Unlocking Opportunities for Accredited Investors – Episode 567

This transcript was auto-generated and may contain errors.

[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, on this episode, we’re talking about moving to accredited investor status. So what that means is we’re going to unpack what an accredited investor means and where people are, or if you’re already there, what that looks like. And if you’re not there, how to get there as soon as possible. Kim, let’s take it away. Well, this is a joy to talk about. And the best news is I come with no product in mind, no license, no any desire to lead people in any direction other than some knowledge and some actionable steps. So first of all, let’s hit the definition, which is Googleable. A lot of people are not familiar with the term, but those that are accredited usually already are. And it’s a

[00:54] million-dollar net worth, not including the equity in your home, or 200,000 a year of income. If you’re single, 300,000 a year if you’re married. And most accredited investments require minimums of 100K, some of them 250K. There’s some exceptions. And most of those investments also require that you have 150,000 of liquid money separate from the money that you are going to invest in order to assure the investment company, the people sponsoring the investment, that you’re not going to be coming to them wanting your money back. Because a lot of accredited investors are not liquid. They don’t have the ability like a mutual fund would to say, oh, here’s 10 grand and go solve your emergency. And so they want that

[01:41] other liquidity. So as you progress through your life, and it has nothing to do with age, oh, by the way, there is one additional way to become an accredited investor. And this is great for those that are younger and maybe don’t have the income yet or the net worth yet. And you can go get your series 65. So just Google series 65. There’s a variety of companies that will train you how to take a test. You’ll go take the test. You’ll pass the test. You will then be able to call yourself an accredited investor. This is a series license that a lot of people in the financial advisory space use. Nevertheless, you can use it to become an accredited investor. A little odd in my opinion of a way to do it, but hey,

[02:20] whatever works. So then you’ll want to start to build that emergency fund and that opportunity fund. And you want to get to 250,000. So maybe you’ve already got a great start. You’ve got your emergency fund handled. Then you want to be very, very focused on building liquidity, building liquidity, building liquidity you can control. So a couple specific ways that people might do this in addition to the obvious one of just saving, saving, saving your earned income as much as you can. People are prepaying mortgages these days out of fear and lack of knowledge of what else to do with the money. Please stop doing that. Put any prepaid mortgages aside in a separate account. And we have a couple of suggestions for where good separate

[03:05] accounts could be. So prepaid mortgages are a way to build up that emergency opportunity fund. Then of course, 401k contributions or 403B contributions. You should look at that space very carefully. If you are contributing above the match level, MATCH, I would encourage you to consider those dollars as money that could be instead used to build liquidity. So these are above match MH dollars used to build liquidity. Now we absolutely have some clients that choose to completely redirect their entire 401k contribution. I won’t make a comment about that. I’ll just say without a doubt, you want to look at the above match dollars for resources. Then the age old strategy of paying yourself first and stopping the automatic drip

[03:56] of your income into your checking account. I’ll say it again, pay yourself first by stopping the automatic drip of your income into your checking account. Now we have a formal structure for this. If you’d like to be invited in, we can help make that happen. And you don’t have to have the formal structure. You can do this yourself. I just find that the structure is extremely motivating and valuable and helpful to make this happen. You live out of your checking account. If you want to get serious about investing, you need to be very intentional about the dollars that are in your checking account. And this has nothing to do with budgeting. And then there’s some additional sources of revenue and assets, so income and

[04:39] assets that you might be looking at to build your liquidity to create the capability to be an accredited investor. And that is any stock bonding mutual fund that is not in a 401k or an IRA. Those are dollars. Now you can do IRA investing in accredited investments. Nevertheless, many of them are better done outside of that space. So if you have dollars that are in stocks, bonds and mutual funds, you could just take the whole asset and move it into the liquidity space so that you could meet those requirements. You could also skim the cream off the crop. In other words, take the interest, the dividends, the capital gains, short and long term and move those off into your liquid account to build up the capability for being an accredited

[05:28] investor. Those are the ones that come to mind to fill that opportunity fund. Spencer, can you think of any others? Yeah, there are two that I go back to all the time. One is being involved in some type of business, whatever that may be, but it’s going to be a transaction that’s going to create wealth. Being involved with some type of real estate investment if you have an understanding and if that fits your investor profile. Again, it’s going to be some type of transaction. What I mean by that is if you go and you purchase a multifamily property, it doesn’t mean that you need to sell that property. You may need to refinance it once there’s equity in there, retain the asset, and now you have additional capital that you can utilize. But it has to be some type of vehicle

[06:19] because savings is the habit but savings is not the silver bullet that gets you there. Well said. For you, you’ve worked with people that are just starting out and then you’ve worked with accredited investors. There’s got to be a couple of things that you’ve seen that happens time and time again. I want to focus on just one really small area. I want to zoom in like a microscope and I want to say this is the area where people might not have realized they were capable to become accredited investors and they’re getting ready to do it. We’re talking about that very small timeline. I want to hear you coach them through that so they have the habit, they’ve done the things, they have the liquid capital, they may be right there or they’ve crossed it. Let’s coach through that just

[07:13] for a moment. Oh, this is the fun part. Start learning, start seeking out accredited investments. This is so easy to do and so joyful. You just go into learning mode, you figure out how you learn best, then you find things to read, watch, or listen, and you talk to people. You ask for accredited investments and it enables you to shift away probably 80 to 90 percent of the investment information that’s out there because you’re very, very focused on just the space that is available for accredited investors and you’ll put yourself literally and or figuratively in a room that is unlike any other because accredited investors speak different language, think differently, act differently, and you want to be a part of that group learning about accredited investments which will cause you

[08:11] to speak differently and act differently as well. I love it. That’s so good. I’m going to add in one layer to that because you mentioned it’s the learning, it’s the doing, and the language for any of you listeners that may be there or you’re close. What it is is there’s a specific area that you can focus in on as well. It may be oil and gas or maybe it’s agriculture or maybe it’s some type of real estate investment or maybe it’s some type of bridge loans or whatever that may be. It doesn’t mean that you have to do all of them. You get to pick and choose. You just have to start to look for it. For you, Kim, as a person that’s explaining this, and again, as we open the episode, no agenda. There’s no license. There’s nothing that you’re pointing

[09:01] to. What it is is you’re helping direct with wisdom saying, hey, I’ve gone through this for a number of years. Emotionally, it’s a leap. When you have someone to guide, that’s where it’s really helpful. For any of you listeners that do have additional questions, reach out to hello at prosperitythinkers.com to get any additional clarity that you have. Any other things you want to wrap in with that? Yes. Go slow and start small. This is the space to be very careful about losing principle. By going slow and starting small, that chance is less. Love it. So good. Kim, thanks for sharing this wisdom today. And listeners, we will have another episode for you next week.