm going to put it in red right here. This is actually one of the most dangerous places to be. This zone is one of the most dangerous places to be. Because this is a line that I call the good enough line. And that good enough line, this is where people will say, okay, I've done enough, we're good. Okay. And you have this set it and forget it kind of perspective. There's a reason I don't like the term passive for passive income. Anything having to do with money, I don't think is passive. Because your relationship with money is just that. It's a relationship. And if we take a passive approach to any relationship, it withers and dies. I want you to be active. The question is, how active? Okay, so I don't believe in set it and forget it in a complete hands off, eyes off type of approach. And the challenge with the good enough line is that when we get there and we say, I'm good enough, what we do is we rest on our laurels. Now, I'm not saying not to be content, and I'll explain this in a second, but when we fall back on good enough, we can fall into complacency. And complacency is the first step to crisis. Especially when it comes to money. Especially when it comes to money. And so what we never want to do is be complacent. What we want to do is to find the contentment with what we have, but also keep the vigilance and the discipline that got us here. Because when we tend to go to that good enough zone, we let go of the discipline, we let go of the good habits. It's like falling off a diet. I got to the weight and now all of a sudden they fall off the diet and they wonder why the weight came back on. Same thing here. I need you to stay vigilant, diligent, disciplined as before. We don't want to get caught up in that good enough line. And so you start to work from that. So there's a couple of things that I want you to work on here and in this zone. This is where you're going to look at how do I increase my investment rate? Now, in my book and the work that we do in the wealth priority ladder, we want you to start putting 20 to 25% of your income away. So if you're not there, then I want you to put 20 to 25% of your income away. I want you to build to that. And there's a sequence, there's a syntax to doing that where we're going to take the discounted or free money first. So if you have an employer that's doing the match and we break it all down for you in the, in the book, in some of my trainings is that you want to make sure that you're funding, fully funding that the match. You're funding your retirement plans, you're funding your brokerage, whether it's your 401ks, your IRAs, your Roths, those kind of things. This is the time to turn that dial up and get the money momentum in place to work harder for you than you did for it. So we want to increase our investment rate at this stage. The second thing we want to do is review the financial systems. Okay. When you look at it, your ability to build wealth is built on your behaviors, but your, your ability to keep those behaviors in check is built on the systems and processes you, you use. So this is a time for you to review your processes and your systems. How you have things automated, what kind of accounts do you have? Do you have tax advantaged accounts? Do you have brokerage accounts? Do you have them titled, right? Making sure that you, you are looking at all of those accounts and saying is everything automated? As much as it could be, the more hands off decisions and lever pulling that you, you can get away from, the easier it will be to build wealth. You'll always check the pulse because we don't just walk away from it. But I want to automate the process. When, when I get paid, the money just kind of zips all over the place, ends up in my investment and ends up in my 401k. My defined benefit ends up paying bills. It is doing its work because I have, I have set it up to do that. This is the time to do that. Okay? And the third thing here is this, is that this is actually a time for you to upgrade your skill set. Whether it's career skills or financial skills. This is a time to uplevel. This is a time to sit back and say what more can I do to bring to me to be better, a better steward of my money machine. A better steward of my money, but also a better steward of my skill set and my ability to Generate and bring value to the people that I care about. The things, the causes and the missions. So those are the three things that I would do here. And then we can cross with that. You'll end up being able to cross the good enough line. You won't fall into prey to the complacency and all that. And when you cross the good enough line, you will cross into what we call the affluence zone. The affluence zone. This is, this is where, where you'll, you'll really start to see things.

Dialing up in a whole different way. Because this is a time where now we get a chance to look at things and we go from evolution to acceleration. Okay? This is the point where you start to look at it and say, now my money is working harder for me than it did, than I did for it. Your income, instead of it being linear and your wealth, it becomes exponential and it starts to build on itself. This is where your money will literally wake you up early and make you breakfast. That's the key. That's what we're trying to do, is that the money is now going out there, recruiting a bunch of friends and bringing them back to work for you. Okay? This is the leveraged income streams we're talking about, the investments compounding, the time is on your side and all of that stuff. So what's happening here is now all of a sudden you have multiple income streams. You have the things that you're doing actively to create income, but then you have the money that's actively, that's actively working in the background without as much of your efforts, that is generating more income in dividends and interest and capital, appreciation value, build up and all that stuff. Okay? Now you have the ability to take and do some things even more where you're, you're paying for things and building more skills out. Okay, your money out is more intentional than ever. This is a time where you know what your money's doing, you're directing it, you're, you're spending it in the places that it matters. You're creating experiences, you're creating legacy, you're creating impact, you're getting behind the causes, and those causes are meaningful. Now all of a sudden, the level of fulfillment goes way up. The level of richness in your life because of how you're feeling, because of who you're experiencing with, who you're sharing with goes way up. This is a time where the wealth starts to grow faster than the active income. The wealth starts to go faster than you might even be Able to spend it. Now there's some traps here just like the other zones. Now the typical traps here is first our friggin ego. We get cocky where we start to say, oh, nothing can stop me. Nothing can stop me. Well, you know what? History says otherwise. There's been a whole lot of people that build a whole lot of wealth, made a whole lot of money and they ended up broke. Remember I said we need to keep the vigilance, the discipline and the habits and the behaviors that got us here. Don't get cocky. Remember where you came from. Remember the journey, remember the tactics, remember the strategies, remember who you are. The second trap, I think is forgetting to give back.

Neglecting to be generous, neglecting to know that, hey, you know what? Look, I'm a son of an immigrant. My dad came here at 17. Okay? Am I doing well? Yeah, we're doing phenomenal, we're doing great. But I don't forget that. I'm just a guy that figured it out. Now I built it, I lost it, I rebuilt it, but I'm not different. I'm not. So I don't forget that. And I want to give back. And I want. It's why I do what I do. The whole writing, the book, my show, my speaking. Yet do I get paid to speak and do something? Yes. But I do plenty of stuff for free just like this, because I want to give back. I want to make sure that I light the path and help other people to do the things that maybe I did to avoid the mistakes that I made. This is a perfect time when you're at this point to look back on your life and say, hmm, what can I do? How can I transfer this in a way that makes sense? Okay? To my, in my case, to my. My son, his wife, my grand. My granddaughters, to you and making it happen. Now there's some things I want you to focus on in this, in this stage also. And number one is to build that legacy. This is a time where you need to start thinking about estate planning, family education, charitable giving, all the things. Because wealth isn't just for you. We're creating a machine that we're going to leave behind, but we're creating a value system we're going to leave behind. We're going to create a process we're going to leave behind. And I want to leave it inside the souls of the people I've worked with, inside the soul of my son, his wife, my. My granddaughters, so they can become even more. To figure out. This is a time to sit Back and say, yes, how am I going to transfer the stuff? But more importantly, how am I going to transfer the values? How am I going to transfer the beliefs? How to allow them to live fully into their world so they can become great stewards of their life, but also great stewards of the money machine that you built. Okay, the second thing here is for you to sit back and say, hmm, how can I mentor and multiply? In other words, you learn some things when you get to this point. How can you teach others? Whether it's your community or society, your temple, your church, your family, your friends.

It'S one of the surest ways to give back because you get a chance to teach them along the road. We just literally had my nephew and his wife, they've been married a year, young couple here staying with us for a week. And we spent some time and I walked them through some things and helped them set up a plan. So they're set up to, to move through and they just gotta follow the plan.

And those are the things that I think we, we want to do. And then the third thing is you need to have a dynamic financial plan. A dynamic financial plan. We talk about it as the, the money machine master plan. And you need to stress test the plan. Revisit every strategy, wealth strategy that you have. Look at the fact that things change, markets change, laws change, legislation change, you change. Keep the plan alive. Don't just set it and forget it and think it's going to work. Every year the economy's changing, does it still make sense? Every year life happens. You might have a new child, a new grandchild, you might have a health situation, you might have a spouse, you might not have a spouse. All those things we need to stress test the plan scenario. Test the plan and make sure it still works for you. That's this game. And we get you up to this affluence zone and we get you to live fully from there. All right, so listen, we've been through all of this. We've talked about the traps, we've talked about the drowning and all that stuff.

But now you have a map. Now you still have the opportunity to go and take the quiz and get the full report of wherever you're at and what to do. But this is the primer for you to go out there and grab ahold of wherever it is you are. This is not about, about judgment. This is not about anything else. Learn these principles. Think about this. My son, he's 35 now, but I started teaching him these at 10. Not like he had a choice, you know, I started brainwashing him at 10. He launched his first business at age 16. And now him and his wife, they literally take off a whole month a year to live and work from another country to experience it. They have their money machine almost fully built. It's probably another four or five years and it'll be fully fully built and churning.

And building. Okay, they're 35. They're 32, 33, and two kids, four homes and a multi million dollar net worth. The discipline, the behaviors, the vigilance pays off over time. It's not luck. It's literally flipping that light switch in the bathroom, seeing where the ghosts are and taking action one step at a time. So here's the thing. We're never going to get comfortable at the good enough line. We're never going to get complacent. We're going to take hold starting today. Okay? So here's your moves. I want you to figure out what zone you're in. Be brutally honest. It's okay. And don't run from the ghost. Let's start building your money machine. Let's flip that light switch on, and let's figure out second. Let's figure out what your next step is, depending on what zone you're in. And it doesn't have to be epic. It just needs to be a step. Progress is more important. Progress is more important that we keep you moving, whether it's canceling one single expense or setting up a savings transfer. If you need help, ask for help. And number three, share your zone. Share your zone in your next move, in the comments, let me know. Let me cheer you on. Let me help you. Let me flip that light switch on for you so you're not worried about the ghosts like my brother and I were. Okay? Because you've got this. You got this.

I believe financial freedom is your birthright. We just got to go claim it. That's why I have this show. That's why I do what I do. And I hope that this helps you along the way. All right? In the meantime, don't forget to subscribe. Make sure that you subscribe, because next time we're going to go even deeper. It's not going to be just building wealth. It's going to be building a life by choice, freedom, purpose, and maybe a few dad jokes that will come in. You know, it's got to be that way. All right, you got this. I got you. And until I see you in the next episode, as I always say, always, always strive to live a life. See you in the next one. Thank you for listening to the Affluent Entrepreneurship 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 Melbourne.

Group and I'll see you there.

And that's it for this episode of Building youg 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.