Wealth Building Secrets of Millionaires – Episode 516            

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[00:01] Welcome to the Prosperity Podcast. Prosperity thinkers, welcome to the podcast. We’re gonna be talking about the wealth building secrets of millionaires. I will say, probably 10, 20 years ago, that had a lot more allure to it. Maybe it should be like wealth building secrets of billionaires. Exactly. But we’ll just say wealth building secrets of millionaires for simplicity sake. So I guess maybe we even start there. Like, why is it that millionaires isn’t as exciting as billionaires? Well, it’s so funny, you know, a million dollars is the age old, I mean, we’re talking 30, 40, 50 years, dollar figure that was pegged by everybody in the financial world as an amount that you could then retire on,

[00:49] live the rest of your life on. Oh my gosh, I mean, I know people that spend a million in a year. So how is that gonna work? And I think it’s not easy to jump to billion because it’s such a huge jump. And somehow saying like 10 million, which could maybe be a more reasonable number is weird. Like, it’s just hard to say, it’s hard to talk about the zeros are weird. So that million dollar number, the term millionaire continues to be used. And I wanna scream when I see it because a million dollars for even a 75 year old is just not a lot of money. And it is also the wrong thing to focus on. I mean, cashflow is so much more important. We’ve talked on this podcast numerous times about how cashflow is so much more important

[01:42] than net worth. But when you hear the term millionaire, most people think of net worth. And I was listening to somebody the other day talking about some 30 year old kid that was a millionaire as if it was like the end all and be all of this kid’s life. And I thought, what do you mean by millionaire? Do you mean that he has a million dollars? Like, so he’s 30. I mean, it wasn’t my place to say anything at the time but I was going nuts listening to the conversation. Yeah, it’s crazy how it is that way. I mean, we’ve adjusted to that. You focus more on cashflow. I’ll say millionaire, at least in my mind, it serves a couple of purposes. And I would love some pushback on this but the two purposes that it serves

[02:31] is one, accredited investor status, if needed for that. And then the second is there’s a little psychological payoff more or less. It’s kind of like, I don’t know, I’m physically fit. I can run a six minute mile more or less. Like, that’s kind of what it feels. Beyond that, it’s like, okay. Well, I was sitting in a room at Strategic Coach actually with a whole bunch of what I would call very high level entrepreneurs and their definition of millionaire is a million a month. So for their business to be earning, right? So yeah, it’s a funny, funny number and our society is way overstuck on it. But let’s get into those secrets because that can be applied to your life, whether you have many millions or just 1 million

[03:24] or you’re working towards having 1 million. There are things that we can learn from people that have wealth and how they got that wealth. And that’s a fun conversation. Absolutely. So let’s start there. What are the common things that you have seen of millionaires and we’ve established the definition. What are some of their wealth building secrets? We’ll use that terminology. Yeah, and it’s interesting that we’ve landed on the word building because maintaining is also equally important. Growing, once you get, and I hear this a lot, getting to your first million is super hard. It’s easier after that, like getting to your second million, third million, but you still gotta grow it. You still got to do the good things

[04:11] that got you to the first place. And there are some things that you need to stop doing because your situation has changed. We’ll leave those for another podcast. But I think there’s about four or five very critical quote secrets. They’re hardly secrets, but tips, if you will, that people of wealth do that people that are just starting out will want to learn. And people that feel like they’re still using maybe some old methods or maybe the methods that they’re using are not quite getting them the results that they want. These are tips that will help you. So that’s what I’m excited about digging in. So I’m gonna ask you first, what is one of your tips? So for me, the building piece is in my mind,

[04:59] and I would say in 90% of cases out there is my experience, that it’s going to happen from a transaction of some sort. So that transaction means that you created a business, bought a business, and then you transacted and sold it, or you purchased some type of real estate, something of significance, and there was a transaction involved. Outside of that, it’s a slow slog with a lot of discipline, and that’s okay. But don’t expect something to happen of that status in your 30s. Transaction can also mean being at the right company, getting stock options, whatever that would be. So transaction in my mind. Well, it is interesting. I am well aware of some early 20-year-old kids that have been millionaires by their 30s

[05:51] through very disciplined savings habits. And you called it a slog. I mean, that’s well said. It’s slow, but it’s doable. And I think that’s super, super important. Every single person can start this in some form or fashion. So once you get past that initial spot, looking for a transaction that will give you a big jump is really valuable. And how do you pursue that? Well, there’s a critical tip that I will say is my number one, and that is to make sure that you have liquidity for opportunities, because so many people want to jump straight to investing, and I get that. That’s the sexy stuff. That’s the fun that’s there to talk about. Awesome. And all the time that you want learning about it, but with your actual dollars,

[06:41] build liquid cash that you can control. Instead of the typical advice, which is put money in retirement plans, put large payments on homes, payoff debt. Those are all things that you can do, but if you will just focus on building cash and building cash, get to 25 grand, get to 50 grand, get to 100 grand. That’s where those transactions, that you could invest 100 grand in, for example, could get you a massive bump in wealth, and you’re not gonna find that for $1,000 a month. So you’re $1,000 a month, or $100 a month, or 10,000 a month. The zeros are just zeros. That ability to put those dollars away, store it in a liquid place that you can control, ideally that has some tax efficiency, is what’s going to create your opportunity

[07:36] to take that big step. I love that, that’s so good. So I wanna try and change the definition, or at least explicitly say what a definition is for me, is one of the other building blocks for building that wealth, which would be leverage. There’s gotta be some type of leverage in there. It could be other people’s money, meaning getting a mortgage, other people’s money on seller financing a business. It could be other people’s hard work. So there’s a lot of ways to look at it. Yep, well, leverage and debt in general is absolutely tip number two in my mind, because business owners, real estate investors all use leverage. But your typical financial person is just talking about paying off debt. Well, first of all,

[08:24] if all you focus on is paying off debt, all you’re gonna get is more debt. Number one, number two, most of the debt that most people have is pretty efficient interest rate debt. It’s maybe student loans, it’s maybe mortgage. You should not be focused on paying that off at all. You should be focused on building wealth that will enable you to leverage it up to get more wealth. It’s leveraging up that we wanna focus on. Whereas the typical financial space basically is focused on leveraging down. Why is that? Is it because, and I don’t know, I’m not a financial advisor or financial planner or any of that language. My opinion, and I’m happy for this. My opinion is that in many cases, a financial advisory firm is more concerned

[09:18] with having a client not mad at them. And they’re more concerned about not losing than they are at actually winning. Yep, I was just talking with a friend this morning and she said, well, my financial planner wants me to keep my IRA in the account as long as possible. This person’s 67 years old. I said, they want you to do that so that they can keep those dollars as assets under management and control on their side of the table. I want you to move that money out of the IRA. Yes, you’re gonna have to pay some taxes on it but you’re going to have to pay taxes on it regardless and get it into your control on your side of the table. And interestingly enough, control and leverage go together. And so that’s tip number three for me

[10:11] is control, control, control. Do not put your money where you cannot control it. And then when you start to build those dollars, use controlled leverage. So combining tip number two and tip number three to up-level your opportunities, to expand your possibilities and view that transaction, to use your word, as the potential for growth as opposed to how so many people look at debt, which is again, just something to get rid of. This is so good because what we’ve done is we’ve taken something incredibly complex that we could say there’s probably a million blog articles about this. And it’s gonna go this way and that way and their formula is gonna work. And you just broke it down to the most simple terms.

[11:09] And on top of that, you’re basing it off of principles and you’re basing it off of real world, real life experience. And so take all the other garbage books out there and just be like, no, no, we’re gonna focus. Lastly, I wanna say before we round out is that your language, it’s what we focus on, we get more of. And so you’re focused and use the correct language to focus on the correct things. Thank you for listening to the Prosperity Podcast. To take control of your money and have it work for you, visit ProsperityThinkers.com.