The 3 Net Worth Milestones That Change Everything

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. What if the real test of your financial freedom isn't how much you make, but what happens when life knocks you flat and you can't. You can't earn, you can't make money? A few years ago, cancer slammed the brakes on my life. Everything in my life. My business stopped, my income stopped, my speaking stopped. But my world didn't collapse because my money machine kept running. So in this episode, I'm going to show you how to build the same system through the three milestones that'll literally change everything. So your money works for you. When you can, you'll learn what each milestone is, why it matters, what to expect, what to do next, and whether you're starting from zero or halfway there. This is your roadmap to freedom. This is building your money machine, where we help you master your money, eliminate financial stress so you can live a life of choice. Because earning more doesn't make you free. A money machine does. And that freedom doesn't start with the next raise, the next client, or the next paycheck. It starts the moment you get your money to work harder for you than you did for it. Think of this as your financial education with a side of sarcasm and a whole lot of heart. And I'm your host, Mel ABRAHAM. And after 30 plus years as a CPA and money mentor, thinking that all I needed was a corner office and a big spreadsheet, I realized that it isn't about bigger numbers, but it's about bigger choices. And so if you're ready to take control and do it the right way to build your money machine, let's jump into the episode.

When life hits you with something like cancer. You find out real fast whether your money's working for you or you're still working for your money. Back in 2019, when they came to me and said, hey, you have cancer, there I was, sitting in a hospital room and realizing that I had to stop my business, I had to stop my income, everything stopped. So I needed to Fight this devil called cancer. But my life didn't fall apart. Now that's not luck, that's design. That's because I had already built a money machine. My money was working even though I couldn't. Now, I didn't build it because of the cancer. I built it because I wanted the freedom. I wanted the agency over my time. But I want to walk you through the three milestones here because it's important to me and it's going to be important to you to be able to separate your earnings from the efforts to earn it, to have the freedom, freedom in your life. And because one of the things that I think we have is this idea of this income trap that we don't realize. And the only time you can build your money machine starts now. It's not something that we can delay. I don't care where you are in your age, stage or circumstances. I want to get you on the field and give you the pathway to make it happen. And this income trap is, is where we get indoctrinated into just earn, earn, earn. And early in my career, I was killing it as a cpa. I had big clients, I had big paychecks. I also had big stress. I thought that success was just getting more clients, working more hours and keep going. And I was dead wrong. What I was doing is I was living on a gold plated hamster wheel. And if I wasn't running on that hamster wheel, the income wasn't coming in. I mean, it looked good, it paid well, but it only worked if I was huffing and puffing and going at it. And the thing is that as soon as I stopped, the money stopped too. And that's the thing that starts to get you to start realizing that if I'm just driven by the paychecks and that's the only source of income, then where does the freedom come from? But they explain to you to go earn money and make money. Good career, good job, good profession, good business, just make money, make money. As if that's gonna give you the freedom. It won't unless you take this next step, and that is building the money machine. It's about having a system of using your paychecks, using your money to get it to work for you. And when we look at it, like I said before, is that the Federal Reserves look at it and say 57% of Americans that are making over $100,000 still living paycheck to paycheck, meaning that it doesn't matter what your income is, you could still be living Paycheck to paycheck. Income isn't the problem. The structure is two people making the same money. One ends up trapped and one ends up free. And the difference is what they do with the money. One builds a money machine, the other didn't. Okay? So if you're telling yourself things like, once I make more, I'll start investing, stop, stop. I mean, I'm being very direct with you because you don't need more money to start. You just need to start so you can have more money. Okay? That's the game. Because think about this. This is how the money machine works. And this is something I talk about in my book called the Wealth Creation Curve. There is a segment when you first start this wealth journey that I call the wealth flatline. It's this boring, hard, focused work where you sit back and feel like you don't. You aren't making any progress. But let's just look at the math. We'll use an example here. Assume that you're going to invest $10,000 a year at 8%. Okay? That's $833 a month. At 8%, it's going to take you about 7.6 years to hit $100,000. And so you're going to go $100,000 now in 7.6 years. Then to get to half a million, it's going to take you a total of 20 and a half years, 21 years or so. But then to get to a million, it takes 28 years total. So just another seven years more. Here's the thing. What we think is, is that our wealth creation journey is linear, but it's not. It's exponential. It sounds long, sure, but time is actually your secret weapon. Time is the thing that drives everything. Compounding doesn't reward people who start later and smarter. It rewards people who start sooner and consistent. Now, whether you are sitting back saying, well, I wish I started earlier. Look, I wish I started earlier, okay? We all wish we started earlier when we start to understand these things. But just because we didn't start earlier doesn't mean we shouldn't start today. Money loves momentum, not hesitation. That's the game we're playing. So I want to walk you through these three milestones and why they're important and what to focus on. And I want to get you on the field. If you're not on the field playing the wealth creation game, because wealth creation is not financial freedom, is not a spectator sport. I need you on the field to play it. Now, if you're already on the field, let's make sure you're pointed in the right direction, doing the right thing. So milestone number one, this is the hardest one, is to hit your first hundred thousand dollars. And when I talk about this, the milestone, I'm talking about investable assets. The money machine is built on investable assets, a portfolio of assets that generate cash flow to allow you to live your life and have it, pay for it. That's what we create. So when we talk about assets, we're not talking about depreciating cars, we're not talking about your clothes, we're not talking about the big screen TVs, we're not even talking about your home. Because your home is a lifestyle asset. You're living in it. We're talking about assets like ETFs, index funds, rental properties, bonds, crypto, all those things that actually can generate cash flow and pay for your lifestyle. Just like it did when I got diagnosed with the cancer and stopped everything but the hundred thousand dollar mark. That first milestone is the hardest. And it's the hardest because first things first, you haven't done it before, okay?

It's something that you're having to learn new skills. You're going to have to learn more financial literacy. You have to understand the principles, you're going to have to build the habits and the behaviors. And like I said, the majority, 80% of your wealth creation is behavioral. It's, it's habits and decisions. And if we haven't built the a hundred thousand, we don't have the habits and decisions and behaviors in place. We need to build them. Well, that takes a bit. And so what ends up happening is it feels hard, you have to push at it hard, okay? And this is the place where you get to prove that you actually can build wealth. Because it's through this process to hit this first milestone that you're showing the consistency, the discipline and the understanding of, of what it takes to build this first hundred thousand. This is not about getting rich. This is about getting traction. Okay? But here's the thing. This is where 90% of the people quit. Why? Because it feels slow. Because it feels boring. Because you don't feel like you're making progress. You say for, I don't know, five years, you look at it, you go, I made $67. This guy, Abraham, Mel Abraham, he's an idiot, okay? He's not. But you get that feeling. I felt that way because I'm going, I'm not making progress. Because you're in what I call the wealth flatline, okay? And during that wealth flatline. You're learning things, you're growing things, but at the same time, you're compressing a spring, you're setting a foundation to build on. Bank of America found 63% of new investors stop before hitting the first hundred thousand dollars. That's right before compounding really starts to kick in. This is the season. This part of it is the season of discipline, not dopamine. It's not about getting status, it's not about getting dopamine hits. Okay, here's what you can expect when you do this. 10K, $10,000 a year at 8% is going to take you, like I said, about 7.6 years to hit that first $00,000. By the time you hit that first hundred thousand dollars at year 7.6, you will have $76,000 that you put in, meaning that you put the effort in and made the contributions came from your pocket and $24,000 came from growth. Some people will say, well, it's not worth it, but let's face it, if someone came to you and said, if you put $76,000 down and I'm going to give you $24,000 for free, how can you say it's not worth it? The truth is, as you're building a foundation, not a fortune yet, but we have to get in the game. And but you now you see this, that this feels like a lot of hard work to not get the same level of reward that you would like. But this changes dramatically. So here's what I want you to do. If you're in this phase and you haven't hit that first milestone, the first thing to do is, number one, automate it. Remove the emotion, remove the friction, remove all of that from the equation. That means that you're going to automate the savings, you're going to automate the investing automatically. Out of sight, out of mind. You don't have to think about it. It's going to happen every week, every month, every two weeks, every time money comes in, every time you get paid. It is automatically going to be put away without your efforts, without your thinking. Okay? That means you're going to have to set up a brokerage account. That means you're going to have to set up your 401k, whichever accounts you, you want to put them in. And what I would tell you to do is to go through the wealth priority ladder. In chapter 12 of my book. It will tell you the pecking order, exactly what to do with each dollar as it's coming in, okay? And Follow that. The second thing I want you to do at this stage is to kill toxic, destructive debt, okay? You can't compound wealth while you're compounding interest for the banks for the credit card company. Now what's destructive? Debt. It is debt that is used for consumables. It is debt that is used for lifestyle. It is the big screen TVs, it's the cars that you finance for seven or eight years because you can't afford it. Here's the deal. If the joy that you get and the use you get out of it is less than the payment plan it takes to pay for it, you can't afford it. And I'm not talking about mortgages on rental properties or mortgages on homes. I'm talking about lifestyle, consumer debt. That is for consumables. That means we're living beyond our means. So at this stage, if you have credit card balances that you're carrying or anything that is destructive like that, I want you on a debt payment plan. Get on a debt payment plan so we can get rid of it and make sure that you're not going deeper in debt each and every month. Okay? Number three, I want you to build your emergency fund. Now, your emergency fund at the beginning is three to six months. That's the classic thing, is that we take three to six months of your expenses, your survival expenses, and you put it in a high yield savings account. So this is your focus. This is not to build wealth, this is to protect wealth. And then the fourth thing here is focus on how can I increase my income capacity. In other words, don't just earn. Upgrade your value, upgrade your worth so you can feed the machine faster. The bigger the shovel of income you have to throw at wealth creation, the faster you can accelerate your path to doing it. And this is time to skill up, learn new things, do new things, take on new things so you can increase your income capacity to do that. Okay? The first hundred thousand dollars, this threshold, this milestone, it's not going to make you rich, but it's going to make you dangerous, okay? Because now you've proven to yourself it's possible. Now you've developed the habits, now you know what it takes. And now if we just continue consistency and consistently all the way, you'll hit the next milestone. Every month you hesitate is another month your future self loses compounding power. Start today. Even if it's $100, even if it's $50, even if it's $10, just start. Get on the field. Because sooner or later you'll find yourself at milestone number two. Now, milestone number two, that's the half million mark. $500,000. This is what I call the momentum stage. Okay? This matters because this is the moment, the tipping point where you've passed through the wealth flatline, typically. And it's the moment where your money starts to work harder than you do. Okay, think about this. $500,000 at 8% will earn you $40,000 a year without lifting a finger. That's four times the amount you're contributing if you're putting $10,000 in a year. But the portfolio itself, the machine itself produces 40,000, that's 400%. That's 44 times more. Okay, it's, here's the interesting thing. This is really a powerful place because now the income that's generated from the machine and reinvested is going to grow faster and faster and faster. Now, if our goal is a million dollars, it may seem on the surface that you're halfway to that goal of a million dollars because you just hit the half million dollar mark. But when you look at how much time it takes, Remember we said 7.6 years to hit the first hundred thousand and about twenty and a half years to hit half a million. Okay? But it only takes seven and a half years to hit the million. So what happens is that when you hit this half million dollar mark, you're actually 80% of the way there in terms of time to get to the million dollar mark. Okay? That's because the slope of the curve is accelerating. Okay? Fidelity looked at this and they found that investors stayed invested during downturns, literally outperformed those that reacted by 3 to 5%. The issue is this. You stay long term invested, it's going to go up and down. But we continue to invest through the downturns and the upturns, you will perform better. And the data has shown it. The key is this translation. Don't flinch. It's going to happen. Here's what to expect in this, in this stage. As you hit this milestone, momentum feels exciting and dangerous. This is where people start to spend like they're rich and they forget what got them there. The things that we want to watch out for are overconfidence, cockiness, you know, the market's going up, I'm making a lot of money. Oh, it's never going to end. Be careful, okay? Be careful about lifestyle creep. This is the kind of time where all of a sudden we start to expand our lifestyle beyond, beyond where we might be safe. Now, I'm not Saying not to expand your lifestyle. I'm saying to be deliberate, intentional, and make sure that is in the places that truly give you joy, that it's in alignment with your values. The other thing to be careful about is risky bets. There is a draw to this. High returns. People will promise high returns. Well, usually high returns come with high risk. Now, I take risky bets, but I take it with a narrow, narrow, narrow sliver of my, of my portfolio. And I know when I take it. And I didn't do this when I began, because when I'm beginning, one risky bet could destroy me. But now I take a risky bet and I know that if it goes to zero, which you can.

It'Ll piss me off. I will eat bad food. All right, I'll have the KitKats and the Twix bars. But it will not destroy us financially. So don't fall for it. Don't fall for it. You see it all. Okay, so here's what to do in this stage. This is the time for optimization. This is when you start to really take a heavy look at the fees that you're paying on your investing and advice. You want to keep your fees as low as possible. Okay? The second thing with optimization is to optimize your portfolio. How is your portfolio structured? Making sure that you have the right portfolio mix between equities or stocks, bonds, real estate, all that to rebalance it yearly, at least yearly, to hit your risk profile and continue to optimize your returns. And then the third thing to optimize here is, is your tax structure. Listen, if you live in a state like I do in California, your tax rates, including state taxes, can be 50, 55%. So my ability to maximize the use of the tax code to minimize what I pay to the government is huge. Every dollar I can deduct saves me 50, 55 cents in taxes going away that I'll never see again. So we want to optimize that. The second thing we want to do here is to protect your income. That means one, making sure that you have the proper insurances in place. Things like health insurance, disability insurance, possibly that, but also making sure that you have the liquidity in place. We started with an emergency fund, but now I want to push you to what I call a peace of mind fund. Emergency fund, three to six months, peace of mind fund, nine to 18 months. Because I want to make sure that we don't dip into the machine. We don't have to start carving pieces off if we need it. So we protect the income and the wealth by Having that in place, the other way to protect the income is this having additional streams of income. So if we have a single stream of income, one strand, that's a prayer, that's not a plan. And I want you to have the ability to navigate. Well, if I lose one strand of income, one stream of income, it's not going to destroy me. Okay? I may not like it, but it's not going to destroy me. So when I first started out, I was consulting. That was the only strand of income I had. That was the only stream of income. As a consultant, as a cpa, I was. I was building, buying businesses and doing the things that I do and working with clients. But then I quickly looked at and said, how do I. How do I protect my income? Well, then I started to get paid to write, then I started to get paid to speak, all on the same topics. Then I got paid to workshop. Then I got paid to create courses. Then I got paid to licensing. So now, all of a sudden, I'm getting income in that's not even including the income coming from the money machine. So this is a time for you to get one income stream running really, really well and then start to build additional income streams to supplement it and to support it and to protect it. Okay? The third thing you do in this stage is to stay the course during volatility. Markets are gonna go up and down. The markets go up 8 out of 10 years. That means they go down 2 out of 10 years. And so even in a downturn, you can make money because good companies, good stocks and everything, they're on sale, and they're on sale for investors. So stay the course during volatility, stay the course during downturns. Make sure you're working from a plan, because the plan will work. When we do our money machine master plans for our clients, we break it down for them in a dynamic plan so they know exactly what to do, how to do it, okay? And that's the key to all of it. All right? Here's the truth. When it comes to this $500,000, this time, this. This threshold, this milestone, it's not the finish line, but it's the gear shift. From here on out, the machine is going to do the heavy lifting. Okay? You're not too late. This is the place that you get a chance to build, and you're just one decision away from building momentum. And so here's the thing. If you're wondering where you are on this journey to financial freedom, one of the things that you can use is our Financial Freedom Zone quiz. It's totally free. You can go to your Financial Freedom Zone quiz and you'll go put some information and you'll answer some questions. It's going to take you 70, 90 seconds or something. It'll produce a report for you, tell you where you are, what to do, what your next steps are, and exactly what to do to climb to the next milestone. All right. All right. That leads me to milestone number three. This is the freedom stage. This is the one million dollar mark. Okay? Now, why it matters $1 million, let's face it, is just a number, but it's a shift in reality. Because at 8%, that million dollars is $80,000 a year. Passively $80,000 a year. That's 800% of what you're putting away. The $10,000 a year, you're putting away eight times that. It's enough to color, cover, you know, somewhat of a lifestyle. I mean, you can't live by the beach in California, but it's $80,000 a year without effort. Okay? Remember, we're trying to separate our earnings from our efforts to earn it. And you don't have to touch the principle at that point. See, freedom isn't about the Ferraris. Freedom is about buying your time back. It's the ability to say, no, I don't want to, and still be okay with it. But the challenge is that we. We don't realize. The Schwab Modern Wealth Study survey that they just did found that 42% of millionaires still don't feel rich. Why? Because they never defined what wealth meant to them. So this is a time to make sure that you define yours. Now, I think you should define it way earlier than this. But if you haven't done so, this is the time to visit and ask yourself, you know, what does hitting in that million dollars mean for me? Why? Okay, because hitting a million dollars doesn't make you feel like you've won. It makes you feel calm, for sure. But it also brings new challenges. And that new challenge is. Okay, now what? The freedom without purpose that you're creating feels empty. It's why people that maybe retire and they don't have purpose now. They struggle, and you find that they go back to work. That's why we need clarity and not just cash. We need clarity with cash, with purpose. So what do you do here? What do you do here? I think you clarify your why. That's first things first. Okay, Number one is you clarify your why. What's the money for? And it's not to Sit in the bank account and it's probably not to collect a bunch of toys, okay? Because that'll get old too. The second thing is to simplify, consolidate, automate and declutter your finances. As you start to grow. The tendency is that complications will find you, complexity will find you, okay? And so there'll be exotic investments, all that. I will tell you that my portfolio today, which is a multi eight figure portfolio, is far simpler than it was when I was in the hundreds of thousands of dollars because I thought I got enamored by the complexity. But complexity brings risk and risk brings loss. Okay? So simplify it. Consolidated automated. Declutter the finances so they're simple, okay? And then start to shift. So you are right now getting to this point, you're focused on growth, you're focused on building. But this is a time for you to start also focusing not just on building, but on stewardship. Stewardship. How am I going to steward these assets? That means that I'm mentoring others. That means I'm creating impact. That means I'm building something that out lives me, okay? And if you've got kids, that and heirs that might get it. Remember I say skill sets before assets. They need to prove their ability to steward the money machine. They don't get it. Okay? It needs to go towards a good cause. The, the fourth thing here is to protect the base. If you don't have it already. You, you want to have estate plans, wills in place, you need to have your insurances in place and you need to have your long term strategies in place. Place because life's going to happen. You're typically, from a statistical standpoint, most people will hit about a million dollars in net worth around 49, 50 years old. Okay? That means that we have to start looking at what's happening down the road, retirement and things like that, okay? Because this is the time that all of a sudden things will just rocket and we don't realize it. Because when your money's working harder than you do, you've won the right to stop chasing and start choosing. That's the game we're playing. You don't stop it enough. You use your freedom to build significance. You decide where you want to go. I've moved my goalpost a few times because I moved my why. But here's the power of this. It takes approximately 27, 28 years to hit that first million at $10,000 a year, year at 8%. Okay? You've, you're doing all right. But watch what happens, how it accelerates to double it from 1 million to 2 million. It only takes. It only takes nine more years. Nine more years and now you've doubled it. And now you've doubled it without any more effort. And then to double it again, it's another nine to ten years. That's it. Now. So here you look at it and you start to see the acceleration of the money machine, the growth of the money machine. But I had to get through the first thresholds, the first milestones to make it happen. And the tendency is to not have the patience, the discipline and the diligence to get here. But when you get here, it's magical. Because imagine what a $4 million portfolio is going to now produce. Now all of a sudden it's producing $320,000 a year at 8%. Totally different game. See, because I realized this in a big way because where the cancer hit, I was in the middle of the multi million dollar stage. I stopped my speaking, I put my business on pause. The money machine was producing enough that I was able to pay the bills, I was able to protect the family. We kept our lifestyle, we didn't drain the accounts, I didn't sell things, we didn't downsize. You don't build the money machine to get rich. You build it so when life hits hard, you already have peace in the bank. Okay? Don't wait for a diagnosis like I got a layoff, a crisis to wake you up. Build your money machine now. Because when you need it, it's too late to start. And I don't care if you haven't started. Let's just get you on the field and start today. We'll build it. We'll do it. I've got you the whole way. Okay, here's the thing. The first hundred thousand, it builds your belief. The 500,000 milestone, that builds your momentum. The million dollar milestone, that builds your freedom. And beyond that, that builds your legacy. But the deal is this. You can't get to any of them if you keep waiting to feel ready. You don't need perfect conditions. You just need consistent action. Every month you wait is another month you give away to your future. So stop scrolling financial advice, start implementing it. Take it today. Start today. Because time is the one thing you can't buy back. Because trust me, TikTok won't retire you. But compound interest, it will. And remember, if you want to know exactly where you are on this journey, grab the Financial Freedom Zone quiz. We'll hook it up here and everything. But you'll know specifically what your zone is. All Right. I hope that this kind of gave you a perspective, you understand the three milestones to building the money machine, why it's important, why, what to do. I hope that you found this of value. And also do me a favor. Would you do me a favor and just share it out? Because the journey to financial freedom is always better when you do it with some friends. All right? And while you're at it, give me a subscribe. All right? I hope that, that this really serves you and I'd love to hear from you. Send me your questions, send me your comments, send me your thoughts. All right, let's keep the conversation going because you don't have to do this isolated or silent. It's the very reason I do what I do to support you on your path to financial freedom. All right? And until I get a chance to see you on the road out there as I'm speaking, always, always strive to live a life that I want you. I'll 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 program Facebook group now by going to melabraham.com group and I'll see you there.

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 Podcasts, 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.