2:07

Magic hundred thousand dollars. That first hundred thousand dollars

2:11

of wealth that makes it so difficult. And, you know, I don't know if. You'Ve

2:14

heard that, but I've heard it plenty of times in my decades of working

2:18

with individuals to help them build their wealth. Is that, God, that first hundred

2:22

thousand. Was the hardest, and they're right now.

2:26

There's some logical reasons for it, there's some psychological reasons for it,

2:30

and there's some mathematical reasons for it. I'm going to walk you through. Why is

2:33

it so hard? What do you need to focus on. To

2:37

make it faster, make it right, and then

2:40

to accelerate it after the. First hundred thousand off? So let's

2:44

get going. All right. So the very first reason that

2:48

the. First hundred thousand dollars is

2:51

challenging or. A little more difficult is

2:55

this. It's this idea of

2:58

compounding takes time. It

3:02

takes time to build wealth from

3:06

a compounding interest standpoint or growth standpoint. When you first

3:10

start out, you're putting money in. You're putting little incremental money in. You're putting

3:13

$100 here, dollar ten there, $500 here. But

3:17

$100 at 10% makes you $10. And it

3:20

feels like, oh, God, I. Got a measly

3:24

$10. It's what I call the wealth flat line.

3:27

And when we're not careful about it. We get kind

3:31

of discouraged, if you. Will, because the wealth flat line

3:35

looks a little bit like this. Is that as you start

3:38

your wealth. Building journey, you're putting money in. You're putting money in, you're putting money

3:42

in, but you feel like you're not making progress.

3:46

Here's what's happening is that you're actually. Compressing

3:50

a spring and you're compressing a spring. And the only way to

3:53

get past. This, well, flat line is time. So

3:57

you got to stay in the game, you got to stay on the field. But

4:00

a lot of people don't because they get discouraged, because what's going to

4:04

happen is once you hit it and that spring

4:07

releases, your growth, accelerates

4:11

from here on out. But that first hundred

4:14

thousand dollars is hard because we're in the wealth platform and it

4:18

doesn't feel like we're making progress and it's discouraging and all that

4:22

stuff. My first hundred thousand dollars in net worth was at

4:25

29 years old. And let me tell you, in my twenties, it was really

4:29

hard to push through that. But once I got there, it

4:33

started to accelerate. In fact, I have a graph that shows how the

4:37

time compressed over and over again. So that's the first reason

4:41

that it's difficult. The second reason is,

4:44

frankly, you need. To

4:48

build your financial habits.

4:54

Here's the thing. The majority of your wealth

4:58

creation is driven by your behaviors and not your

5:02

money. See, when we come into it, we think, gosh, if all I did

5:05

was fix my money and make more money, I would be

5:09

fine. But that's actually not truly the case. It's about

5:13

your behaviors. It's about your decisions, it's about your habits.

5:17

But you haven't developed the behaviors. You haven't developed the habits. You

5:20

haven't understood that because you're new to the game. You're just

5:24

starting to build wealth. You're just starting to get yourself going.

5:27

So what ends up happening during this time is there's a

5:31

tremendous amount of learning. There's a tremendous

5:35

amount of friction. It's like learning a new language. It's just like

5:38

learning when you first started learning how to walk or ride a

5:42

bike. It takes a little bit, but once you get

5:46

beyond it, it becomes much easier. But the

5:50

idea here is this. It's about creating

5:53

behaviors and habits that make it second nature.

5:57

So now your wealth creation becomes

6:01

really automatic. It becomes part of your financial

6:05

identity, as I call it, to allow you to make the

6:09

right decisions that drive the right behaviors, that drive the

6:12

right financial results. So that's the second one.

6:16

So time compounding takes time and

6:20

building financial habits. The third,

6:24

the third is

6:27

psychological limits.

6:32

This is about your stories. This is about your

6:36

beliefs. This is about the things that are in

6:39

between your, your ears, that are holding you back. Here's the

6:43

thing. We're never,

6:47

in most cases, none of us were ever taught about money.

6:51

We didn't have formal education. So we have these

6:55

ideals about money that were created through

6:59

observing other people. I say that our financial lessons are caught,

7:03

not taught, because we're not having these conversations. So what happens is

7:06

we have these stories in our head. Money is dirty. Money

7:10

is for the greedy. I don't have, I didn't come

7:14

from money, so I can't have money. I'm from the wrong side of the tracks.

7:17

All those stories around, oh, my gosh.

7:21

To have a six figure net worth, that's a

7:24

lot. And so you're coming from a

7:28

place that you've never been, which means that you're unfamiliar with it. It's no

7:32

different than the first time you go to the gym. You lift some weights, and

7:36

a day. Or two afterwards, you're sore as hell.

7:39

But what we're dealing with here is we have to break through our

7:43

comfort zone and the psychological barriers of our stories and our

7:47

beliefs. And really, I think that

7:51

the hundred thousand dollar mark is necessary.

7:54

The friction and the stress around it about

7:58

why it's so difficult is necessary because it develops

8:02

you into a better steward of

8:05

wealth so you can carry beyond

8:08

$100,000. This is why I think that people,

8:11

that partly why people that win the lottery within a couple of years are

8:15

broke again because they haven't built the skills, they

8:19

haven't broken the psychological barriers, they haven't created new

8:22

built belief systems, they haven't created new skills, and so they're not

8:26

prepared to handle it. And so this journey to that first hundred

8:30

thousand prepares you psychologically, skill wise and everything else

8:34

to make that happen. So those are the three things, I. Think that make

8:37

it difficult. But if that's what makes it difficult,

8:42

what do we need to focus on to make it easier, to make it faster?

8:45

Well, there's a couple of things that I think we can focus on, and the

8:49

first is this. Let's change a color for this.

8:54

The first focus area is to increase

8:58

your savings rate. And what I mean by this is this. We come into

9:08

this believing that, gosh, if I just make a lot of

9:11

income, that's going to turn around and be the

9:15

solution to all my prayers. Now, don't get me wrong, a big.

9:19

Shovel of income helps you get to your

9:22

wealth number, to your financial freedom number a lot faster

9:26

if you do the right things. See, I think there's something that I call the

9:30

four wealth drivers matrix, and I teach this. It's in my upcoming

9:33

book, building your money machine, that talks about

9:37

it. But the reality is that there are four things that drive your

9:41

wealth, and the first piece of it is your income. So

9:45

it has an impact. But we all know people,

9:49

Mike Tyson. Burt Reynolds,

9:52

Willie Nelson. There's so many name people

9:56

that you might recognize that made hundreds of millions. Of dollars

10:00

and ended up broken. So clearly, it isn't about

10:03

the income alone that creates wealth because they had plenty of

10:07

income. What it's about is how much of that

10:11

income they're putting to work for them in what I call the money machine.

10:15

How much are you saving? How much are you investing? And we want to

10:18

push that savings rate as high as possible.

10:23

And when we do that, that's what. Starts to drive

10:27

our wealth, is to. Really push that savings rate. So

10:31

the very first thing is to look at how you can

10:34

increase the percentage of income you're putting

10:37

away for purposes of

10:40

investing. And you might say we want to. Push our clients to

10:44

20%, to 25%. And you might

10:48

say, well, wait a. Second, we can't do 20% to 25%. That's okay.

10:52

Do 1% increments. Start somewhere. And

10:55

keep pushing to increase. Keep pushing to increase. Just like

10:59

lifting at the gym, you. Get used to a weight. You put a little

11:03

more weight on, a little more weight on, a little more weight on. With that,

11:06

you start to build strength. With that, you start to build muscle. Okay? Same thing

11:10

with your money. You start to build your money muscle. You start to build some

11:14

of the things that are, that are coming about when you do this correctly.

11:17

Okay? So pushing the savings rate up

11:21

is the first focus area. The second focus

11:25

area is to have a cash

11:30

resource plan, okay? Now,

11:34

some people, they would call this the b word

11:38

budget, okay? I call it a cash resource plan for a

11:41

reason. Here's what I believe. I believe that every single dollar

11:49

that. Comes into your life needs to have a job description.

11:52

And here's what I mean by this. Think about this. Can you imagine

11:56

hiring ten people and. They come into your business and you have

12:00

them for the first day in the conference room, and you're having a conversation

12:03

with them and say, I bet you notice that we do things a little differently

12:06

here. We don't give you job titles.

12:11

We don't give you job descriptions. We don't give you

12:14

roles. We don't give you goals. I don't give you tasks.

12:19

But I want to double our business in the next two

12:22

years. Is that really going to happen? No.

12:26

I mean, you would never run a business like that. You would never hire a

12:30

bunch of people like that. Yet that's what we're doing with our money.

12:34

See, I believe that every dollar

12:38

that. Comes into our life needs to have a job description before it ever

12:42

comes. Into it to our life. We need to know that that

12:45

dollar. Is for our mortgage, that this dollar is for our clothing,

12:49

for our food, for our entertainment, for

12:53

the yard work, whatever it is. But we define it in advance.

12:57

Just like we were going to hire the employees, we would define their job

13:00

description in advance. And so when we do

13:04

that, we can create an environment that

13:07

develops the. Muscle to create habits and

13:11

behaviors that. Will support wealth creation at an

13:15

accelerated rate. And so it's important for us to

13:18

do this in advance to make that happen. Now, there's another interesting

13:22

thing that I've seen over the years happen with this, is that

13:26

let's say that you put money away for a vacation, or you already

13:30

put it in the plan for a vacation, or for a nice dinner out, or

13:34

a nice evening out. See, because

13:37

it's already planned in advance. You can actually spend

13:41

it without guilt and shame versus what

13:45

a lot of. People do is they go and spend money and they come back

13:47

and after they had a nice night, they go. Oh, God, hopefully I can afford

13:51

that. Maybe we shouldn't have got that bottle. Of

13:54

wine, but this way you already know.

13:58

And so this is an important, hugely important aspect when you

14:02

start to bring that in. Number three. Number

14:06

three on this is to build.

14:09

What they call other people call an emergency fund.

14:13

Okay. I call it a peace of mind.

14:16

Fund because I want you to have.

14:20

Peace of mind that no matter what happens, you're

14:23

okay. The people that you love are okay. The things that you

14:27

do are okay. Now were different than most.

14:31

A lot of people say three, maybe six months. I actually think

14:34

thats wrong. I think thats too short, especially if youre

14:38

an entrepreneur. I think you need to think in. Terms of nine to

14:42

18 months, almost twelve months. Heres why.

14:45

When you have liquidity cash available

14:49

now. Mind you, we can put it in high yield savings accounts. We can get

14:53

5.5% at the time of this filming, which isn't

14:57

horrible. But remember, this isn't about investing the

15:00

money. This is about keeping it safe, keeping you safe, giving you liquidity and

15:04

giving you peace of mind. Every dollar has a job description. The job

15:08

description for these dollars is safety, liquidity, peace of

15:12

mind, not investment growth. So you're going to have that money

15:15

there to cover you. If, God forbid, something happens, like what

15:19

happened with me with the cancer, and I had to step away for a. While,

15:23

something long term, if you have. You'Ll have the liquidity.

15:27

If an opportunity comes up, an investment opportunity comes up. Let's say

15:31

we have an economic downturn and you want to pick up a piece of property

15:34

that you can get at a really good price, well, you have the

15:38

liquidity to do that. So this not only becomes your peace of mind

15:42

fund, it becomes an opportunity fund, depending on how much you have in it.

15:45

And so we want to make sure that you have that there so you don't

15:49

end up in the ditch doing it, doing it that way. All

15:52

right, number four, the fourth focus.

15:56

Point for you is I want you. To

16:00

invest. Wisely and

16:06

simply. Too often again, we get caught up in, and this

16:14

has happened to me, these crazy,

16:17

esoteric investments that sound really good, that have a lot of

16:21

complexity to it. Well, y'all,

16:24

complexity will find you as. You become more successful,

16:28

so don't go searching for it. When you have complexity, it creates

16:31

risk. When you have complexity. It creates friction. When you have friction, you have risk,

16:35

you have potential losses, you have lack of understanding, you have all kinds

16:39

of things. We do not invest in trends we do not invest in

16:43

means. We do not invest in things that are going to be adrenaline

16:47

rushes. You're investing should not be an adrenaline rush.

16:51

We take a long term view. We're very specific with how

16:55

we invest. I want my investing to be boring and

16:58

just let it grow. Okay? Let it grow. I take

17:02

advantage of time. I take advantage of the compound effect.

17:06

I consider low cost index funds and ETF's as

17:09

the way to start because it's a diversified basket

17:13

that allows you flexibility. So if we have some

17:17

downturns or we have a couple companies go bad, you don't go, go

17:20

down the drain with it. So I want you

17:24

to invest wisely. With things you

17:28

know and know about. And you do

17:31

it in a proper, diversified type of portfolio, so you're not

17:35

taking a skewed level of risk one. Way or

17:39

the other to make that happen. All right. And the fifth focus area

17:42

for you. Right now would be, would really

17:46

be how to increase, increase your

17:49

income. Get a bigger

17:53

shovel. If you're doing all these other things. Right,

17:57

then get a bigger shovel. How do you increase your

18:01

income? I've done some videos on this. There's, you know, whether it's side gigs.

18:04

The biggest thing, though, is to figure out what your worth is.

18:08

Too often we don't ask what we're worth. Make sure that you're getting

18:12

paid your value. That means that you

18:15

detach it from the hours that you're spending and look. At the solutions

18:19

you're giving. So looking for ways

18:22

to build additional income streams or

18:26

scale your current income, whether it's in a job or a business, is going to

18:30

give you a bigger shovel so that savings rate can put more

18:33

in and more at work for you sooner. Now, it might

18:37

require you getting new skills, it might require you doing other

18:40

things. But remember, the objective here is

18:44

to get you past that first hundred thousand

18:48

dollars of wealth because everything accelerates from there. You got to get you

18:52

past it. It's going to force you to grow. To make that happen. All right,

18:55

so it leads me to the next piece. And the next piece is, okay, you

18:59

reached 100,000. Now what? All right, let's talk about

19:03

that, because I think that this is, I'm going to do this in red because

19:06

I want to make sure that you really start to look

19:09

at this. The first thing is this. I want

19:13

you to figure out and. Really think about

19:16

diversification. Okay,

19:20

let's do that. Let's clean this up.

19:23

Diversification, here's what it

19:26

is. If you invest in one asset, you have the

19:30

potential for it to go to the moon.

19:34

Because if you happen to, if you. Happen to get it right and

19:37

it goes, goes to the moon, you're along for the ride.

19:41

Here's the problem. If you happen to get it wrong. And it

19:45

goes to the core of the earth, you're long for the right also.

19:48

So here's, here's the thing. A diversified portfolio,

19:52

especially when you first start out. The reason you do that

19:55

is it's going to allow you to better manage your risk. And

19:59

we talk about risk in other videos. It's about your risk tolerance,

20:03

which is the psychology of the risk, the risk capacity, which is

20:07

the logic of the risk, the mathematics of the risk, and. The risk

20:10

need at that intersection. Risk need is how much risk

20:14

do you need to take on to hit the numbers that you want? So

20:18

the idea, it's what I call. The risk triad, is to make

20:22

sure that you have a properly structured portfolio that

20:25

reduces the risk at the lowest possible level

20:29

without inordinately reducing your returns. This

20:33

takes some work, it takes some planning, but once you've received,

20:37

you've got to that first hundred thousand.

20:40

Now let's focus on even more diversification and making sure that

20:44

you have the money working harder for you than you did for

20:48

it, just like the book says, to make it happen. All right,

20:52

now, number two, at this. Stage, you're

20:56

going to focus on future funding and

20:59

retirement. And retirement goals. Okay? You're going to

21:03

start looking more closely at longer term

21:06

goals because now you start to have a critical mass that you're going to grow

21:10

from. Because think about this, $100,000 that

21:14

makes 10% becomes 110,000 in a year. That

21:17

number, if you look at the rule of 72, at 10%, the hundred thousand

21:21

becomes 200,000 in seven years. In

21:25

seven years, another seven years after that, that 200 becomes

21:29

400. So all of a sudden, your first hundred becomes 400,000

21:32

in 14 years without doing anything. We need to then

21:36

now start at this stage really thinking about

21:40

retirement goals, other goals, big purchases,

21:43

funding, education, all those things. We have a process that

21:47

we call the wealth priority ladder that we use for our clients and

21:51

folks to make sure that they understand what to do with every single

21:54

dollar and when to make sure that they do it right, to maximize

21:58

their growth and minimize their risk and keep

22:02

them on the path to financial freedom. That leads me to

22:06

number three in. This and that is

22:10

you gotta, you gotta consider taxes. I know

22:13

it's, it's a bad word, taxes, but

22:17

the fact is that taxes matter when you live.

22:21

Depending on the state you live in, you could be paying taxes anywhere from

22:25

20% to 50%. Well, if

22:29

someone's going to dip their hand in your pocket and take $0.50 on the

22:32

dollar, you doggone better find out and

22:36

understand. You don't need to be a tax expert. You just have to have a

22:39

basic understanding. How do you make sure you keep the majority of the

22:43

money in your pocket? Don't let them dig in. And the way to do that

22:46

is to make sure that you understand some of the tax elements that

22:50

can help. You, that you can use to your benefit

22:53

legally. Because, look, we have to pay taxes. But that

22:57

doesn't mean we have to overpay taxes. So we're going to use the tax code,

23:00

the way it was structured to legally reduce our taxes as,

23:04

as much as possible. And at this time, you want to make sure

23:08

that you're in play to do that. All right, that leads me to this.

23:12

Last piece that I think is important. So you got your

23:14

$100,000. You got your first hundred thousand dollars net

23:18

worth. You know what your focus points are, you know what the next steps are

23:22

and what you want to focus on. After the $100,000,

23:25

what do you need. To be careful about? All right,

23:28

so let's look at what. You need to be careful about here.

23:32

And I think that this is really an important thing to understand.

23:36

The first is this. Lifestyle. Oh, my gosh.

23:49

Lifestyle. Sometimes our lifestyle

23:53

gets away from us and we call it lifestyle inflation. We call it lifestyle

23:57

creep. All of a sudden we make more money, so we grow more expenses.

24:00

And now all of a sudden, you're in a situation where you go, wait a

24:03

second, I went from making 50,000 to 100,000, but why

24:07

do I feel like I have no more money than I had when I had

24:10

50,000? It's because your expenses got bigger.

24:13

Here's why we start with our

24:17

clients. To always start with a lifestyle vision.

24:21

What do you want your lifestyle to look like? Not everyone

24:24

else's. Not what the media says, not what social media says, not what they're parading,

24:28

not what the comparison. But what is your lifestyle? If it is a

24:32

tent in Montana, great. If it is a yacht in Monaco, fine. If

24:35

it is somewhere in between, totally cool. The question is, are you living

24:39

your life? And not to allow the additional dollars or the

24:43

influence from anyone else to create

24:46

lifestyle creep. Because what happens is the income goes. Up,

24:50

the expenses go up, and you don't get ahead. What we should

24:54

do, I'm not saying not to enjoy it, but to be

24:57

intentional about it. My wife and I, look, we spend a fair amount of

25:01

money, but we do it with intent. We enjoy our

25:04

lives. We know that we're growing our wealth. We continue to grow our

25:08

wealth, but at the same time, when we're going to spend additional money, we

25:12

spend it on things that have sustainable joy, that bring us a

25:15

tremendous amount of joy. We love to travel and we do it

25:19

well. So that's where we spend a lot of our money,

25:22

that our dogs, our time at home, that kind of thing. But

25:26

we don't overspend, we don't leverage it. We don't put ourselves in debt, we don't

25:30

do any of that type of stuff to do it. And we don't just

25:33

spend because we have the money. We'll put things away and we'll do it

25:37

differently. So beware of lifestyle inflation. Lifestyle creep

25:42

in there. Number two here

25:45

is beware of high

25:49

risk investments, y'all.

25:52

Oh, my God. I could talk till

25:56

the cows come. Home, as my dad would say, all right, about this.

26:00

And I got caught in it. I got caught in an investment

26:04

that was high risk. Actually, it wasn't an investment.

26:07

It turned out to be a Ponzi scheme. It wiped out one third of everything.

26:10

I owned, one third of everything I owned.

26:14

And well into the seven figures between me and two buddies, we lost

26:17

over. Four and a half million bucks. Okay. Because

26:22

I had some success, I had. Some wealth, I had

26:25

some things going. On, and I thought, oh, let me. Take

26:29

on a little more risk. Let me go after a few more things. Oh, this

26:33

looks cool. I didn't understand it completely, and I did that

26:36

the tendency, as you have more success, is that

26:40

more people will come to you with investment possibilities. More people

26:44

will come to you with opportunities. You have to stay.

26:48

Stay. Very true. This is why we give investing rules.

26:51

I didn't follow the rules in the. Upon the scheme. That's why I got hurt.

26:55

The rules came out of the Ponzi scheme. That's what's kept me safe.

26:59

We lost, like I said, lost over seven figures, one third of my net.

27:02

Worth within 18 months. Not only did I recover it, I tripled

27:06

it. Part of that is because I put. Rules in to

27:10

keep me safe. Part of that is that I have criteria to keep me

27:13

safe. Beware of high risk investments.

27:17

Like they say. It sounds too good to be true. It probably

27:21

is. And if you don't have a set of

27:24

investing rules, get a set of investing rules before you go into

27:28

an investment, and you live by those rules. And if you

27:32

happen to pass on an investment that

27:36

goes to the moon, so be it. Okay? So be it. I'd rather

27:40

you be safe and be. Here for a long term than try to hit

27:43

for the fences every time and end up striking out more than you like.

27:47

Okay? So beware of high risk investments. And the third thing is

27:51

this, don't neglect

27:56

insurance. Okay?

27:59

Yeah. I don't need to sell you insurance, and I am not an insurance

28:03

salesman. I won't sell you insurance. But I do think that

28:06

there's some things to be clear about. There

28:10

are some things that you need to have in place, because if I think about

28:14

the three, the three elements of building the money machine. One is to generate

28:18

the income. The second is to accumulate the income. The third is to insulate the

28:22

income and the assets. The problem is that if we

28:25

don't. Insulate it, we could lose it through. Lawsuits, through accidents,

28:29

through mistakes, through taxes, all those things.

28:33

Having the right insurance in place is

28:37

really important. So, for instance, health

28:40

insurance, I get it. It's a complex field. Our

28:44

health insurance, don't get me going. Our medical system here is all messed

28:48

up. But the fact of the matter is that we need health insurance. Think

28:52

about if I had no health insurance when I got diagnosed with

28:55

cancer, we wouldn't be having this conversation.

28:59

So the right health insurance for those. Of you that are income

29:02

earners for your family, you might need some long term disability

29:06

insurance to cover you if you can't work for the long term.

29:09

So you want to look at that life insurance to

29:13

replace your income. If, God forbid, you,

29:17

you, you were gone. But specific life

29:20

insurance, I'm not a. Proponent of whole life, universal life, and all those

29:24

newfangled stuff that they can bury commissions, bury fees, do all kinds

29:28

of crazy things in there. You don't wrap investments.

29:31

Insurance. Insurance is meant to be insurance. Investments are meant to be

29:35

investments. Life insurance is meant to be life insurance. And I get

29:39

term insurance, and that's about it. Liability insurance on your home, okay, on your car,

29:47

that kind of stuff. Umbrella insurance to cover you

29:51

if you have claims that are far greater than some of the things that you

29:54

have. So this isn't meant to tell you all

29:58

the insurances, but the point is that don't neglect

30:01

making sure that you have the proper insurances in place to

30:05

make sure that you've covered yourself from any kind of potential

30:09

losses. You're not going to be 100% covered.

30:12

But by making sure that you have. The right things in place, you

30:16

will limit the exposure. All right, so that's the game

30:20

that. You got to play first hundred thousand dollars. Yeah. It might be more

30:24

difficult, but it needs to be to develop you as an investor, to develop you

30:28

as a, as a wealth steward, to develop you to be prepared

30:32

to be on the. Road to financial freedom. But beyond that, it will

30:35

accelerate, it. Will go faster, it will grow faster, and

30:39

you will find yourself in the financial freedom zone

30:43

pretty doggone quickly when you develop the right habits, the right

30:46

behaviors, and the right choices that you're making along the way. I

30:50

hope that this helps. I hope that this gives you some perspective

30:53

and hopefully gives you some direction. All right. As I always

30:57

say, I hope to. See you on the road. I hope to see you on

31:00

another. Episode as we go together on this. Path

31:04

to financial freedom. And until then, always, always strive to. Live a

31:07

life that outlives you, cheers.

31:13

You. Our.