Let’s talk about one of the most important life skills there is and something that they never taught us in all the years we spent in school.
How to make money!
I am not talking about how to get a job and trade your time for money.
We all know how to do that.
I am talking about how to use your money or someone else’s money (banks or investors) to make you
money.
I am talking about how to build cash flow and wealth.
This isn’t going to be the most exciting lesson, but it can be the most life-changing.
Here are the best vehicles to understand that lead to wealth and freedom.
Three types of asset classes.
- Business Ownership
- Paper (stocks, bonds, etc.)
- Real Estate
Business Ownership
Starting or buying a business that you work on and not in is one of the best ways to increase your
income and build your investment portfolio.
If you truly have a product or service that you don’t personally deliver (working in your business) and that you can charge for then you are on your way to financial and personal time freedom.
Think of it as being a head coach or owner of a professional sports team.
They aren’t running the plays or scoring the points, but they are responsible for the people who are.
Owning a business means you are a leader, strategist, and decision-maker.
You can do this by yourself or with partners.
If you choose to have partners, just make sure you know how to choose them.
Business partners are like marriages, and as you know, both can end poorly if you aren’t careful.
You also can do this with very little of your own money.
If you have the skills, then you can raise capital from investors or borrow from banks.
You don’t need your OWN money to do this.
To be a successful business owner you must develop all the high-income skills I always talk about.
If you don’t have those then start developing those first.
Your business is likely to fail without them!
If you have a business but aren’t yet to the level you would like to be, or feel you should be at, then likely it’s some of these high-income skills that you are missing.
People tell me all the time that they have $25k or $50k to invest but they don’t know the best place to invest it.
What they really mean is that they don’t trust themselves to make the right choice for their money.
They are scared they are going to make the wrong decision, or they don’t trust the options they have.
And they should feel this way because without the proper knowledge and experience they are gambling with their money.
That is because they don’t know what a good investment looks like.
I used to feel the same way.
How could we know the best place to invest if we don’t have the experience or skills to make an educated decision on what a good business looks like, or a good investment is.
Being in business for yourself first will lead you to be able to make good investment decisions later.
So, I always tell them what my mentors told me.
Invest the $25k or $50k in yourself first.
This will give you the skills you need to go to the next step, and it will give you the biggest returns of all!
Then, when you get to the level of true business ownership you will be able to take the lessons you have learned from being a business owner to invest the cash that
you earn into other businesses or assets that multiply without you trading personal time for a paycheck.
You also can do this inside of a growing business you are already a part of if you are valuable enough or the business model has franchising options like mine.
So, the path looks like this.
Develop high-income skills…….
Buy or build a business…….
Build the business to cash flow your life and to invest into more assets (businesses, paper, real estate).
Paper Assets
It’s much easier to understand what people mean when they say they own a business, but what does it mean when they say they own or invest in paper assets?
What is a paper asset?
These are investments in pieces of paper that define ownership of an asset.
Classic examples of investing in paper assets are stocks, bonds, money market accounts, mutual funds (IRA or 401k’s), or insurance plans.
These investments are very passive and typically provide very moderate returns.
These are the investments that take a lifetime to see real value from.
Therefore, these should not be the bulk of your plan to become financially free.
Let’s be real, who wants to work their entire life to hope they have enough money to retire one day?
I have never understood why you would want to save all your hard-earned money, live a boring life, Struggle each week and do a job you don’t really like.
All because you plan to “retire” at 65.
This is what most people call their “retirement and investment plan.”
Sounds more like a prison sentence to me!
But that doesn’t make all paper assets a bad strategy.
They just shouldn’t be the ONLY strategy you are aware of.
Experts in the equity markets with big funds are the only people who get rich in this category
and I will be the first to tell you that I am far from an expert in this area.
I realized early on that I needed a lot of my own cash and time to become wealthy with paper assets.
I did not have the cash and didn’t want to wait until my life was almost over and so
this was not the initial path for me.
But as I continue to earn cash flow from the other two categories this is a place, I now invest in.
I look for companies like Amazon, Uber, Netflix, and Shopify to invest in.
It is a supplement to my plan versus being THE plan.
Here are the pros and cons.
Pros
- Retirement accounts are very passive.
- Not likely to lose all your investment.
- Anyone can find these options.
- Can be easily liquidated for cash.
Cons
- Low returns and take a lifetime to make progress.
- No control in how the company you invest in performs.
- No leverage to borrow money or raise money to buy these.
- High fees and commissions to buy or sell these.
Real Estate
Here is what is important to realize about real estate.
There are two types when it comes to investing.
Passive and Active.
For real estate to be a true asset and not a liability (regularly take money from you) there must be
someone behind it that runs it like a business.
It doesn’t have to be you but that’s the difference between passive and active.
The same is true for paper assets above.
The paper typically results in a share of ownership in a business that you aren’t involved with and the same is true for real estate if you invest on the passive side.
However, if structured properly you can still benefit from a lot of the tax advantages that real estate has to offer as a hard asset that you can’t get as a paper asset investor.
Owning a business also can provide these same tax advantages and you can be either passive or active.
These advantages lead to more cash flow for you.
Real estate investing is a business, and the product or service is the renter who is paying for a place to live or a business that needs a building or piece of land to occupy.
There is much less complexity in a real estate business than most other businesses but that doesn’t mean it’s easy to own or operate.
It is not and it takes a strong foundation in all the high-income skills to increase your chances to succeed.
From an investing perspective, it is less risky because all people and businesses need a home/shelter.
This isn’t the case for most other products and services.
The masses don’t all need what you have to offer.
If you were going to blindly gamble as a passive investor in any of the three categories listed here, then
this would be the vehicle to choose.
I highly recommend you DON’T’ do that but there is a reason that more millionaires in this country made their money in real estate versus any other one industry.
Let me end with sharing why learning to make money is so critical.
Here it is……
FREEDOM!
The highest dividend your money can pay is the ability for you to control your time.
Time is our most valuable asset.
Not the house…
the cars…
the jewelry…
or any other material item.
It’s FREEDOM with your TIME!
Our money or some that we raised or borrowed, if used properly can buy us time
and no one taught us this.
UNTIL NOW!
Don’t sit on this knowledge.
It’s life-changing!
Talk Soon,
Bobby