Demystifying the Term Millionaire – Episode 333

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[00:01] Welcome to the Prosperity Podcast. Welcome to another episode of the Prosperity Podcast. You know, years ago, the term millionaire, it really meant something. Today, we’re going to demystify that. We’re going to talk about a well-known millionaire and why being a millionaire really is just the beginning. How about that, Kim? This will be fun. Do you know that I’ve been helping people with their finances for over 30 years, and 30 years ago, people were talking about being a millionaire? You’ve got to be kidding me. And we’re still using that number? That makes no sense. Yes. Well, you happen to be married to a person that is brilliantly rooted in calculations and in truth, and that million-dollar number doesn’t mean what it means anymore.

[00:53] So on that note, Todd would tell us that a million dollars at a three or four percent inflation, a very, very low and probably not accurate inflation rate 30 years ago is worth $300,000 today. Oh, I think for some of the listeners that are hearing that right now, may have felt a little bit of a sting. How about that? Absolutely. How is it possible that the press is still talking about being a millionaire as if it means anything? There’s one person and this is where the conversation started for this episode. And so we’ll back up. We’ll talk about this for a second. So I was reading an article and it was about Jay Leno and Jay Leno has lived a very interesting life. One thing that he has done is that he has always had at least two forms of income.

[01:51] And with those two forms of income, what he does is he doesn’t spend one of those income and he saves the other completely, completely saves it. And that’s what’s helped him build that wealth. And so they were talking about being a millionaire, but also savings. And so Kim, we’d love to dive into that conversation, maybe use that as an example and see how we can help the listeners break free from that past mold of millionaire and really go to that next level. Well, it is so important, first of all, to realize the definition. And when the press talks about being a millionaire, I truly think that what they mean is that you have a million dollars or that your net worth is worth a million dollars.

[02:38] So those are two different things, right? Having a million dollars implies kind of cash, net worth being a million, it could be all real estate and you could be starving. So it’s so important, first of all, to shift the discussion as we have so many times on this podcast to understand the difference between net worth and cash flow. And every typical financial advisor that I know, I mean, that’s a strong statement, but everyone that I know that is in the typical financial advising space is focused on net worth. And we have been beating a different drum for as long as I can remember in that it is cash flow that you want to be focused on. So if you want to talk about a million dollars, I’ll bring this back to Jay Leno here in a minute.

[03:22] If you want to talk about a million dollars, let’s talk about a million dollars a year of income. Or if that isn’t a big enough goal, let’s talk about a million dollars a month of income. If that’s not a big enough goal, talk about a million dollars a week of income. I mean, there’s clearly businesses and people that are doing that. And so it’s so interesting to me to look at somebody like Jay and compare that to many, many, many other well-known figures that we know that spend insane amounts of money and end up broke because they develop a lifestyle of spend, spend, spend, whereas Jay chose to develop a lifestyle of save, save, save. Now, because he did have, I’m not even going to say ridiculously high, the guy provided a

[04:06] lot of value. So he got paid a lot. I mean, that’s awesome. It’s as it should be. But because he did have a high income, he gets to have things like cars and garages and 3D printers to print parts for the cars and et cetera, et cetera, et cetera. And he saves. And he gets to travel and do the shows that he wants and work the work that he wants. And he saves. And what I mean by save is as a verb, he takes his income and he puts it in a place that is going to go to work for him either as a liquid account that provides peace of mind and opportunity funds and emergency dollars. And, or he puts it into something that creates more cashflow that creates more income. And guess what? I bet he saves some of that too.

[04:58] Yes, absolutely. You were talking about the two sides of the coin, which is the cashflow and then the net worth. And so if we unpack Jay, we can look at and we can say, okay, the net worth is growing. He’s saving, but he also does have cashflow as well. He’s got the royalties from all of the media pieces that he’s doing. So he has cashflow. And I imagine there’s other investments as well. For this millionaire status, and I’m just using that term, how are you seeing people really balance on that of getting the cashflow and the net worth to sing a perfect song together? Yeah, that’s a good question. The creating of cashflow from one’s assets is the single hardest job in personal finance. And so it is not an easy balance. It’s not

[05:55] easy for advisors. It used to be easy, like throw some money in a stock account and get dividends and or put your money in bonds and spend the interest and the yield that they kick off. That just doesn’t exist anymore. And of course, you can’t put it in a bank in a CD because there’s no interest there. And so it has fallen upon the shoulders of the advisors and of course, clients too, who are trying to take more responsibility for their lives to find things like bridge loans and real estate deals and mineral rights and other aspects of finance that can take net worth and create income from it. And I believe that that is a practice that people want to start. And I truly mean the word practice. You need to practice creating income from your assets. And you want to start

[06:48] that as early as you possibly can, you know, 30s, 40s, 50s. It’s not too early to start creating income from your assets. The typical approach is all net worth focus, grow, grow, grow, grow, grow until you’re this magical age of 65. And then you snap a finger and all of a sudden you turn around and create income that frankly, probably never worked. And it certainly doesn’t work today because we have people living way much longer, way, way much longer. It is absolutely going to be normal for anybody in their 60s today to live to 100. If you’re decently healthy and you do a decent job of maintaining your health during that time, you cannot possibly save enough money to create income for 40 years. You know, some families can, but we must create cash flow. We must

[07:43] keep earning our cash flow in addition to creating what most people call passive cash flow. In other words, income investments or income from investments, investment income, however you want to word that. And we want to be out in the workplace creating value, which then also earns cash flow and income. And that is, I think what is going to propel the society forward with such joy. Because when you look around at the typical retired people that are reliant on only their net worth to create their cash flow, they’re very scared. So I want to ask some specific questions that I think will help the listeners out. And here it is. I had this opportunity to be in this industry for 30 plus years. You work with a

[08:36] variety of people and you’ve definitely worked with a lot of high net worth individuals. And so I’m going to use the term millionaires just for sake of conversation. But with the millionaires that you’ve worked with or high net worth individuals, what are some of those common pieces or should say common vehicles that they’re using for cash flow that is helping build their net worth or vice versa? Yeah, that’s a good question. So I’m going to rephrase it, make sure I understood. I think part of that question is, can you have an asset that both grows and creates income? Because that’s what builds net worth while at the same time kicking off cash flow, right? Yes, absolutely. And the answer is yes. And it’s not as common as something that’s specifically dedicated

[09:28] to income. So one of the first questions that I ask when I’m speaking with somebody is what do you want this money to do? Does it need to be liquid and be your emergency opportunity money? Does it need to create cash flow monthly income so that you have the ability to put food on the table? Or does it need to grow to beat inflation and be available for you in the future? When people say all of the above, I’m okay with that kind of. So all of the above means that they don’t really know. And that’s a legitimate answer. We always have to carve off the cash liquidity emergency opportunity fund first. That’s the foundation of people’s wealth. It’s the foundation of people’s peace of mind. It’s the foundation of our lives to have

[10:16] emergency opportunity money. And that money has to be separated cannot really be invested for either growth or cash flow slash income. So separate that out. Now, if we’re talking about the creation of cash flow, my all-time favorite space is this fairly large category called bridge loans. And bridge loans could be private lending. They could be real estate. They could be mineral rights. They could be other types of loans, bridge loan, done temporarily. That’s usually what the bridge term means that create income. And just so that readers and listeners of our work are clear, that is usually in the, I’m going to call it 7% space. It might be a little higher, but it is a really good creator of cash flow. And with the creation of income from bridge loans,

[11:17] there’s an additional ability that I love to pair with it, which is the single premium immediate annuity space also around that 7% mark, but it doesn’t work until you’re in your late 70s or 80s. And so this again is why we need to practice creating income in our 40s and 50s so that in our 60s and 70s, we are confident in our ability to do that so that then by our, let’s just call it 80s, we can go the single premium immediate annuity route, which is such a no-brainer, but does not work unless you’re older. Okay. So speaking of bridge loans, you’ve worked with people that have never heard of them and you’ve worked with people that are all on board. How are you helping people bridge that gap? And I’m, yes, I’m using that phrase. How are you helping people with that?

[12:17] So it’s all about education. It’s all about keeping an open mind and just learning. And I say that a lot with clients. And what’s cool about the bridge loan space is while many bridge loan products are for accredited investors only, there are a few that are available to the non-accredited investor. And like you said, in both cases, many people have not heard of this. And so I tell them, just go into learning mode, just have an open mind and go into learning mode. You’re not trying to make a decision right now. You’re just learning. And of course, with our wonderful internet, there’s room for massive amounts of research. Excuse me. I always get people started by sending them an email with specific information

[12:59] about the space. Actually, I should say general information about the space first and then specific information about certain products that would fit their situation because it does need to be personalized or customized. And it is possible to do that very, very possible to do that. And I’m happy to help people learn. And then of course, there’s the internet for learning and books. And one of my other favorite questions to ask people is, what is the best way for you to learn? Do you like to read? Do you like to listen? Or do you like to watch? And I try to have all three of those methods available for learning about bridge loans. So I think with this episode, what’s really helpful is we’re talking in terms of millionaire and we’ve kind of demystified what that really means.

[13:50] But as we’ve unpacked our conversation today of cash flow and net worth, what we’re really talking about are some of the tools inside the toolbox that millionaires and high net worth individuals are using to help grow their net worth to help add additional cash flow and to really help their family in that legacy. And it’s something that’s not often talked about. It’s so powerful. Well, as you’re aware in our perpetual wealth book, we talk about the idea of creating perpetual wealth for your family. And it’s something that a lot of people want to do. And it is doable. You just have to define what that means. And maybe for your family, it’s a hundred bucks a month. Maybe for your family, it’s a million dollars a year or whatever a month, whatever the numbers are,

[14:40] the bridge loan space, the creation of perpetual wealth space, the capability of an emergency opportunity fund and what that does for your family. All of those things create legacy, provide opportunity. Our society is in desperate need of the ability to understand money more and truly know how it works and to not be the guinea pigs that just take what the press say and go do what the press is talking about. Or frankly, any author, and I include myself in this, when you’re reading something that’s available to the public, it is written with a very wide swath in mind. And so each of our listeners needs to take the information that’s out there, whether it comes from us or anybody else, and apply it to their

[15:36] own personal situation. And this is where our real skill comes in. Do the learning and then help us help you personalize the message so that you can implement properly based on what is best for your family and your situation. So well said. And I think one of the things that you as a listener can do right now is if you haven’t started even going down the path of thinking of how to get additional cash flow or how to grow your net worth or maybe even how to use this tool of a bridge loan, reach out to Kim and the email is hello at partnersforprosperity.com. And what would be a good thing to put in there? Maybe subject line bridge loan, would that help out? It would. And it’s something that enables me to start the

[16:24] conversation with people. And for the listeners that have communicated with me, you know that I love email, and I tend to be pretty blunt in my emails, which means I can ask some really blunt questions, but I can also give some really blunt answers. And that helps me figure out fairly quickly, whether you’re at a point that I can actually help you. And Spencer, you said it earlier, and I’m grateful for it. Because I work out of my home, I have the ability to be very, very efficient in my day, I’m able to help a lot of people. And we don’t have any minimum other than an open mind and the ability to save some money. And so there are definitely people that I’ll via email say, I can’t really help you, you

[17:06] know, I’ve given you some ideas and there’s really nothing else that I can do. And I always feel bad about that. But sometimes there really isn’t anything that I can do. And then, of course, many, many others I can help. And even if it’s a young person starting to save a couple hundred bucks a month, or what is more often and quote older person, you know, could be 30, 40, 50, 70, whatever, with millions of dollars, wanting to shift away from the typical financial planning message and method and help them get into a space where their dollars are divided amongst those three areas of cash, income, and growth. Because I feel that that is the strongest foundation for people’s monies, rather than the typical approach of let’s hope it does all three things all at once,

[17:58] which it’s never going to do. No, it’s not. Well, very well said. And you know, it’s an open invitation to all of you listeners to send an email to ask your questions, and to see if it’s how Kim can help you out. And if it’s a fit, that email is hello at partners for prosperity.com. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit us at partners for prosperity.com. If you liked this episode, make sure you subscribe and leave a review.