EXCLUSIVE: Building Your Money Machine For Financial Freedom - PART 2

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.

Welcome to this episode of the Affluent Entrepreneur Show. This one, it's a different one, It's a unique one. It's something that I haven't done before. So if you hadn't noticed, I have been in a special training series. I do this once a year. It's called the Affluent Entrepreneur Experience. This is my live three part series that I do where I'm helping people just like you get the priorities, the principles and the processes it takes to build a money machine. And we know that the money machine is the key to your freedom. It's a key to life of choice. It is a key to getting your time back.

Okay?

And so in this episode, what I've done is I've taken the training and I've condensed the training down into the highlights, the juicy stuff that you need to know to start to move yourself forward on the road to financial freedom. So take it all in, take some notes, let me know if there's anything I can do to bring it further for you. Enjoy this episode of the Affluent Entrepreneurship.

So we're going to talk about six principles. Here's the thing that started to drive me to being more principle based in the things that I do. You can call it principles, you can call it rules, however you want to look at it. And so the first principle is why before how and how much? Because here's what, what I have seen is that.

Money is truly not a, not a purpose, it's a result.

So the question is why? There was a 2017 Harvard study of 4,000 millionaires and it was a happiness study. And they, they, they looked at these millionaires and they asked them the different things that were, that brought them happiness. And you know, making money wasn't on the list, but how they made the money was. The why behind the money was what was, was driving their happiness more so than the money themselves. Because they realize money as a result, money is a tool. Money is a tool to an end to give us what we need. And here's what I also know. When you give your money.

A higher purpose.

You will give your life a higher purpose also. So when you give your money a higher purpose, you will create a higher purpose for your life. It truly is about understanding why you do things. Everything I do is driven by a why. Everything I do. And now, mind you, your why will change. My why initially was my son. I was a single full time dad. He was everything I had met Stephanie. Okay, there's missions, there's causes. Yeah, I have an, I have a non, a nonprofit, a charitable organization that deals with abuse and violence, abuse and violence against women and children. That's a big mission and cause for me. I get behind causes that have to do with, with animals, especially being a puppy owner. Okay. So all of that are the whys that start to drive everything. And so the question really is when you come to me or someone comes to me and say, I just, I want a million bucks, my first question is why? A million dollars is an arbitrary number. It could be a lot, it could be a little. But why? And so, so the question that drives it is always the why. Because when you start to hit difficulty, when you start to hit, hit the problems, this is what's going to get you through. It leads me to principle number two. Principle number two.

Principle number two. Wealth confidence comes from clarity. And you're probably going, what the heck do you mean? Here's what I mean by this. Wealth confidence comes from clarity is this is that you cannot move from somewhere until you know where you are.

And the way you know where you are is to be willing to accept your current reality.

Not judge it, not beat yourself up, not blame it. I, I, I know. So.

I got diagnosed with the cancer on a Friday.

And my wife and I pretty much spent all of Saturday crying till we had no tears left. And on Sunday, sometime on Sunday.

I woke up, I looked at her and I said.

This has been given to me. This is our lot. This is the hand we've been dealt.

So now what? What are we willing to do? And what am I prepared to do to beat it? But it wasn't until I was willing to accept the current reality that I was empowered to do something about it.

So there's two levels of clarity. The first is, what's my current reality? What's my current income? What's my current expenses? What's my current debt? What's my current assets? Being clear about it, not judgmental to just say, it is what it is. Now I can, I can do What I need to do and the second clarity.

Is where do I want to go?

What's the trajectory?

What's the vision for my life? Stephanie and I, one of the beautiful things about having Budo is that every day, at least once a day, her and I take a walk with him.

And it gives us a chance to chat. It gives us a chance to talk. It gives us a chance to connect and reconnect to where we want to go and talk about our dreams. Now, it doesn't happen every time. Sometimes it's just us going and talking about nothing. But it gives us the opportunity to continually attach to a future that we want.

But we have to accept our current reality before. Before we can move from that reality, because it's with that reality that I can sit back and say, okay, I got cancer. What are the different treatments I can go through? What are the things? And we hit it. I hit it every way from Sunday. Eastern medicine, western medicine, holistic, all of it. All of it. Because the odds. They looked at me and said, you might lose your. When they told me I might lose my bladder, I said, hell, no.

Now, you know, it's. I've been three years clear. You know, I had four. Three surgeries, four tumors removed.

And. And three years clear. Now, just so you all know, this Friday on the 8th, I go back in for another scope and scan, all right? Preventive. And not because there's anything, but because it's a high reoccurring cancer. I got to go in. I'll be honest. It. It. It's unsettling. During that, I tell my wife, I go, I now know what a defendant feels like when they turn around and say, the. The jury reached a verdict. Come on back in the courtroom. So walking in there going, oh, what's the verdict? So. But the point is, is that. That once we're willing to accept our current. The hand we've been dealt, we can then play the hand. But if we're in denial, we can't. Now, with that, we turn our head up from what we currently have, and we look forward to what we want. We say, there's a gap. How do I fill that gap? How do I fill that gap? And that's the game that we play when we start to understand the clarity of it. Now, here's the other thing that comes from this. And this is a.

This is an aside, but it's a personal philosophy that I think, thank you. Thank you for all the good wishes. I'm hoping for good news. That'll be three and A half years clear. So I feel great. They have told me they've never seen anyone fight it the way I did and the way I attacked it. So, yeah. And I've got a great team of doctors. So here's the thing. My belief is your financial journey isn't a solitary one.

It's not a solitary.

Meaning that if you're an intimate relationship, you're married, you want to be married, you wish you were married, you need to have the conversations with them, bring them into the conversation. Money is the second leading cause of divorce behind infidelity. It shouldn't be.

Be.

It's one of the largest stressors in a relationship. It shouldn't be. Money should be driven by a vision for a life of togetherness and moving you forward to experience life. That's what it should be. But the tendency is, first off, we don't know how to have money conversations. I actually did an episode on that just recently, because what we tend to do with money conversations is we come in, we sit down, we go, honey, why'd you spend so much at the golf club? Well, that kind of conversation isn't going to go well. If. If the vision for our life to live that richer lifestyle is to. To live it and share it, then we need to talk through that. We need to start with the vision of life and then bring it down to tactical. We need to let the vision for our life to inform a plan. The plan will inform the tactics. We don't go the other way around. The tendency is to dig into the checking account, the credit cards at the beginning. Oh, you spent too much here, you spent too much there. That's going to do nothing but create divisiveness in a relationship. And that's. That's not what we want. We want togetherness. We want to bring it together, but I think that we need to have people in it together. Stephanie didn't want. Didn't want to know anything about money.

She said, you handle it.

No, I want the peace of mind to know that you're taken care of. And I want you to have the peace of mind to know that I'm trying to take care of you. Now. She doesn't really. She's an executive. She does. Amazing. Okay. But I think that that's the important thing to look at now. Let me introduce you to someone else who realized this and experienced that. And this is Karina Kapura. And she said. Just wanted to drop you a line to let you know that your podcast and work have really sparked a lot of conversation between My husband and me. That's so good for us. Not only from a financial perspective, but a relationship perspective. We realized that we have two parallel success stories, but have not fully integrated them. And after being together for more than 20 years, we decided to break down the silos and really be team players for each other, rather than rooting each other on from the sidelines. We both really love your take on family money and entrepreneurship and how they need to work in harmony. Feels like after so long, we had some sort of awakening. We even decided to go on a second honeymoon. Thank you.

And I think that when we use our money to create the relationships at a deeper level, it completely changes things. Okay? And so this leads me to principle number three. This one is really important, okay? They all are. But wealth creation is a today thing, okay? It is not something to be put off to tomorrow. Here's what. Here's what most people do when they're building wealth is they make money. So I go to a job or I build a business, and I start to make money and. And everything. And so I make money, then I spend my money on my lifestyle, on the things that I want to do. And then I take whatever's left and I invest it. Whatever's left, and I invest it. The problem is, is that think about this. I'm making money here, I'm spending money here, and I'm investing money here. But what am I investing? The leftovers. That means you're building a financial future on the scraps.

I know that's rough, but it's the truth. And that's what most people do. The rich, the people that actually build wealth, they switch this. They understand that wealth creation has to be a priority. So they make. They look at it and they go, hmm, they make money. And instead of spending money, they first look at it and go, I'm going to invest money first and spend money second.

So they make investing the priority, and they never forsake it for trying to keep up with the Joneses or a current lifestyle. And I get it. You might look at it and say, well, if I did this, Mel, then I wouldn't have enough to pay for my bills. Well, then we need to examine a few things, because if you're an entrepreneur, we go back and look at how we making money, and how do we increase that? If you're not an entrepreneur and you're in a job, we go back here again, say, are there ways to get paid more? I'm gonna put a training out for you guys that talked about how do you get paid your worth. How do you get paid your value? Because it's one of the things that I think that we don't do well is that we don't value ourselves, and therefore we don't get paid at a level that we should. But the second thing that I think is really important is that, is to understand that.

That it is no longer a luxury to have a single source of income. Multiple. Multiple sources of income are necessity. They're a necessity. And. And because that will give you the security that you need if one source of income goes away. Lose a job, can't work. Okay? All those things. Here's why this is important. When we start to look at. At this, it's. It's about understanding something that I call the wealth flatline, okay? When you build wealth, it goes like this. It isn't. It isn't a straight line. That's not how we build wealth. It goes really, really slow at first. There's this segment of time that I call the wealth flatline, okay? And what happens is that you start to build wealth and you're putting money away. Think about this, okay? You're putting money away in a 401k, in a retirement plan or in a brokerage account or investments, and you're putting $500 away and going, mel told me to do this. I'm gonna do it. 500 bucks, 500 bucks, 500 bucks, whatever. You do it for three years. You go, I made $67. This is stupid. This isn't working. Here's why it's not working. It's because you're in the well, flatline. We don't get money momentum until we get outside of this. Your wealth is in the acceleration zone here.

And the only way to eat up the wealth flatline is one thing and one thing only. Time.

But the tendency, because we don't have patience, because we don't have patience, is to not stay in the wealth flatline. And I did this. I left. So I was at a big consulting firm in downtown L. A. I had my 401k. I had $20,000 in there. I decided I don't want to work here anymore. And I cashed out. This is when I moved to Japan.

So I cashed out the 20k of the 401k. I paid tax on it. I end up with like 13,000, and then went to Japan. Great trip. Stupid idea, okay? From a financing standpoint, but here's what I did. The problem with doing that is maybe I was here in the flat line as soon As I cashed out, I went back to ground zero. I had to start all over again. So what we need to do is get in the game, stay in the game so we can end up here. It's not, it's not something that, that we can just kind of go through. We actually need to stay in the game. We. We got to burn the flat line.

As much as people, you know. What are you investing in? Look, my portfolio is really boring.

It's boring.

If you're getting an adrenaline rush from your investments, you're in the wrong investments. It's. Now, mind you, I have some risky investments because I choose to do that. But it's a very narrow sliver. It could go away tomorrow. I wouldn't be happy, and I would pout for a weekend, but it isn't going to destroy us.

But the point, the, the important thing is to realize that I got to eat up that flat line. If I don't eat up that flat line, I won't get the acceleration. Here's the beauty of the acceleration zone. I will make more money from my money machine working than I will from me working than I every day and every month and every year from here on out. But the only reason that happened, because I stayed. Once I realized this, I stayed here to eat this up. So it's now in this zone. That's. That's the key to all of this. And, and when you start to understand that time is your greatest lever of wealth, you get in the game, and you stay in the game far faster. That leads me to principle number four. Principle number four, income doesn't make you wealthy. Listen, it's not about, you see, it. It's not about how much you make that matters. You can make a lot of money and spend a lot of money. That same millionaire exercise or The Millionaire study, 10,000 Millionaires showed that most millionaires made their million and they didn't earn more than 100, $150,000 a year. So they didn't sell a business. They didn't make a billion dollar deal. They didn't do any of that. They just stayed consistent in that, well, flatline and then allowed the acceleration zone to go.

So it isn't about just, just the money you make. It's about what we do with the money. It's about. It's about understanding that we have to assign every dollar. Every dollar needs to be assigned a job description, y'. All. You wouldn't hire a bunch of people. You wouldn't hire a bunch of people in.

Bring them into the break room and say, I'm glad you decided to come work for my company. I have no job description for you. I've got no idea what I want you to do yet. But I want to double our business. Go to it. You think it's going to work? No, but that's what we're doing with our money. We put it in a checking account, but we never tell it what to do. Tell every dollar what it's meant to do. When you do that, it will do the work it's meant to do. And the beautiful thing about dollars, unlike employees, dollars don't have PTO. They don't have sick time. They work 365 days a year, seven days a week and 52 weeks a year, and they won't unionize on you.

We need to get our dollars to work harder for us than we did for it. And if you don't think that income doesn't matter, take a look at these folks tell in. In common. You see, all of them made lots of money. All of them went broke. Some still are, some are no longer with us. So principle number five is incremental shifts lead to exponential change. This is me in Hanada Gardens in Japan. And I had a. A martial arts studio for 11 years. And the students used to come to me and say, sensei, why is it.

When you do a technique, it hurts so much more? And I, and I said, because I know the little things that make a big difference. Okay, little things that make a big difference. So this is an arm bar. And when I change just the angle slightly, it goes from painful to excruciating. It almost feels like your arm is going to explode. Okay? It's just a little thing. It's the same thing with your wealth. Too often we think that we need a lot of money. When I make a lot of money, then I'll, then I'll build wealth. No, it's a behavior. We gotta, we gotta change the behavior no matter the amount. You don't go to the gym. You don't go to the gym the first time ever and get on the bench press with a 45 pound bar and put 45 pound plates on both sides and think you're gonna bench press without damaging yourself. You go over to the smaller weights, the chrome weights. Nothing wrong with chrome weights. You can go to the chrome weights and you're going to start lifting those because.

Because now all of a sudden you're working the muscle to get the behaviors. Let's look at some numbers. I'll do some math. For you here, okay? And. And. And what. What can happen when you do this? Right?

If all you did was put 200 bucks away in 30 years, you could end up with 300,000. Now you might go, well, okay, well, what happens if you did $800, 1.2 million.

Now you're sitting back and saying, well, I don't want to wait 30 years. Good. Let's just wait 20 years. That's half a million.

What if we went all in? $1500 a month, $2.2 million. There's 900,000. Point being is it doesn't take a lot. Remember what I said? The flat line.

We have to eat up the flat line. I've got a kid who cuts my hair because it doesn't take much to cut my hair. Okay? Yes, it's a month. That's a. That's per month. I've got a kid, he cuts my hair, and he tells me one day I get in there, and he knows what I do. So we talk money and everything. And he says, I had one of my. One of my good friends just bought a $5,000 watch. I said, really? He said, yeah. I said, does he make a lot of money? He says, no, he's 22 like me, 23 like me. And. And I said, so why would he spend $5,000 on a watch which he probably financed, okay? And he said, because his friends thought it was cool. I said, all right, so let me do some math for you. Every dollar you put away in your early 20s will turn into $80 by the time you're 60. Life. So for him to spend $5,000 on a watch to impress a couple of dudes that probably won't be in his life in a few years, yet he's looking at a $5,000 watch. I'm looking at 80 times that. Saying he just cost his financial future $400,000. It's a $400,000 decision, okay? And the challenge is now, I'm not telling him not to do it. All I'm saying is that when you make a choice, that it's conscious is intentional and aware of. When you make a choice, that you're conscious about it. Look, I spend plenty of money. Look, I. I got a 900 coffee maker in there, and I know that can get more expensive. So. But the. The key is to understand the dynamics of your choice. When you understand that, then you start to look at it differently, and the power of time starts to get to you. So. So this is the thing that I want you to start to look at is that. That when you are doing this, it doesn't take a lot to make a lot think about this. This is something that I did. I was speaking keynoting for a hair stylist group, and I said, just take your first service of the week. Just take your first service of the week and put it in an investment account. Whatever it is, whatever you do, your first sale, your first service of the week, just. Just allocated, it's done. It doesn't take a lot to take to put $200 away. If you make it deliberate and intentional. He's at 418,000. Sally did a little better because she invested longer, although she started. Started the same time as Justin, so she gets to 660. Okay, so she invested longer and more than Tom, but didn't get close. She's still one third away from him. But then there's Angela. Angela invests 200,000. Just $50,000 more than Sally. Okay. Yet that 50,000, instead of being 660, she's at a million 500,000.

Getting in the game and staying in the game.

Getting in the game and staying in the game is important. Kathryn, I am with you on this. Trust me when I say you're okay. At 50 years old, you're okay. Yeah. Do you have this kind of leverage? No, but we still have the ability to make it happen. All right? I don't want to. I don't want to break your heart, but I want to give you the pathway to make it. Make it a reality. All right, so that leads me to the next. So this next principle is that you need to have portfolio thinking.

Here's what I mean by this. There's. What I mean by this is that we've been told that when you make investments, to have a diversified portfolio, so you'll have some in cash, you'll have some in stocks.

You'Ll have some bonds.

You might have some real estate, you have some other investments, okay? So you diversify the portfolio. Now, the reason you do that is that it reduces your risk of loss. So that's why we have a diversified portfolio when we invest. But we never do this. We don't ever talk about it in. In the sense of our income. We need to also diversify our income in a way that you are not dependent on one income stream. So if one goes away, you're. Okay, let me. Let me go to the next. The next slide so you'll see what. What I'm talking about. Because if we just look at the income. Let's just look at Me, for instance, so I make some income from speaking.

I make income from courses.

Mentoring.

Consulting.

Hey, investments.

Royalties.

And.

Board. I'm, I'm on, I'm on boards of directors. So. So I make income from a variety of different places.

If any of these go, go away, it, it affects me, but it doesn't destroy me. And this is why I think it's really important for us to start to look at how do we diversify the income. This brings me to this whole idea of the, the five incomes, okay? And these are the different levels of income that you can, you can create. And why this is really important is for you, for you to really start to, to look at it from, from a different perspective. There's a concept that is out there in the world and you hear it all the time. I want passive income, y'. All. Y', all, you don't want passive income because there's no such thing as passive income.

I look at it in this way. Your relationship to your money, your wealth and your income is just that. It is a relationship. I've been married now almost 13 years. If I took. Now I'm married to an amazing woman, I got the better end of that deal, all right? And if you don't think I can sell, take a look at my wife. All right? So, but the point being is that, that when you start to look at it, if I took a passive approach to that relationship, how good do you think my marriage would be? It would, it would wither and die. It's no different than your, than your money. And so I don't want you to look at it through the eyes of. Set it, forget it, and it's passive. I want you to look at it through the eyes of how much effort does it take for me to generate it? The leverage component, how much leverage is there? Okay, so this is where the five incomes come into play is that it's the degree of leverage. How much time and effort does it take for you to, to generate it? At the beginning, you're all going to be inactive. You're going to be building an active income as an employee, as a solopreneur, doing one on one. We all start there. That's okay. The question is, most people were trained to stay there. And so they have no, no way out. And if the active income goes away or their ability to put the effort out or their desire to put the effort out goes away, I want you to have a life of choice, not need. I can choose to do what I do, what I do because I love Doing what I do. I love speaking, I love serving, I love seeing the light bulbs go on. I love seeing people's and helping people get their dreams lit on fire. The next level of income, next level of income that you can have is business income. Now all of a sudden you take that active income, you start to leverage yourself out of the business. You start to have team. You're not as owner dependent, you may be talking to one too many, you might have a job and now you have a side hustle. This is where most people play and where I want you to do is start thinking about the next three levels of income. The next three levels of income come to this.

You can see that the effort here is, is more than the effort here. And that's what we're trying to get at. Well, the next level up is what we call asset based income. This is when you buy real estate or equipment or software and you're renting it. So it takes some effort, but it doesn't take as much effort as, as me in a job or as a solopreneur. So the leverage point goes up.

The, the fourth level of income that you can have is residual income. This is you licensing your stuff, royalties. It could be a downline. If you're in a network marketing, white labeling. It's things like my books, my courses, I'll get a check from royalties on that. So I spend a lot of time doing the work to get it done and get it dialed in. But then after that initial work is done, it will carry on. I have my other book, the Entrepreneur Solution. I still get checks today. So you create this residual income stream based upon efforts that you did in the past to create it. And we want to look for that. And then the last and most leveraged level of income is portfolio income. This is your investments, your bonds, your mutual funds, REITs and ETFs and things like that. Because they're paper, they don't take a lot of effort. Once you're in the game.

Here'S where this is important and this is what I, what really the message behind all of this is. You will probably be making 100% of your income here for a while. Let's just talk about me and the cancer. When I got diagnosed, I was speaking, I was consulting, I was doing all these things. 100% of my income, 100% of my income was generated down here from my business income and my active income. That's it. Now I also had, I also had income up here, but I wasn't using it. I Had all the investments because. Because that's my money machine. And so it was making money, but we were reinvesting to build the money machine bigger.

So I wasn't living off of it. I was living off of this. Does that make sense? Does it make sense? Just let me check in with you. Okay? Yeah. So. But then when I got diagnosed, I went to my wealth team and I said, hey, y', all.

I'm not doing this anymore. We brought this down to like 10%. I said, flip the switch. Okay? I need the rest coming from here. So the money that was coming out, a portion went to. To. To support us and now a smaller portion. So we were growing slower, but we were still growing.

But I flipped the switch. I didn't have to spend anything. I didn't have to. We didn't have to sell anything. We didn't have to downsell. We didn't have to. We didn't have to downsize. I didn't have to drain an emergency fund. I didn't have to drain a savings account. I didn't have to sell. I didn't sell my wife's shoes. Lord knows that would have been a fate worse than the cancer, you know, so we, we just flipped the switch like we had an atm because we built the thing. The idea is this, is that your money machine is really built on these three more than anything else. Yeah, it was a backup generator for sure, Shannon. So then once I came out of the cancer, I went back to my team and I said, shut this baby off and start investing it fully there. I'm bringing this back up to 100%.

A life of choice, not need. The beauty behind understanding the five incomes is that you have now the opportunity to create a life by choice. And that's the thing that, that, that I want you to work from. It's a. And a lot of people will say, well, that, that's, that's hard. It is. It takes time. It's not what we're trained to do. It's not, it's not how we, how we were trained in this industrial age thinking, but it's what we should be doing and when we do it right. My son is 33. His wife's 30. They have two, two. Two beautiful kids. In fact, it was.

Okay, you're going to have to proud grandpa moment. This was my birthday just this weekend. And there's my two little granddaughters, my wife, so, so yeah, I don't know. I just had to share. But here's, here's the point of that. Is that, that they've got the two kids, they've got three homes and a multimillion dollar network because I got them to start early and they are staying in the game.

And that, that's the thing, that, that really starts to drive everything.

I get it. Some of you might be sitting back saying, well, I'm 50 years old. That's okay. We're going to still make the moves to start building these. These things. We still have to make the moves. We still have to build it. Now that the point is that your freedom is sitting up in those three elements. Your freedom.

Is. Is in those three elements. If you don't have those elements in place, there's no freedom for you because you constantly have to be generating income. Now, I don't expect to ever stop working. I love what I do. I love what I do. But by doing some of the things that we're talking about here, you will build your money machine over time. And, and when you start to understand the dynamics of the wealth flatline, you'll see that once we get past this, and this could be, depending on how much income you're throwing at it, three to 10 years.

You'Re in the acceleration zone, and all of a sudden, like I said, we make more money here than I do down here. All right.

I hope you found this special, unique episode of the Affluent entrepreneur show really enlightening and helpful to start to understand what it takes to build your money machine, what it takes to create the path to financial freedom. Listen, if you want to get access to the full training, all of the training and all of the goodness that's coming that comes with the training, the workbook, and all that stuff, just go to affluencelive.com, grab the spot. You can get access to either the replays or the lives, and I'll see you on the journey to financial freedom. Cheers.

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.