We all talk about business and how much money we make. How big our revenues are. How we get big contracts. Often times how much money we spend. None of that means wealth.
It all comes down to what we do with the golden goose. Money. For those unfamiliar with the old parable, the golden goose lays golden eggs.... For many, the buck stops there. That is their understanding of the parable. So don't kill the goose. There is another step though... Those golden eggs... WTF is an egg? It will eventually be another goose. Another goose that lays golden eggs.
There seem to be two types of people... Income people and people with money. Both require an income, but people that have money take it a step further. They didn't kill the golden goose, they put it up and just took care of it.
Your net worth should always be rising on average. Sure there will be up times and down times, but it should trend up. FOREVER! Make your wealth immortal!
My business partner and RE mentor likes to say this: There are 2 people... One makes a million dollars per year and keeps/invests 100k. For all intents and purposes, he lives within his means. A screw you life! The other guy makes 250k and keeps/invests 150k. Who is really richer?
Sure the income guy goes on nicer trips and has nicer shit... But who thinks net worth? Who will have the final laugh? The difference is pretty staggering. I took it a step further... WITH MATH!
After 20 years of this exact same thing happening every single year and let's say they both just got a measly 8% annual ROI.
A.) Million dollar income guy is liquid $4,908,307
B.) Quarter-million/year investor guy is liquid $7,362,755
Now let's say their business goes under. Both of them. At that same 8%...
A.) Has a declining investment income starting at $392k per year and only goes down from there. On the same trajectory, million dollar income guy will be worth less than $0 in 8 years. How screw you is that? Not very. In 10 years he is 2 million+ in the hole. He is BK. Has to start over.
B.) Has increasing/passive investment income! $589k on the first year! Holy crap! I think he earned a lifestyle upgrade don't you? Let's just triple his lifestyle to 300k per year. Let's set a lambo on fire every year. In 10 years he is liquid $11.5 million without his business. In 10 more years he is liquid $20.6 million.
At 8% now... Old man "B" can burn a $1.5m Bugatti every year until he dies and still grow his net worth. When he dies he leaves his kids a LOT of money, and hopefully his money management skills, and had a ridiculous ability to spend.
Pretty big a$$ delta there. Now, I am not saying this to suggest some Suz Orman or Dave Ramsey slowlane nonsense. Not even close. I am suggesting you BE the bigger income guy AND be someone that protects that golden goose with their life. Start working on minimizing your consumption while maximizing your income. Be a producer NOT a consumer. I will never be rich enough not to want a good deal.
I encourage you to go play with Excel and create your own scenarios. They tell a big story. They scale up and they scale down. Build a flock of geese.
It all comes down to what we do with the golden goose. Money. For those unfamiliar with the old parable, the golden goose lays golden eggs.... For many, the buck stops there. That is their understanding of the parable. So don't kill the goose. There is another step though... Those golden eggs... WTF is an egg? It will eventually be another goose. Another goose that lays golden eggs.
There seem to be two types of people... Income people and people with money. Both require an income, but people that have money take it a step further. They didn't kill the golden goose, they put it up and just took care of it.
Your net worth should always be rising on average. Sure there will be up times and down times, but it should trend up. FOREVER! Make your wealth immortal!
My business partner and RE mentor likes to say this: There are 2 people... One makes a million dollars per year and keeps/invests 100k. For all intents and purposes, he lives within his means. A screw you life! The other guy makes 250k and keeps/invests 150k. Who is really richer?
Sure the income guy goes on nicer trips and has nicer shit... But who thinks net worth? Who will have the final laugh? The difference is pretty staggering. I took it a step further... WITH MATH!
After 20 years of this exact same thing happening every single year and let's say they both just got a measly 8% annual ROI.
A.) Million dollar income guy is liquid $4,908,307
B.) Quarter-million/year investor guy is liquid $7,362,755
Now let's say their business goes under. Both of them. At that same 8%...
A.) Has a declining investment income starting at $392k per year and only goes down from there. On the same trajectory, million dollar income guy will be worth less than $0 in 8 years. How screw you is that? Not very. In 10 years he is 2 million+ in the hole. He is BK. Has to start over.
B.) Has increasing/passive investment income! $589k on the first year! Holy crap! I think he earned a lifestyle upgrade don't you? Let's just triple his lifestyle to 300k per year. Let's set a lambo on fire every year. In 10 years he is liquid $11.5 million without his business. In 10 more years he is liquid $20.6 million.
At 8% now... Old man "B" can burn a $1.5m Bugatti every year until he dies and still grow his net worth. When he dies he leaves his kids a LOT of money, and hopefully his money management skills, and had a ridiculous ability to spend.
Pretty big a$$ delta there. Now, I am not saying this to suggest some Suz Orman or Dave Ramsey slowlane nonsense. Not even close. I am suggesting you BE the bigger income guy AND be someone that protects that golden goose with their life. Start working on minimizing your consumption while maximizing your income. Be a producer NOT a consumer. I will never be rich enough not to want a good deal.
I encourage you to go play with Excel and create your own scenarios. They tell a big story. They scale up and they scale down. Build a flock of geese.
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