Pillars of Wealth Creation

My Podcast is called Pillars of Wealth Creation and each week we release 2 episodes that focus on building wealth. The goal for the podcast is to give the listeners advice from those who have achieved financial freedom or are working diligently at that goal. Too often people go through life on the path that we are all taught of going to school, getting a job and working all our lives to hopefully save enough more to retire by 65 and then downsize, live frugally and maybe take a cruise or two. For me and many others, that sounds rather boring. If I ever stop “working,” I plan on doing more with my free time than sitting on the couch watching TV. I want to be traveling the world and living my life.

I recently talked with one of my good friends who is working a job that he is not satisfied with, but he is comfortable. He has 2 kids, a wife and a house and wants to be sure that food is on the table, which is very honorable. He knows that the job will not lead him to where he wants to be and that he can achieve far more if he goes outside of his comfort zone. Trust me, this guy is one of the toughest and most driven people that I know, so if he ever breaks out of the zone and takes the full leap, without limiting beliefs, he will be a force to be reckoned with.

So, that leads us to the all-important question, what are the pillars of wealth Creation?

First before we dive into the Pillars; let’s talk about what WEALTH really is. Wealth is more than just money, money is a tool, a helpful tool, but not the only thing. Wealth is about achieving happiness and gratitude. Wealth is about having loved ones surrounding and supporting you and you supporting them. It’s about giving back emotionally, physically and monetarily to others. Wealth is about being financially, emotionally, physically and spiritually free. Pillars of Wealth Creation is not about how much money you can get before you die, but about the legacy you can build and the memories that you can leave behind. It’s about making every day feel like a Saturday!

1. Personal Development: Building up your mind in order to receive wealth is the most important factor to achieving wealth. Understand your burning desire, thinking big, getting out of your comfort zone and out of your own way, focusing, making mistakes and learning. These are all so important to your personal development. You’ve probably heard people say to find out your why. Why do you want to own your own business and quit your job? You get a weekly paycheck and many of you have a pretty decent income, so what is it that makes you want more? Please don’t say money. Money is not a solution, so work on yourself and be sure you are taking care of your loved ones and building new relationships.

2. Cash Flow: Building passive or semi-active cash flow is extremely important to building financial wealth. This allows one to be able to do what you want, when you want and to still have income coming in. Once your cash flow exceeds your expenses and desired expenses, then you only work because you want to work. Having that choice is liberating. Having that passive cash flow will allow you to take risks and do the things you love. It takes the weight off your shoulders and allows you to breath. When you achieve positive cash flow, however, you still need to grow it and mind the field. If you get lazy about cash flow, it can and will go away.

Cash flow comes with buying businesses and real estate. If you want more of a passive approach invest in a real estate syndication or hold notes. Same thing with businesses. You can invest in a young, but established business that is creating monthly income.

3. Appreciation. Buying assets that appreciate in value like Real Estate, Precious metals, businesses will allow you to create quick wealth. This can come with a great deal of risk. Had you invested money in a start up like Amazon or Facebook, you would be sitting in a great position, but for every Facebook, there is 50 failed start ups. I have recently invested in a few promising start ups, that will produce no cash flow and could 10x my money, but I also know that my money could be gone if the business fails. I put very little money in appreciating assets that have no/limited cash flow and high risk and would advise you only to do that when you have the funds to take the hit if it fails. For the best appreciation investment, look for underperforming assets that have potential to increase in value. Think if you bought real estate in 2008-2013. In most cities the values have dramatically increased all while cash flowing really well. When you look back and think about it, there was little reason to believe that the real estate would appreciate.

4. Leverage: Leveraging your money and other people’s money will allow you to accelerate your wealth quickly. Leverage is dangerous if used improperly and becomes like a drug to some people. With leverage, only leverage assets that are producing positive cash flow in a conservative manner. This doesn’t mean to leverage your car or leverage real estate that just breaks even or makes a couple of bucks. The old adage of “don’t wait to buy real estate, buy real estate and wait,” is terrible advice if you are buying the wrong type of real estate or over-leveraging it. Going back to the car thing – my advice is to buy a rental property that makes $300+/month, then buy a car with a loan (if you must) that costs less that $300/month.

Great tools for leverage are a 401k/IRA, life insurance and your own personal home (if done carefully).

5. Tax Savings: Finding the loop holes in the tax codes can save you thousands of dollars. It is very important to hire a CPA that can advise you on tax loop holes that can help save you money. High income W2 workers get taxed at a very high rate and can pay close to 50% of their income in taxes if they are not diligent in tax strategies. Rental real estate, 401k’s, whole life policies and owning your own business are great ways to eliminate some of your taxable income.

6. Savings: Every dollar that is earned should have some of that saved – I suggest at least 20%, but more if you can. As you start to acquire some passive income, I suggest saving all of that money and re-investing it into more assets. Once you start the savings train it will gain steam and build to be a powerful tool. Having true wealth to me is having savings to withstand a down turn in the economy or a tragedy, then having enough cash flow in order to never need to work again. Savings works hand in hand with all of the above.

7. Giving Back: When you are able to give back it feels so good knowing you helped make a difference. Think about all the ways you can help in this world and what you care about. Whether that be helping the disabled, helping the poor, helping children, helping the environment, helping animals, etc, you need to find what makes you happy and give back. This will create a sense of worth and success. On a selfish level it will help you to network and create a positive image for you.