Your Wealth Can Explode to $5M… But Only If You Avoid These Traps!

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. Only 10% of Americans ever hit a million dollar net worth. But here's the wild part. Mathematically, millions should get there. So what's happening? What gives? It's not a lack of intelligence. It's not a lack of opportunity. It's 10 specific wealth traps that quietly erase hundreds of thousands of dollars over a lifetime. And most people, they don't even see it coming. See, today I'm going to break down the numbers, the psychology, and the exact traps that keep people stuck. And then I'm going to show you the the simple 4 to 5 fund portfolio that turns ordinary income into millionaire outcomes. I'm mel Abraham, a CPA, an entrepreneur, and a money mentor for over 30 years. And I've helped thousands of people reverse these traps and build real wealth. And this is building your money machine, where we help you master your money, eliminate financial stress, and live a life by choice. Because earning more doesn't make you free, But a money machine does. Let's jump in. All right, if you're watching this right now, your wealth is either quietly exploding in the background or it's quietly dying. There's no middle ground. There's no neutral. There's no I'll figure this out someday. That's the financial fairy tale disguised as good, good advice. And the fact is, is that I'm going to give you some tough love. Most people never reach a million dollars. Not because they can't, but because they keep stepping into wealth traps that feel normal. See, you've been told, wait until you make more money. Trap. Okay, buy a bigger house. Trap. The market feels scary right now. Trap. Oh, you still got time. This is the deadliest trap of all. Okay, now, these traps don't cost you hundreds of. They cost you hundreds of thousands and sometimes millions. And I spent decades helping people build their money machines and kill and kill these traps. Okay, so we avoid it. Okay, today we're going to flip the script and whether you're 25, 45, or 65, you can explode your wealth, but only if you avoid the traps. And so I want to, I'm going to walk through some things, but before I do that, I, I'm going to kind of give a punch to most people that they never hear. Every delay, every excuse, every, I'll get to it later. It's a withdrawal from your future wealth, not just money, but the version of yourself you were meant to become. And as much as you know that you're meant for more, today I'm going to give you the traps. The psychology of the math, the simple portfolio that ordinary people use and really make it rock. Okay, so here's the deal. Let's talk about this simple portfolio first before we even get into the traps. Because you need a blueprint. And this is not about some esoteric Ferrari engine, exotic kind of portfolio. This is the simple, reliable, boring, effective Toyota Camry money machine that you know will be there. This is the millionaire portfolio. No overlap. It's, it's, it's the key. Now what I like to do is we're going to invest in ETFs and index funds because we get diversified mix of funds so we get diversification on our side, we get asset allocation on our side. And we do it in a way that allows us to, to know that we participate in all the different markets. And you'll see that in a moment. But here's why I think that we get ourselves in trouble. One of the things that we do is we start to chase these really high returns which usually come with really high risk, even though they may not tell you that. So even my investing from a six figure portfolio to a seven figure to a multi eight figure portfolio is as simple as what I'm going to describe here. And so I look at a five fund portfolio as the max because you want to keep it simple at first. And many, many people, especially starting out, they haven't hit their first million. Then, then you don't want complexity, you want to keep it simple. So the first thing is this. I want a portfolio that's made up of a couple of different buckets of investment types or, or asset classes. And the first is a total US Stock market fund. Now this could be something like vti. I'm going to give you ticker symbols here. I am not recommending these, I'm just giving them to you as examples because I don't know your specific and personal situation. Okay? But the US Stock market was one of the highest performing stock markets, has been around for a long time. And you can invest in the thousands of stocks that make the stock market. The US Stock Market and something like VTI is a Vanguard Total Stock Market fund gives you access to that. So when you put money in it, you're investing into thousands of companies. The second piece of the portfolio is a total international stock market fund. So it is the counterpart to the U.S. stock Market Fund. Because now we get exposure to the international stocks, Germany and the UK and things like that. And you're going to get that exposure. And what happens with these different aspects of the portfolio is that different categories will, will perform differently at different times of the year and different, different times of the season. For instance, the international stocks in the current year performed really well at the beginning of the year and the US Stock market lagged behind and then came, came back. Now, now every year different asset classes are at the top. So you can't necessarily predict that it's always going to be the top. So that's why we participate in a number of them. Now this next one piece of it could be controversial and that is a total US Bond market fund. Now this may be, remember I'm not giving you percentages. The percentage to the bond market fund might be very, very small depending on age, stage and circumstance. But it is a place to give you a bit more stability in the portfolio as we move forward now. So right now you've got a portfolio with three different funds. A total stock market fund, a total international stock market fund and a total US Bond market fund. Then the fourth part of this portfolio would be something like a real estate investment trust fund, like a VNQ could be a possibility. Again, it's not a recommendation. But now you are bringing real estate into your, into your portfolio as a possibility. And now you are seeing how we're diversifying in these different areas. So when real estate's performing or the US Stock market's performing, you're participating in the overall return is going to give you the returns you need to hit the numbers to get to the million and beyond. Now the fifth part, remember I said it's a five fund Portfolio can be a couple of different things depending on your age, stage, circumstance and what you want to do. You could invest in a small cap value fund type of a thing or an emerging market fund. So this is where I would start to look at things. That emerging market brings on more risk, but it brings on higher returns in, in that regard. So, so I look at it and say if I was going to build a portfolio to build that million dollars, that millionaire portfolio, I, I would do it with four or five funds like this at the very beginning. Keep it simple, keep it accessible, and keep it with low cost, low fees. Now that's it. It's no hype, it's no complexity, it's no wizardry. It's a simple machine that you feed consistently. Okay? And when you have that machine in place, you just gotta avoid the things that destroy it, the traps. So let's talk about the things that can destroy that when you put it in place. Okay? And trap number one is this. I'll start later. This is the million dollar murderer. Okay? Delaying investing is the most expensive bill you will ever pay. Think about this. If you invest $300 at 8% until age 65 and you start at age 25, you have $630,000 by the time you hit age 65. If you wait a decade, 10 years, and you start at age 35, it's less than half, you end up with $300,000. If you wait another 10 years at age 45, it's less than half again. And so you end up with $130,000. See, the 10 year delay is a $330,000 mistake. The 20 year delay is a $500,000 mistake. It's really easy to think, hey, I, I'm young, I have time, I can get to it later. But it's also really easy to go, I'm young and I have a lot of bills, so I don't have the money to do it. And we'll talk about that. But here's the reality. I have one woman who told me that. She said, I'll start doing investing when life calms down. Here's the thing. Life is allergic to calm 5 years later. 5 years later she said, I didn't know procrastination charges interest. What a statement. It does. Okay, trap number two. Lifestyle creep. This is like death by a thousand convenient purchases. Okay? Lifestyle creep doesn't show up as a yacht. It shows up as a $400 a month DoorDash bill. Or upgrading the phone for no reason, or we deserve this kind of weekends when you can't afford it. Or cars that cost more than your investment contributions, okay? That you have to finance for seven or eight years just to try and make the payments. Okay? So here's, here's the reality is that when, when you look at it, you need to start to look at what you are investing and how lifestyle is eating it up. When you get a raise, for instance, I want you to increase your savings rate. First I talk about the 5050 rule. So I don't want you not to celebrate. I want you to celebrate. But what I don't want is, let's say you get a $10,000 raise. I don't want you to go and spend $10,000. I want you to put $5,000 towards lifestyle and celebration and all that stuff and maybe upgrades. And the other $5,000 goes towards, towards your future saving rate first. Okay, Trap number three, High interest debt. Listen, if compounding helps you build wealth, negative compounding, in other words, the interest you pay, someone else destroys it. Okay? You can't build a millionaire portfolio while paying 24% interest, okay? It's like trying to fill a bathtub with a drain. Wide open. Money in, money out. Think about this $10,000 balance on a credit card at 24%, you're paying $2,400 a year. That's your investment fuel just burned. Okay? The student that is investing $300 a month but had $9,000 credit card balance, she wasn't building wealth. She was treading water with literally ankle weights. Once we tackled the debt for her and automated investing, she's now investing $850 a month and she is well on her way to the million dollar portfolio and beyond. Okay, Trap number four. Stock picking and fomo. Listen, this is like adult Pokemon. Everyone thinks that they are the Warren Buffett until earnings season arrives. Here's the interesting thing. 90% of active investors underperform on a simple index fund over 20 years that they cannot, they cannot beat the market in the long term. And you don't know what a company is going to do. We had just went through an earnings season. One company literally said that they increased their revenues by 60% and that they have projections for, for an additional, you know, 50, 60% in the coming year. They're in the AI space. Do you know that the, the, the stock went way up and then it tanked in the same day and now it's, it's down. Okay, here's the thing. I remember a man coming to me, says, told me he lost $40,000 on a stock. And I corrected him. I said, you, you lost $40,000 compounded for 30, 30 years. That's a million dollar mistake. Okay? So it's very important for us to realize that stock picking is a, is a difficult thing to do. And that's why the, the portfolio is built on. Instead of trying to find the, the needle in the haystack, let's just buy the whole haystack and make sure that it all goes up because the market goes up 8 out of 10 years and we want to participate in it. Trap number five, market timing. All right, this is to me, I was trying to do this at one point, but it became financial whack, a mole for me, okay? Trying to time the market, trying to sit back and say, I know when the top is, I know when the bottom is, is like trying to play goalie during a solar eclipse. Okay? Just can't, can't be done. There's a study and watch the math behind this, that if you were fully invested, if you invested $10,000 in 2002 and just left it in there, didn't try to time the market, get in, get in when it's low, get out when it's high, get back in when it's low, get out when it's high. Like we have that kind of crystal ball. And you left it in there for 20 years. From 2002 to 2022, it grew to $64,000 without you doing a thing. Okay? Six and a half times, almost what you put in. However, if you tried to get in and out of the market and you missed the 10 best days of the market, the 10 best days in the market, that was less than half. So that instead of 64,000, it's 29,000. That's mind you, missing 10 days in 20 years. If you don't get the timing right, you cut your returns in half. And if you missed the 20 days of the market, it's down even less, $15,000. See, and the best days, this is the crazy thing happened right after the worst days in the market. So it's that point where your fear is, is, is up because the, it's the worst day in the market. You feel bad, you're out, you don't feel like getting in, and now you lose out on 50% or more of your growth in doing that. See, your feelings, your emotions, your, you got. Can't be trusted, okay? They can't be trusted. That's why we have to use a system and a process to make sure that we're making the right decisions on an ongoing basis. Okay? And, and now before we get to the next traps, if you're trying to figure out where you are on this financial journey, then one of the easiest ways to do it is to take my Financial Freedom Zone quiz. You can, you can take this, it's a 70, 90 second quiz. Answer some questions. It's going to figure out where you are on the journey, what you, what you need to Focus on what to watch out for and what your next steps are. Totally free. You can, you can go to your financial freedom quiz.com and we'll hook it all up for you here. Anyways, okay, on to the rest of the traps. Trap number six, big purchase setbacks. People underestimate the long term damage from one oversized purchase. Think about this. You upgrade a car from 25,000 to 65,000, that's a $40,000 difference versus if you took the 40,000 and invested at 8% for 30 years, that's a $403,000 difference. One car, nearly half a million dollars gone. Now, I'm not saying not to upgrade things and not to live a good life. I'm saying that you want to understand the consequences and the ramifications of a choice. I think that you should be buying assets that are going to build first before you do anything else and allow those assets to be the thing that funds the luxuries later. Okay, Trap number seven, no cash buffer. This puts you into what I call a forced liquidation situation. Now I get it. Some people say, well, cash is trash. You know, I put money in a high yield savings account and it's getting eaten by inflation, that kind of thing. Remember, every dollar has a job description. And some dollars are there to build your wealth, but some are there to protect it. This is there to protect it. The fastest way to kill compounding is to be forced to sell your investments when the market's down. Okay, this was something that happened in 2020. And one client and this that had liquidity didn't touch his investments. His portfolio exploded after the recovery. And then another person that came to me afterwards, they had no liquidity, they had no emergency fund. And so what happened is they needed liquidity during the 2020 downturn. And so they sold, but stocks were down. And so they sold at a loss or at lower values than they could have. And, and then when they decided to get back in, they reentered at a higher cost, which meant that they lost six to eight. Eight years of progress. See, liquidity, it isn't fear, it's defense and its freedom. Trap number eight, under investing. Okay, a tiny fuel tank kind of syndrome. Here's the thing. You can't reach a million dollars investing at $50 a month. Well, you can if you're going to live for hundreds of years. Okay? But you have to push your investing, your savings rate. Investing rate is the most important number that when it comes to building that initial wealth. When we say that I want you investing 20 to 25% of your income. Now, I get it. Some people, you can't start there, but let's build to that in doing that, okay, think about the Math here. At 8% for 30 years, $200 a month will give you $282,000. $500 a month will give you $705,000. $1,000 a month will give you $1.4 million. See, your wealth grows proportionally to your intentionality with, with what you do with the ink, with the income you have, not your income. So people will say, well, it's not how much you make, it's how much you keep. It's not even how much you keep, it's how much you get to work for you that matters. And in this one, we want to get as much working for you as possible. Trap number nine, concentration. Risk. Okay, this shows up as well. I'm in all tech stocks, or you might be in a situation like my wife's in, where she gets company stock, employer stock, and their employer stock is booming. And now all of a sudden, the, the value or the portion of the portfolio becomes overweighted. Okay. Or you sit back and say, I'm just going to bet it all on crypto. And so any of these things create concentration. It's why the portfolio that I talked about earlier is designed the way it is, is to give you diversification. Because, let's face it, not everything goes up at the same time. And at any moment in time, you've got things that are going up, things that are going down, things that are going sideways. And so unless you think that you have the crystal ball to guess it right all the time, then. Then having a concentration of risk in a single category, a single industry, or a single type of investment can get us in trouble. So your salary and your portfolio shouldn't depend on the same company or the same asset in the work that you're doing. The diversification protects you from being wrong. Okay? And that leads me to the final trap. Trap 10, and that is quitting too early. This one really breaks my heart because there are, there's data that shows that most people quit before their first hundred thousand dollars. And that first hundred thousand dollars is the most important tipping point because you've never done it before, and you become someone different. In building that first hundred thousand dollars of wealth, you, you learn the skills, you learn the, the, the language, you start to understand some things, you start to build the habits, you start to build the system, you start to do that. But people get to $80,000 and. And it feels like a grind. And it is. The first hundred thousand dollars is hard because the money isn't really working for you in the way that it should yet because we haven't hit the acceleration point. You're doing the heavy lifting. But after you get at the tipping point of critical mass, it starts to grow. But people will get to 180,000, 150, even 200,000, and they quit because they say, wait a second. Most of the growth in my portfolio is from me putting money in. The problem is that we don't see the magic of time and compounding until we get into it. $250,000 mathematically doesn't feel like the halfway point to a million, but it is in time. Watch what I mean from zero to $250,000. When you'd look at $10,000 a year at 8%, okay, $833 a month will take you 13.8 years to hit that first 250,000. But the last 750,000 to get to a million takes you another 13.8 years. So if you can get to the $250,000 tipping point, you're halfway to a million. Keep the habits, keep the process in place, and know that time and compounding will take care of the rest and get you to that million at the same time. Okay, compounding is slow, slow, slow at first, and then boom, it takes off like rocket fuel. But most people quit right before the explosion. Okay, I don't want you to do that. Now, you might be saying to me, but wait a second, I'm 40 years old, I'm 50 years old, I'm 20 years old. What do I do? Let's talk about some age specific things, because before we close this out, and the first thing is, let's say you're in your 20s, y'. All. If you're in your 20s, it's the magic spot. Time is your superpower. You. You have less effort. You just have to have more discipline and get in the thing. So what do you do in your 20s? Make sure that you're getting in the game and pushing your savings and investing rate up as high as possible. Avoid destructive debt. Avoid allowing your ego to make purchases that your bank account can't. You can't afford. Okay? Start small, but start early. Stay in the game. Now, if you're in your 30s, this is where we call the messy middle. Life gets busy here, okay? This is when you're buying things and life is happening. You're getting married, you're having kids. All the things that start to get in the way. So what do we need to do here? We need to take what we did in our 20s or start putting things in place, but automate it. Automate everything possible to take the friction out of doing it. That means I want you to, to start wherever you can. 1%, 10%, 5%, I don't care. And then I want you to do two things. When you get a raise, I want you to do the 5050 rule. So 50% goes towards, towards your financial future and you do it on automatic. And 50% can go towards your life. Okay. The other thing I want you to do is if you haven't hit 20 to 25% yet, I want you to do the 1% rule, which is I want you to start pushing 1% more into your savings rate every quarter. That means it's 4% a year, but it's going to get you to that 20% over a period of time. Okay. That leads me to what happens if you're in your 40s. This is your acceleration decade. Okay? We got to take it seriously here. I need you maxing your accounts, your 401ks, your brokerage accounts. Follow the wealth priority ladder in chapter 12 of my book or my, in my trainings, the money machine. Blueprint it, walk you through exactly what to do. But this is a place to be really careful if you haven't started building. We got to get in the game and we got to get in the game as heavy as possible. That means that I need to keep lifestyle creepy to a minimum. I have to keep my lifestyle stable. I have to fuel the machine as much as possible to get to make up for the lost time from the prior decades. Okay, and again, automate, Automate, automate. So you don't have to pull the levers and push the, push the buttons and turn the dials. It happens without you thinking. And if you're 50 or 60, you're not behind. You have to be focused though. You can still make it because we're living longer and we have the time to start doing it. But we need the discipline, we need the behaviors and we need the money to do it. This is where you have to really find ways to maximize your cash flow. Use the cash flow, get it in there. You have access to catch up contributions and IRAs and 401ks. Put as much away as possible, which might mean you have to take some hard looks at your spending and your lifestyle and the things you're doing on one side and also at how you're earning income and what you can do to build that income. You can still hit a million dollars, but you can't do it if you're feeling like you're in chaos. I hope that this helps. I hope that you get a chance to really look at this. You don't need to be perfect in this journey. You don't need luck or timing. You need clarity. You need consistency and a simple, repeatable system. Okay? And that's what we're talking about here. So, again, if you are not sure where you are on this financial freedom journey, go take my Financial Freedom zone quiz@yourfinancialfreedomquiz.com but in the meantime, the most important thing is I need you on the field playing the game. You can't. Wealth creation is not a spectator sport. You can't do it from the sidelines or the stands. You have to be doing the work. And the work may require discipline. It may feel hard. I get it. But it is also simple. I gave you a simple portfolio, simple things to do, even though it may be hard based on your age, stage, or circumstance. But just because it's difficult doesn't make it impossible. But what I do know for sure is you never get in the game. Then financial freedom is impossible. But that becomes a choice. And I know that can be a hard pill to swallow. But I want to help you on this journey. I hope that this helps. I hope that you get in the game, and I hope that you see that this is a path to getting to the million and above and exploding your wealth the right way. Avoid the 10 traps, get in the game and make it happen. And if I can help you along the journey, let me know. I'd love to hear from you and I'd love for you to share this with. With a friend, because the journey to financial freedom is always more fun when you're doing it with people you love. All right? And at the same time, if you haven't done so already, go ahead and subscribe, okay? Keep the show running and rolling, and it'll also make me feel good, all right? Until I get a chance to see you in the next one. Or on my journeys, my speaking and all of that, or on your path to financial freedom. Always, always strive to live a life that outlooks you. See you in the next one. Cheers. Thank you for listening to the Affluent Entrepreneur show 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.