The Best Financial Strategy For Your Income Level: $30k, $67k. $100K+

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. Ever felt like no matter how much you make, you're still struggling to get ahead. See, listen, if you're making $35,000 and can't seem to build a savings, or Maybe you're earning $75,000 and you're still living paycheck to paycheck or even making six figures, but wondering why wealth still feels out of reach, well, this episode's for you. I want to have a frank conversation with you because the truth is, the best financial strategies are aren't a one size fits all. They depend on your income level. They depend on where you're at. And I want to break it down for you because if you're not using the right strategies for where you are today, you're leaving money and opportunity on the table.

Most people believe that if they just earned more money, all their financial problems would disappear. I know that I felt that way. Maybe you feel that way. But the truth is that earning more money without a strategy is like pouring water into a leaky bucket. It disappears before you ever build any real wealth. It just goes in one end, out the other. And I've spent years helping people figure it out to go from financial struggle to financial freedom. And in my book, Building youg Money Machine, I lay out the exact steps. But today, I'm going to simplify it for you. I want to talk about three breakpoints in income and what your focus should be on. So by the end of the video, I want to walk through income, exactly what you want to do. If you're making, say, $30,000 a year, then making $67,000 a year, which is the national average, and 100,000 plus to build wealth the right way. And we'll talk about the four wealth drivers to make that happen. So let's start out with that first level. 30,000 what? You know, at tier one, you're making $30,000 a year. I remember coming out of college, my first job, I was making $26,500 a year now, it was a while ago, but it seemed like a lot, but it didn't seem to go very far even back then. And so here's the thing. If you're in this level now, mind you, these are levels that you will be passing through, hopefully on the growth to financial freedom, additional income and everything. But at this level, your key focus is going to be on financial stability. This is when you're sitting back here trying to figure out, how do I move from survival mode to security? And the two things that you need to focus in on here is your income. How do I secure my income, but also how do I scale my income? How do I negotiate the right kind of pay? How do I increase my income by creating more value in the marketplace for my job and everything. So I'm. So I actually I'm worthy of getting paid more. And then my savings rate. People think that at the very beginning that, that the income is the thing that's going to drive their wealth. And it is partially true. But the real thing that drives you out at the beginning or at these lower levels is not the income, but the savings rate, the percentage of that income you're putting away to work harder for you than you did for it. And the more we can push that savings rate up, the better off we are. So let's just talk about a couple of steps to think about at this level. And step one is this, to secure your foundation. That's the first piece of this. The biggest risk that you have at this level is that you have no breathing room. One unexpected expense can send you into financial chaos. That's the challenge. Whether it's a broken, a busted transmission, a busted mainline in the house like we had here, a medical situation, anything. We need to get breathing room. Now, one of the reasons that the wealth priority ladder in my book is built the way it is, is to get you that breathing room, to know how to give yourself the liquidity so you can breathe if something happens. And that a single unexpected expense doesn't send you into a complete despair, okay? But you create that stability by making sure that you have your basics covered. I'm talking about your, your survival, the roof over your head, the food that you eat, the clothes on your back, your medical, your transportation. It's the fundamental survival basics to do that. Now, in the wealth priority ladder, one of the things to focus on, the very first level is this idea of a comfort fund. And the comfort fund is not an emergency fund. It's literally $1,500 or one month's expenses. The only reason we do this is to give you somewhere to go other than into debt if something unexpected happens, okay, if you have to pay a medical deductible, if you have to pay for new tires on a car, you don't have to go into debt to make it happen. You have this, this one month's expenses or $1,500 set aside in a high yield.

Cash account, savings account that allows you that breathing room to do that. So. So the first piece is making sure that you have that in place. The second piece at this level is to be very, very wary and careful about your use of debt. Credit cards especially. Okay, we don't want to take on destructive debt, consumer debt. We do not use debt to pay for lifestyle choices. I get it. $30,000 doesn't seem like a lot when it's all said and done depending on where you're living. And it really isn't. We want to increase that income. But if I have a gap between my income and my lifestyle that I want to live, we do not fill the gap by putting it on credit cards. That is a demon that will come back to haunt you for years to come, especially in a high interest environment right now. You know, things like credit cards, payday loans and all that stuff are a challenge. Now you might be listening to this and saying, or watching this and saying, I already have that. Now what? Well, if you have it, there's two things I need you to do. One, we stop using it, we stop digging. Put those things away. Do not keep going into debt each and every month. And two, I need you on a debt payment plan. If you're unsure about how to get on a debt payment plan, go to melabraham.com.

There's a debt breakthrough calculator. It's a download you can get for free and there's a short training there. I need you on a debt payment plan. First I want to stop, stop the bleeding by no longer using it and start repairing it by getting it paid down. Okay, Number. The other thing you can do here is negotiate your bills. Internet, phone, insurance, all those things are negotiable. A lot of things are negotiable when we're living in an environment where 78% of Americans are living. Check to check even high earners. It isn't about more money, it's about better money management. That's important. So step one at this level is secure your foundation, comfort fund, eliminating destructive debt, being on a debt payment plan, and negotiating the right bills. Step two here is to Increase your income. The bigger the shovel of income we have to put at this, the better off we will be. Now, we can cut expenses and that leaves more for us, but you can't cut your way to wealth. You can't deprive your way to a rich life. So it is important for us to start looking at things like, like how do I get paid more? And the way to get paid more. This is a general statement, okay? We get paid based upon the value that we provide. Okay, I get it. There's people out there that will say, well, I've worked here 20 years, I'm entitled to a raise. No, actually hard fact is you're not. There isn't an entitlement. And I know that might be smack in the face and doesn't feel good, but the economics will dictate that you get paid for the value you create. Solve bigger problems, solve better problems, bring better skills, bring better productivity, bring better focus, impact, profitability. And now you're worthy of being paid more because you're more valuable. So in order to increase the general element of increasing income is to ask myself, am I one first, getting paid what I am worth, what I am valued at. Second, how can I increase that value? Are there skill sets that I can acquire? Are there projects that I can take on? When I was working at the consulting firm, I had a reputation. And that reputation was I would take on every project that someone else didn't want to do. It was these unique projects, one off projects that people didn't know how to tackle them and they just said, give it to Mel, he'll figure it out. So I was this problem solver and what that did is it gave me a reputation, but it also gave me the, the cachet and the ability to ask for more money when it came, raise time and that kind of thing because I was more productive and I was more valuable to them as a utility player. And I think that if we do that with our customers or we do that with our bosses or our companies, that it becomes a very different conversation when it comes to asking for a raise or negotiating salary or anything like that. So you want to, you want to start to do that. The second thing that you can do here is look at high value side gigs. Are there things that you can do outside of your regular employment or your other other things that are freelancing, tutoring, consulting, things like that, based on your strengths, your skills and the work that you do that you can get paid more, that you can get additional value for, additional compensation for and if you can add that in, get that in. It may be long term, it may be short term, it may be temporary to just get you over the hump. But right now your job is to secure the foundation and increase your income and at this level to make that happen and all that. Now we can do some other things like you know, we can rent out a room in the house and rent our car for side income, those things. I'm not a, I'm not a fan of that. First off, I think that there's some, some risk in, you know, having tenants in your own home. And I did that early on, but I just be cautious of that. There's other ways to make that happen. And you want to look at. I have a framework in my book called the five Incomes. And, and what that does is it's starting to move you. As you move up the five incomes, you move from actively participated income. In other words, you have to put all the effort in to make the income to leveraged income. In other words, the efforts you put in to generate the income are far less than the income generated. We want to ultimately get 80% of our lifestyle or more paid for by leveraged sources of income, portfolio, residual asset based, all those things. So over time I want to build that. But right now at this level we need to think about increasing income. Step 3 At this level is now to take the friction out of it. Automate your wealth habits. In other words, let's make sure that you are paying into your financial future first. That means that if you're at a company that has a match or 401k, you're participating in it automatically. Automatically you're getting the match. If you need to build out your, your peace of mind for an emergency fund, it is automatically getting, getting done. So what I want you to do here is to take your, your money that's coming in, follow the wealth priority ladder, making sure that you have the money going into the right accounts in the right way order. So take advantage of, of company matches. That's free money. So the first thing is going to be going to 401ks going into to get that match. The other thing is that I want to, if I'm building my peace of mind for an emergency fund, I want that money automatically transferred. A high yield savings account. If I'm trying to pay down debt, I set up my payment plan, I have it automatically paying down. Why am I doing this? Because the less friction I have with my wealth creation, with my habits, the easier it will be. Make it automatic make it the priority, make it the first thing, not the last thing and you will set yourself up for the next threshold. All right, so that leads me to the next tier. The next tier is like I said, 67,050 to 67,000. The wealth building phase. This is tier two. This is where we're looking at the average income level nationally right now. But the fact is is that the focus here is financial security. Previously it was financial stability, but financial security is now looking at things and saying how do I increase my savings rate like I was doing before, but increasing even more. Remember, I want you to, to invest 20 to 25% of your income to make sure that you are putting yourself in a proper kind of trajectory for your financial freedom. 20 to 25% of your income. So your main wealth drivers in this phase of your journey is going to be your savings rate. Pushing that up your investing and your investment returns. Making sure that you're building a simple but diversified portfolio. Index funds and ETFs is the place to start for me. It's liquid, it's simple, it is low cost, low fee and, and you need two, three, maybe four funds. That's it. Stock market goes up eight out of 10 years. Leave it long term and allow it to build it's financial security that we're focused on. So what are the steps in this one? Step one is automate and optimize your wealth growth. As we talked about in the last tier, automation is, is important, it's even more important here. That wealth priority ladder is, tells you exactly what to do and I want you to completely automate it. 20 to 25% of your income is going towards investing. You, you're paying down your debt if you still have it. So you're on a debt payment plan, but it is going into, you're investing in 401ks, IRAs, brokerage accounts, wherever it is, depending on your situation. And now all of a sudden you're investing in. Your wealth building is on automatic. Okay, if we don't do this, what happens is that you get paid and now you have to make an effort to write the check, to transfer the money, to make the investment. So, and that friction stands in your way now, you will probably continue to do it for a period of time, but you might fall off here and there because you got busy, because of travel. This that everything that I do is pretty much automated. Whether I'm on a plane, whether I'm in another country, whether I'm sitting here at home. Money is being moved around and invested Based upon the criteria to allow it to happen in the background. No friction. Okay? Step two, maximize your employer benefits and or tax advantages. In other words, when we talk about it in the wealth priority ladder, the first money that I want to put away is to make sure that I'm taking, taking advantage of any employer match, 401k match. If they're going to match up to the first 4%, then I'm going to put 4% of money into my 401k. They're going to put an additional 4% in. That's a hundred percent return. Take advantage of it. This is huge and so many people are not doing that. If I have access to a Roth, then I want to put money into a Roth. If I have access to an HSA account, I may want to put it in there. Now you have to look at the nuances with the HSA because it's a high deductible plan and depending on your health situation, it may or may not make sense. In my case, it doesn't make sense because of the post cancer and all that stuff. So. But these are things that I want you to be thinking about is look at your free money first. Matches, okay? Look at your discount money second. That's things like discounted employee stock purchase plans and that kind of thing. Take advantage of those tax advantages in this stage to maximize what you have in your pocket and working for you. Step three is stop asking $3 questions. Focus on $30,000 decisions. Okay, this is huge. We start to get all caught up in. And this is my dear, dear friend David Bach talks about the latte factor and he gets, he gets grief about, oh, the $5 coffee. It wasn't the $5 coffee that he was talking about. It's the mental state and the mentality around it. The realization that everything adds up. But the biggest mistake that can happen as you're, as you're crossing the $67,000 threshold is lifestyle. Lifestyle creep. You, you, you, you're getting more income, but you don't feel any better. You still feeling broke. You still working, check to check. And the reason for that is you don't have a plan in place that is guiding you on what to do to move you to where you want to go. The plan is going to look at where do I want to go, where am I today and what's the path to get there. So now it tells you, should I be paying for.

A car that is a $70,000 car. Remember, $3 questions versus 30, $30,000 decisions. I want you to be really careful about the big decisions. The car purchases, the home purchases, the vacation purchases, all those things, less the, the, the coffee purchases. Because that's the thing that's going to actually dramatically impact you over the long term. So it's, it's really important for us to look at it through those, those kinds of eyes. Now, when I say plan, a lot of people hear budgeting. No, it's a plan. It's not a budget to, to confine you, to handcuff you, to strap you. Remember I said deprivation isn't the path to a rich life, but permission and discipline is. And when you sit and do a plan, when I do a plan, a money money machine master plan with my clients, we build it out and we figure out what the priorities are. The mistake that most people make, especially at this level, is, is they, they allow the emotions to come into their purchasing decisions because they don't have a plan. Money comes in, they go, I got money in the account, I'm going to go spend it. And now you're buying things you wouldn't have otherwise bought. When you have a plan in place, you get it. You get the luxury of asking yourself this question. By buying this or investing this, does it move me closer to my ultimate vision for my plan? And if the answer is no, you don't. And the answer is yes, and it's part of the plan, you do, it takes the emotions out of it. I look at it as a plan and not a budget. All right, all right, that leads me to tier number three. These are those folks that are, they've crossed the six digits, you're at 100k and above. This is a point where we're really starting to push towards wealth acceleration, financial independence. It was a, a study of 10,000 millionaires. 79%, almost 8 out of 10 were first generation millionaires. Means that they made it in their lifetime. They did not inherit it, they did not gift it, they didn't get it, they didn't win it in a lottery, they created it. And one third of those never made much more than $100,000, but yet they were millionaires. So when you hit tier three, you have the opportunity to be one of those folks and really do it the right way. Now when you're doing this at this stage, believe it or not, there's still a high percentage of people that are still living to check, to check. And the problem is that what they did is they allowed lifestyle creep to get in place. They allowed debt, destructive debt to get in place. They don't have a plan. Okay, so one of the things to look at here is that the drivers here are going to be your investment returns and maximizing and optimizing your investments and time. This is moving from security to financial independence and financial freedom. And in the financial freedom journey, you're going to look at, at how do you scale beyond work the five incomes to make that happen? So let's just look at the steps here. Step one is get clear on what rich means to you. Now I, I look at it, wealth is a statistic. It is a number in a bank account. It is your, your, your net worth. It's all that stuff. But wealth has no meaning if it doesn't give you the life you want. And that's why I say what we are actually looking for is a rich life. It's how we feel, how we experience life. It's those elements. Benjamin Franklin said, wealth is not for those who have it, but for those who enjoy it. And that's really where I want us to play. Because if we disconnect the money from life, then we disconnect the joy that comes out of it. We don't need to have the money for the sake of money. We need it to have the richness in our life. And so step one here is really, at any step, I want you to be clear on this, but especially here. What is your rich? What does that look like? How is it, you know, how did you want your days to look? How do you want your life to look? How do you want your relationships to look? I wonder? You want your health to look? How do you want your family to look? To get really clear on what that rich life looks like? Because when you get clear on it, the now we can build the dynamic plan to make it a reality. But without that clarity, you don't know what your finish line looks like. You don't know what enough is. You'll keep running this race until you run ragged, and you'll never find contentment in the journey. And that's the thing that concerns me. So ask yourself, what's my end game? Is it financial independence? Freedom? Is it early retirement? Is it traveling the world? Is it generational wealth?

Is it missions or movements? I don't care what it is, but I care that you are clear on what it is. And if you're in a committed relationship, do this with your partner. It's huge. So the first thing is to get clear on what life looks like. Second, shift your focus to cash flow and investment returns. You're going to Transition from accumulation.

To wealth creation. This is where you start to build and make sure that you are maximizing and optimizing your assets to generate cash flow. The concept of the money machine is to have basically an ATM that could produce cash flow to pay for your lifestyle.

As you decide. When I got diagnosed with a cancer and we shut the businesses down, we have the machine, we turned the machine on. It paid for our lifestyle. We didn't reduce our lifestyle, we didn't sell anything, we didn't do anything. I mean our life changed because of the cancer, but not because of the finances. That's what I want for you, a life of choice. And so we're going to, at this stage, it's about optimizing the investments. You're going into the accounts. These investments are in, should they be in, in pre tax accounts? Should they be in after tax accounts? Should be they in tax deferred accounts? Okay. Should they be in tax free accounts? Roth backdoor, Roth tax loss harvesting all. Now all of a sudden we're starting to get into more nuanced investment strategies to maximize the available cash during the rest of your life and building it. So now we start to look at it through those eyes. And then step three here is to build a true money machine. I talk about something called the five incomes. There's five levels of income and each level has, has less and less effort on your part to create the earnings on the investment part. The first level is active income. That's what we all do. Employee, business, solopreneur. We are putting effort out to get earnings in. That's active. That is a lot of effort. I want to separate your earnings from your efforts over time so you can live a life of choice. Then there's business income. We leverage a little bit of our time back by getting team and people in place. Okay. But both of those take a lot of effort. Then the next three in the five incomes are asset based, residual and portfolio income. Those start to leverage your time back. I don't need to put daily effort in to create the income that comes out. The objective of a money machine is to have a money machine where 80% plus of your lifestyle is covered by, by the income generated from the top three of the five incomes, asset residual and portfolio. When you do that now, your money is working harder for you than you did for it. When you can sit back and say my money is making, you know, six figures, multiple six figures, seven figures and I might be doing my work, doing my business, still doing that by choice, making, you know, Six figures, seven figures. But the machine is churning and growing and doing that. That's your focus in step three, in this, in this tier. So, so that's, that's the game we're playing. Because once you have this in place, you are moving yourself closer and closer to that financial freedom point, that point where your machine and the cash flow of the machine covers the cost of the lifestyle that you dreamed about. That's true freedom. That's true choice, and that's what a money machine does. I hope this makes sense. I hope that this helps you understand that. Let's just look at a recap on what your focus is at each level. $30,000. I want you to focus on stability and income growth. At $67,000, I want you to focus on systematizing your wealth building. At 100,000 plus, I want you to scale your investments, scale your leveraged wealth, your leveraged income, and focus on building the money machine the proper way. All right? I don't know where you're at, but you know what, do me a favor, let me know where you are in these tiers. Drop me a comment below and let me know, all right? I hope that this helps. I hope this gives you some food for thought, some path to take, and some things to do, all right? Because I know that when you get in the game and do the game right and follow the right set of rules, which I'm trying to give to you, you'll win the game. Because here's the thing, it's just math. And math always maths out. It always works out. I want to give you the recipe. I want to give you the equation. I want to give you the formula. Make it happen. That's why I have this show. If you are not subscribed to this channel and the show, do me a favor, do so now. And one other thing. Would you do me a favor and share this, Share this out to someone else that you want on this journey with you because the financial freedom journey with our friends together is a much more fruitful. All right? I hope to see you in the next one. And until I do, or on the road to your financial freedom, as I always say, always, always strive to live a life that I love you. 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 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 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.