The Pitfalls Along the Path to Wealth

Self-employed, entrepreneurial thinker, real estate investor, or small business owner… you’ve taken the road less traveled. You are freedom-oriented and independent. You are seizing the opportunity to pave your own path and create your own cash.

I understand. After a job in banking and several years working for a typical financial firm, I took matters into my own hands and created my own life insurance practice.

I had started to realize that “typical” money methods did not allow me to do what was BEST for my clients. I watched people lose FORTUNES in the market, only to be told to just keep doing the same thing with their dollars! And I saw people frustrated that there were no other options.

I was not taught that there were other options. Better options. Yet I always felt like something was “missing” from typical money methods.

When I went searching, I found those better options. I discovered the principles and strategies that have helped people build sustainable wealth long before other options even existed.

These financial principles and strategies had been used by successful people—many of them entrepreneurs. I codified these principles and strategies and coined them “Prosperity Economics.” This became the foundation for Prosperity Thinkers.

The Wealthy Have Practiced Prosperity Economics for Centuries. 

(Yes, even before I coined the term, THIS is how people built and kept wealth.) There has always been an alternate path to building wealth WITHOUT the Big Banks and Wall Street firms—I just had to find it!

Typical money methods tell you to buy mutual funds and keep them in a retirement account and WAIT… for decades… with your fingers crossed that someday you’ll have enough to someday retire. Yet too many people who DO retire end up BORED and BROKE!

Wealthy people keep control of their own cash. They don’t plan for “someday.” Instead, they prioritize what’s most important, pay themselves first, and protect their loved ones. Additionally, they tend to keep working and keep contributing—often long past “retirement age.” That’s one reason that entrepreneurs and active investors have such an advantage! They free themselves from typical jobs, and keep contributing and earning!

Entrepreneurs are smart, creative, caring, and passionate. As an entrepreneur who has worked with thousands of other entrepreneurs over the last two decades, they are some of my favorite people in the world.

And sometimes… they make BIG MISTAKES with money!

Are You Robbing Your Wealth With These Common Money Mistakes?

The ten mistakes below are common to MANY people in all walks of life. However, they can be especially disastrous for entrepreneurs, business owners, real estate investors, and the self-employed. Avoid these mistakes like the plague!

Mistake #1: You haven’t made saving money a priority.

Your “emergency fund” is a credit card. You have no regular, habitual, automatic way to save money. And you have little cash for emergencies and opportunities!

Let’s face it: business and investments can be unpredictable. If you wanted a predictable income, you’d just work a regular job!

That’s why it’s EXTRA important that you, as an entrepreneurial investor, SAVE MONEY.

You may have “lean years and green years.” Years when you sock away cash, and other years when you raid your stash to stay afloat or expand your business or investments. Make saving money an automatic habit, and your savings will be there to SAVE YOU when you need it!

DO THIS: Make saving money consistently a priority.

Mistake #2: You aren’t charging enough to be sustainable.

Many entrepreneurs feel they are profitable if they are “making money.” Money comes in alright, but then it seems there is never enough to pay taxes, insurance, or actually SAVE some of it! Ultimately, if your business doesn’t support your whole life, you’re going backward. You need money to:

• pay all your personal bills
• save for emergencies and opportunities
• pay all of your business expenses
• cover your insurance premiums
• pay all of your taxes
• invest for the future
• invest in mentorship or education
• tithe or give
• pay off debts
• take vacations or sabbaticals
• “miscellaneous expenses” for entertainment, eating out, etc.
• plus money to take care of yourself with healthy food and wellness care.

Get honest with yourself about the money that flows in and out of your business or investments. It may be uncomfortable to charge more for products or services, or say “no” to that great real estate deal that doesn’t quite “pencil,” but it’s necessary.

DO THIS: Pay close attention to the numbers so that you can be sustainable over the long haul.

Mistake #3: You/your family aren’t properly protected.

It breaks our heart to hear about entrepreneurs who aren’t properly insured. You probably know of situations such as these:

– An investor with a great long-term plan passes away too soon and leaves their family with a big financial mess.

– An accident or medical emergency arises, and an entrepreneur is not properly covered.

– A business partner or key employee passes away, and the business dies next.

– People have to start “go fund me” campaigns in the middle of personal tragedy because they weren’t prepared for a worst-case scenario.

Make sure you have all the insurance coverage you need. If you have adequate savings, you can choose high deductibles, which will lower your premiums.

We also recommend a special kind of life insurance that can help you:

• Beat bank rates by 2-10X on your long-term savings.
• Guarantee a legacy for your heirs or the causes you care about—no matter how long you live.
• Use your savings as collateral for affordable business financing (no qualifying or credit check required!)
• Protect the “human life value” of breadwinners, parents, even your children.
• Get “three for one” coverage for permanent life insurance, long-term care needs, and cash for a terminal illness.

DO THIS: Put first things first and protect the ones you love.

Mistake #4: You’re paying too much in taxes.

You’re probably not claiming all the deductions you could be. You might be paying penalties for late payments or filings. You might not have the right business structure, perhaps operating as a sole proprietorship when incorporating could lower your taxes.

Money lost to taxes is gone forever… as well as the additional dollars you could have earned with it! So get good advice on reducing your taxes and follow it. One great resource is my friend Tom Wheelwright’s WealthAbility podcast.

DO THIS: Pay more attention to how much you KEEP than how much you “make.” What you keep is what matters!

Mistake #5: You’re making common bookkeeping mistakes!

Early on in a business or investment venture, it’s typical to try to do everything yourself. However, mistakes can be costly—especially when it comes to your money!

If you like bookkeeping, are adept at it, and have time to do it, go for it. But many entrepreneurs are better served by delegating bookkeeping to a professional.

Another option is to have a professional bookkeeper help you set up your own bookkeeping system properly so that you or an assistant can take it from there.

Carrie, my own bookkeeper, is essential to our success!

DO THIS: At the very least, get professional help to set up your bookkeeping system properly.

Mistake #6: You invest before you save.

Even though people tend to use the terms interchangeably, saving and investing are NOT the same thing!

Saving is about storing and growing your money where it is SAFE and it can be accessed if needed. Saving can be both long-term (for a lifetime) and short-term (to prepare for emergencies or to save for your next vacation.)

Investing is about getting a RETURN on your money in the form of asset growth and/or cash flow. It is usually mid-to-long-term in commitment.

The problem occurs when entrepreneurs DO have money to “save,” but they invest instead when they lack savings. The money goes into the stock market, a property, or other venture that is not liquid and cannot be USED for opportunities or emergencies!

If all you have are “investments,” and you need cash, you will have to disrupt your investments. You may have to sell stocks or mutual funds at a loss if prices are down. Maybe, you’ll have to liquidate a property at the wrong time. You may have to pay taxes and penalties to raid your retirement account. Having proper SAVINGS in place actually protects your investments!

DO THIS: Save first… THEN invest! Build an emergency fund and/or cash value account that can cover your living expenses for 6 months before you invest.

#7: You invest in volatile, unpredictable investments.

Oftentimes, entrepreneurs seem to have a higher tolerance for risk. But if all of your investments are in the stock market, your dollars are at the mercy of the roller-coaster ride of the markets.

Remember how the stock market was nearly cut in HALF in the Great Recession? How the housing market collapsed next? That was the result of systemic risk. Even if you invest in what appear to be solid investments, you can STILL take a huge hit if there is a crash or “correction” in the markets.

Actually, this is a common mistake that nearly ALL investors make. We’re conditioned from our very first job with a 401(k) to give a portion of our money to Wall Street, without asking too many questions.

Investment risk is especially detrimental to business owners and real estate investors. If the stock market or the economy takes a plunge, that’s usually bad for business. That means your business income and your investments could both get wiped out at the same time!

A much better strategy is to save and invest in financial vehicles that are non-correlated to the stock market… including investments that are immune to housing market fluctuations! It’s fine to have stocks and great to own properties, just don’t put all of your eggs in one basket.

Life is unpredictable. You don’t want your investments to be unpredictable, too!

DO THIS: Diversify outside of the stock market and aim for more predictable, reliable returns.

#8:  You’re not investing in yourself!

Chances are, you have been taught that “assets” and “investments” exist in bank accounts, retirement accounts, precious metals, and real estate. Few of us are taught the truth: YOU are your best investment! YOU are likely the biggest bottleneck in your business—and your business’s greatest potential asset.

When you invest in yourself to—

• Learn new knowledge that can improve your business or help you charge more
• Up-level your skills (especially marketing and sales skills, which impact your bottom line)
• Surround yourself with people who make you better
• Gain personal skills and confidence that help you up-level your life
• Improve your health, vitality and energy

—You are improving your ability to earn and expand your income.

DO THIS: Read The Last Safe Investment: Spending Now to Increase Your True Wealth Forever by Michael Ellsberg and Bryan Franklin. And never stop learning!

#9: Your money is locked up in a retirement fund.

To clarify—it’s a GOOD thing to have an IRA, 401(k), or other retirement fund! The problem comes when virtually ALL of your investments are in accounts that can’t be accessed until you are 59-1/2 without taxes and penalties. As a business owner, you want control over your own money.

If your dollars are in mutual funds locked up in a retirement account, you can’t invest in your OWN business… you can only invest in other people’s businesses on the stock exchange! (Kind of crazy, right?)

If you still have a job and receive an employer match, we recommend investing ONLY to the match level, then investing elsewhere where your dollars won’t be locked up.

DO THIS: Keep a portion of your money accessible so that you are prepared to invest in yourself and your business.

I also recommend my friend Garrett Gunderson’s book: Killing Sacred Cows: Overcoming the Financial Myths Destroying Your Prosperity.

#10: You wait too long to get professional help.

Are you a lone wolf or a do-it-yourselfer? Many entrepreneurs and investors are. Sometimes, that stops us from getting the help we need.

There are other reasons why you might be avoiding getting professional financial assistance:

• You’ve got “trust issues.” You’ve been burned in the past by the market or a planner.
• You have “financial shame” and you feel you should be much further along financially.
• You’ve heard about required minimums and you don’t know if you have enough to work with.
• You think you’re doing alright on your own, even if all your money is in the stock market and subject to huge risks.
• You just don’t know who to contact if you have financial questions!

DO THIS: Make it a habit to seek out experienced professional advice and assistance.

Would you like our personal help?

As a friend of Cash Flow Wealth Summit co-founders Patrick Donohoe and Tom Wheelwright and someone who understands entrepreneurial thinkers and investors, we want to be a resource for you. Whether you want to turn a million or more into passive cash flow, or you’re just getting started and have $100/month you can save, we have helped someone in your situation.

We can help you:

• put proper protection and savings strategies in place
• guard against market volatility with investments that are “immune” to economic swings
• craft a financial strategy that compliments existing ventures and investments
• and generate MORE CASH FLOW from existing assets!

To schedule a complimentary consultation (or just get a question answered), simply send an email to welcome@prosperitythinkers.com with your question or a request for an appointment.

There’s no sales pitch — just honest money methods, answers to your questions, and personal assistance if there is something we can help you with.