The 3-Step Japanese System For Financial Freedom

This episode is called the Japanese philosophy that made me rich. And here's. Here's the promise right up front. If money feels fragile, like one surprise could knock everything over. This will show you how to build money that actually holds up in real life. See if you ever thought that, hey, I make decent money, so why don't I feel secure? You're not crazy and you're not bad with money. Most people who were taught how to earn and how to spend, but not how to prepare for when life gets messy or punches you in the face. I learned a Japanese framework while I was living in Japan, training in the martial arts. That completely changed how I build money. And it's the reason recessions, market crashes, and even health scares didn't wipe me out. So 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, it doesn't make you free. A money machine does. And I have spent 30 plus years as a CPA, an entrepreneur, and a money mentor, and someone who's walked this actual financial freedom journey himself and made my share of mistakes. And I want to break it down for you and give you this philosophy because it's tactical, it's strategic, and if you implement it, it will change the dynamics. I'm your host, Mel Abraham, and let's do this. All right, let me take you to Japan for a moment. We're talking about 1989. I moved. I quit my job, I moved to Japan to train in the martial arts. Now, the martial arts training in Japan is very different. In the US There are no signs, there's no advertisements, there's no public access, and they train differently. They're just the same. Now, I went two hours north of Tokyo by train to train with my sensei. Now, my sensei was also different. He was a 17th generation samurai bloodline. I mean, his. His lineage goes back to some of the most famous lords and emperors of Japan in history. And so his way of training was very different, just the same. And I would. I would literally, this dojo was right outside his home, and I would walk down this dirt path twice a day to train for two hours a day in this small little dojo with a number of other other people that were training with him. And so if you're thinking about, oh, you're picturing dramatic fights and cinematic moments and heroic music playing in the background. Yeah. No, it was repetition. It was structure. It was doing the same simple things over and over until they were completely unbreakable. And One night we were, we were training just like we always did, and then all of a sudden I hear Sensei yell, yame. Which meant for us to take a knee. Stop. He was going to do something. And, and so I kneel to one knee and Sensei looks at me and says, you test now. Now you have one of those moments where you know something significant is going to happen and that you can't turn back. Well, that this was it. And this was a, this was my test for my third degree black belt test. And it was a short test, it didn't take long, it was a five second test, but, but it was a difficult one because what I would have to do was to kneel down in front of him while he stood above me, okay? With a 31 and a half inch razor sharp steel sword, mind you, he was samurai trained, okay? My only job was to avoid the cut. Now, that cut was either going to come straight down on my head or it was going to come straight across. I didn't know which one. I just had to avoid it. And so what happened here is that I started to get jumpy, I started to get nervous, I started to panic, if you will. And he stopped for a moment and he looked at me and he says, just be here with me. No plan, no structure, no thinking, just be here with me. And I settled in. And then it was silent. And that the silence was shattered by his kiai. And that sword started to come down directly on my head. And as it was as if someone had pushed me out of the way, and I rolled to get out of the way. And as I'm coming up, ready to celebrate, the battle was won. I saw the flash of steel, the flash of a blade, and I realized that he wasn't cutting just once. He was going to cut twice. And now he was going to cut across. Now I was off balance. The only thing I could do was collapse to the floor and try to get as small as I can and hope that, that, that the sword would pass over me. That's what I did until he called Yahme. And I opened my eyes up again and I looked at him and I go, I'm alive. And he said, and you passed. See, that started this whole lesson and this philosophy, this understanding of it, because he said to me, he says, the first strike rarely ends the fight. It's the second cut that finishes people. And that line stuck with me because that first strike, all the things you do, they prepare you for it. That preparation, whether it's financial or anything, this is Where I start to realize it, people will survive. The first hit, the layoff, the market drop, the unexpected bill. What takes them out is what comes after those things. Because what I learned in Japan didn't just help me pass a black belt test. It's the same philosophy that helped me build wealth and more importantly, helped me keep wealth. It's a philosophy that they call Shu Ha Ri. Okay? And I'm going to break it down for you and show you exactly how it applies to wealth. And practically tactically, show you how what you need to do, what it's telling us to do, and what I've done. Okay? And once you understand this, money stops being fragile. Okay? So what is Shu Ha Ri really? Okay, it's a philosophy of mastery. It's used in the martial arts, it's used in craftsmanship, it's used in leadership, it's used in business, and it's used in life. But here's the part most people miss. This philosophy isn't about reacting to danger. It's about preparing. So danger doesn't destroy you. That difference matters. Okay? So let's walk through this not as the theory, but as something you can actually use. So the first part, shoe is about systems. Build the systems that create stability. Shoe. You know, the idea is this. It's about design. Okay? Systems are built to work when things get out of hand. So you want to build the systems when. When you're calm. Shu means preserve, okay? So you follow the form, you install order. And then this is where people start to resist because SHU feels like it's slow. Shu feels like it's boring. The consistent investing. The consistent putting money away. The consistent looking at the numbers, Shu doesn't feel impressive. It's the basics. It's the fundamentals. It's the wealth priority ladder done every single day. But boring is what survives chaos. See, if you've ever said, I make good money but I don't feel safe, or maybe I earn more, but I still feel behind, or maybe I'll start investing when things calm down. You didn't fail. You just skipped this part. You skipped Shu. See, what we need when it comes to SHU is a couple of systems. And the first is the earning system. An earning system is how money reliably enters your life. Reliably enters your life. Not hustle, not grinding harder, not working. Going from 40 hours a week to 60 hours, then to 80 hours. That's not sustainable. It's a system for earning. A real earning system has three parts. You have a primary income source that you can rely on, okay, a primary income source. Mine is my speaking. It's my, my thought leadership. Okay. And in that income source, it's built on, on the second piece of it. And that is the skills that increase your value over time. So often people ask me, how do I, how do I make more money? Well, first things first. Own your value and increase your value in the marketplace. Okay, we think that, oh, I got to take on another job, I got to take. No, let's focus on value first. So the real earning system as a primary income source and a set of skills that can increase your value over time. And then third piece is what I call optional leverage, bonuses, side income ownership, scalability, things like that. My thought leadership, the work that I do to help people build wealth. There are little ancillary things that I do that's that also supplement the income. The speaking, the writing, the consulting, the courses. The primary avenue is thought leadership. But the way that the, the income is being derived is multiple places. Then this matters. Because if income is random, everything else is fragile. But if your income is intentional, everything else becomes possible. Two people can earn the same income, the same salary. One focuses on upgrading their skills intentionally and deliberately. The other just stays busy and keeps putting their hours in. Five years later, they live very different lives. So you ask yourself this, what's one skill, not 10, one that would increase your income because it increases your value. It makes you invaluable, indispensable to your clients, to your company, to the people you serve. Which one skill is that skill that will, will increase it over the next year. That's your sole focus because that's the thing that drives it. Now you're building an earnings system that matters because effort doesn't build wealth, value does. Now the second system that, that you need to build and shoe is, is the wealth system. The money machine. That's what my whole book is about. This is where most people get confused. See, the wealth system, what I call the money machine is, is how your money grows independently of your efforts. See, if, if your wealth creation stops when you stop working, then it's not really wealth creation. You're renting your future. I want you to own your future. And that means that your money has to work 24 hours a day, 7 days a week, 365 days a year without your effort. This money machine is built on a number of things. The first is automatic investing, automating the wealth creation part of it. It's why we have the wealth priority ladder and having you putting money away A certain way, in a certain hierarchy, in a certain strategy to make sure that you're optimizing, maximizing your wealth creation. The second thing that comes into play is, is compounding over time, knowing that what we're doing is we're using the compounding growth of money on top of money on top of money. That gets you there. The third thing is that we build a machine that is sustainable, which means that what we need is diversification, which is that. That third element, the diversification, which starts to reduce the risk if something goes wrong. And then the fourth is that you get a true separation of earning from growing because the wealth is growing while you're earning. Okay, if your wealth only grows when you work, then you're never free. But if your wealth is growing while you live, stress drops dramatically. Okay, so that's the thing. Now, here's the thing that I wanted to have you ask yourself, if you stopped working tomorrow and everything stopped working, what breaks? Because if everything stops, you don't have a wealth system. You have a job, but that job is only driven if you're running on the treadmill of earnings. That doesn't get you there. Okay, a money machine doesn't replace work. What it does, though, it replaces panic. And it gives you choice. Now, the third element of SHU is this. You need two plans. Why? Because you have two systems. This is where clarity comes into play. Because once money starts moving, anxiety often increases because money without direction creates confusion. So I say you need two plans. One's a life plan, one that defines what matters to you. Because I've watched people collect all kinds of wealth over time, but they aren't happy. They're not fulfilled. Why? Because it's not aligned with their values. They don't know what actually matters to them. They're just chasing a number in a bank account. See, when you understand what matters, a life plan defines what matters. It defines how you want to live. It defines what the target is, what that enough line is. And I've done other episodes on this to go deeper in it. But what enough actually means, it doesn't mean that you stop everything. It just means that you move from demands to choice. Okay, that's the life plan. Then you need the money plan. And that plan answers a different set of questions. The money plan answers how much income is needed to support the life that I envision. And then it begs the second question of how much wealth, how big of a machine do I need to. To generate that income so I can live my life? And then the third question Is how am I going to use the machine, the money to fund the life plan. See, these two plans interact just like the two systems interact, okay? Without a life plan, money never feels like enough. But without a money plan, life plans stay as wishes and hopes, but not reality. See, money without meaning creates anxiety. Meaning without money creates fragility. We want both. All right? Now listen, if you're trying to figure out, well, I don't even know what my lifestyle is going to be like or what it could cost, I've got you. I've got a tool for you, okay? It's called the lifestyle cost calculator. And if you're trying to figure out these plans and what it costs, then I'm going to. You get this for free. Just go to melabraham.com lifestyle we'll hook it up here and grab it and do some calculations. They. They're not going to be exact, but they're going to give you a ballpark. They're going to give you direction. They're going to get you in motion to start driving the things that matter, okay? So you're not chasing random numbers. You're actually moving through it, because clarity will beat hustle every single time. All right? That's you. It's not exciting, but it's what keeps you standing when life swings. When the cancer hit, when I had. Had been pushed out by my partners, all the things that happen. But then that leads to the second part of this philosophy, okay? Ha. The second cut, the unbreakable foundation. See, HA is about protection. Ha actually means break, okay? The systems can carry you when you're under pressure. Okay? This is where life tests you, okay? In the. In the Japanese martial arts tradition, there is. There is a concept called fuiuchi. I know it's hard to say, but this is. Translates roughly to the unexpected second strike, which is what happened to me in my test, okay? It's. It's not. Not the layoff. It's the months after the layoff when things didn't work. It's not the diagnosis, it's the recovery. It's not the market drop. It's the decisions you make emotionally because you're scared. See, life doesn't ask if you're ready. It just swings at you. I hadn't seen a doctor in seven years, but I was healthy. At least I thought I was. I ate healthy. I worked out six days a week. I never thought that was anything that I had to worry about. I was taking supplements. I was doing all the right things, except for a sweet Tooth and lo and behold, I get diagnosed with cancer. No one in my family ever had cancer. I never smoked, I don't drink. What happened? But that was the unexpected. That was the unexpected. Now the second strike with me was we thought we beat the cancer, but it came back. And life doesn't ask if you're ready, it just swings at you. And this is where I think things start to come into play in here. And this is something that I call the freedom funding flow. It becomes critical because this is how you build an unshakable foundation before life tests you. Okay? The fact that I had this in place, the fact that I followed the money machine principles, the fact that I followed the wealth priority ladder, the fact that I had this unshakable foundation in place allowed me to let go and say, I'm going to allow this to take care of the financial side of my world so I can take care of my health side of my world. It gave me the ability to allow the system to take over when I didn't feel calm. Okay? So here's how the freedom funding flow. I'm going to break this down for you. This is the way I want you to start looking at your, at your funding, at your money, where it goes first, the priorities. And this is a piece of the wealth priority ladder. It's not the whole thing, but it's the bottom element that if we don't get that right, the rest of it won't matter, okay? And it's a sequence and the order actually matters, okay? Because if you invest too early, you're on shaky grounds. If you skip protection, you could fall apart. This is why people feel fragile and they, they look at and they go, I just hope nothing breaks. But this flow assumes that things will break and it's built accordingly. The first level on this is what I call the comfort fund. The comfort fund is simple. This is not, this is not your emergency fund. This is not your peace of mind fund. That comes later. This is about, oh my gosh, don't panic, I need oxygen. Okay? This is where I tell people I want you to get fifteen hundred dollars or one month's living expenses in a high yield savings account. The whole purpose of this is that you're not going to borrow money from a friend, you're not going into debt and you're not going to go into the ditch if something happens. If the water line breaks, if, if a transmission goes out, okay? This is a safety net of an oxygen mask for a short duration, okay? Its only job is to keep the small disruptions from knocking you off balance, that's it. The comfort fund doesn't change your life, it starts to stabilize it. Okay? That's phase one of the freedom funding flow. Phase two of the freedom funding flow is our two steps that we do simultaneously. One is to tackle destructive debt. That debt, that is for lifestyle costs, that is consumables. The big screen TVs, the cars that are being financed for seven, eight years, the luxury vacations, the things that you can't afford to pay for in cash that you're putting on buy now, pay later types of programs. That's destructive debt, okay? Productive debt is debt that you go into that's going to increase your cash flows or increase your wealth over time. That's not some luxury car, that's not some luxury vacation. That might be a rental property with a mortgage. That's cash flowing. So in this phase, I want you on a debt payment plan. If you have any of that, I want you getting out of debt. I don't want you digging in a hole any further. I don't want you using that, okay? But that's not the sole focus because at the same time I want you building what I call your peace of mind fund. It's, it's the juiced up emergency fund. An emergency fund is three to six months of your living expenses, okay? And that's cute, that works. But a peace of mind fund is nine to 18 months in a high yield savings account. Now, you're not going to get there right away, but here's what I'm saying. In this phase, I want you to take, if you, let's say you have an extra $500, okay, over and above your expenses, over and above the minimum payments. I want that $500 to go to two places. One, to eliminate your destructive debt and two, to build your emergency fund or peace of mind fund at the same time. Now, I didn't say they're equal. So you might take the $500 and say, I'm going to put 400 towards the debt and 100 towards my piece of mind fund. The reason I do this is two different mindsets. One is debt management, the other is wealth creation. Okay? Two different mindsets, two different behaviors. I want you to develop them at the same time, okay? So that's the game that I want you to play is to eliminate the destructive debt at the same time that you're building your emergency fund and then going to push it to a peace of mind fund. That's it. Because cash doesn't Earn much. This isn't about piling a bunch of stuff into a high yield savings account, but panic. Even though cash doesn't earn much, panic cost you everything. So that's why I push to to the Peace of Mind Fund over time. Now, this phase isn't building wealth, it's protecting the wealth that you're building. Okay? This fund gives you leeway, it gives you breathing room, it gives you calm. That's the game that we're playing. If money can't buy you calm, it's not doing you doing the job. It is. That leads me to the third phase of this and that is the Freedom Fund. This is where the fund begins. This is where you start investing. Once you have your protection in place, the investing begins. Okay? This is where the money machine starts to to grow. You're no longer saving, you're building wealth intentionally. Okay? So the investing part of this is now you're going to be putting, putting money away into various accounts. This is where things like asset allocation, diversification, asset location, meaning which accounts do you invest in? All those things start to matter here because now you're building it to build wealth, to take care of it in a way that is sustainable for your future. This is the core of your unshakable foundation and your money machine. Now, when you're putting money away in the Freedom Fund at this level, what I want you to start to think about is what's the specific order? And I go in detail in my book and in my money machine blueprint of the order of which accounts to go into. But think about getting discounted or free money. If you participate in a 401k and your employer matches, making sure that you're maximizing those kinds of things at the very beginning, making sure that you're taking advantage of tax benefited types of accounts like a Roth 401k if you're eligible, or maybe a backdoor Roth if you're not, or an HSA plan that's triple tax advantaged and those kinds of things. This is when that kind of thinking comes into place. Because when you start to have these pieces of the Freedom funding flow in place, you now have a system that runs without you see, the returns matter. But we need to then use the system to drive everything. If you skipped Shu, in other words, you didn't get the system in place, then ha trying to build this destroys you. But if you didn't skip Shu and you have your systems in place, then this portion of the philosophy ha proves your strength. But now we move to the Last piece of the philosophy, and that's revolution. This is what, what. What you build in real life. This is about relief. See, systems give you your life back. See, with me, I was seeing so many doctors during my cancer journey. I was trying to hit it from every direction. Eastern medicine, Western medicine, holistic, you know, energetics. I was doing everything that I could. That meant that I was seeing therapists and doctors and qigong masters and all that throughout the day. That was my occupation. That was my purpose. That was my focus. And there was no way that I would have been able to do that if those first two stages of Shu and Ha were not in place, if I didn't have the money machine place. Because I don't know what it would have been like to work for a living during the day and fight for my life during the night. Okay, this segment of the philosophy is where you start to look at it and say, how do you do this? Because re means to transcend not more money, but less fear. And this is what all of that structure buys you. You don't stay in bad situations because you're financially strapped or trapped. You don't say yes because you. You're scared to say no. You choose. You have options, and you choose calmly. The market drops, the headlines can scream. Life can throw the curveballs. It can punch you in the face, and you don't flinch. See, you don't think your way through chaos. Your systems drive you through chaos. You're present. You sleep better. Money stress isn't riding shotgun in your life any. See, you don't need to trade health for security. You don't need to postpone life for someday. Your money supports life. Life doesn't get sacrificed to money. Re is money doing its job. Here's the truth that most people miss. Money isn't the goal. What money removes is the goal. And it removes panic. It removes forced decisions. It removes living small out of fear. Shu Ha Ri didn't make me rich because it made me aggressive. It made me rich because it made me prepared. This isn't Japanese philosophy layered onto money. This is money built the way life actually works. So ask yourself, are you building something impressive or something unshakable? Because freedom isn't luck. It's built. It's built on an unshakable foundation. And if you're uncertain of it, follow the Shuhari philosophy. Because the second cut, it will come. That sword is already in motion. And you have a choice to decide how you're going to build, how you're going to do it. So you make sure that you have systems in place, your money properly set up. So when it comes, when life decides to make a left turn or punch you in the face, you're not surprised, but you're prepared. You're not knocked off, but you're still moving. That's the game I want you to play. Now, I know that this was a little different than most of my sessions, but we were having this conversation about my time in Japan and all of my martial arts training. And I said this was one of the core philosophies that really drove some of the things that I did and allowed me to. To get up when life knocked me down. And it knocked me down many times. Not just the cancer. It could be relationships. It was a bike accident. There was so many times a Ponzi scheme. Having a system in place, having this philosophy in place, is the thing that allowed me to make sure that the second cut didn't do me in. That's what I want for you. All right, I hope that you found value in this. I'd love to hear your thoughts on this, and if you have questions, let's have a conversation about it. Love having a conversation with those of you in my audience. All right, I'm here for you, and that's why I do this. So if you haven't done so already, make sure you subscribe. And while you're at it, give me a thumbs up. Okay? YouTube likes it, and it warms my heart, too. All right. Until I get a chance to see you on your path to financial freedom, out there building your systems, following Shuhari. All right. Always, always strive to live a life that outlives you. I'll see you in the next one. Cheers. For now.