There’s a lot of economic uncertainty right now, and finding out the facts can be confusing. Are we in a recession? Are we not? You’re going to get different answers depending on who you ask. One thing that’s for sure is that things are different now than they were not so long ago.
Because of that, I want to give you some ideas on things that you might want to be doing or things that you should do more or less of in your business in the hope that you are financially set up in the best way possible.
In this episode of The Art of Online Business, I sat down with Mel Abraham to talk about how you might want to be looking at your business in this economically uncertain moment in time. Throughout our conversation, Mel also shares some of his tips on money, business, and wealth building.
Mel is a CPA by education but an entrepreneur by exhilaration, and the Author of the #1 Bestseller, The Entrepreneur’s Solution: The Modern Millionaire’s Path to More Profit, Fans & Freedom. He’s the founder of Thoughtpreneur™️ Academy & Business Breakthrough Academy where he helps entrepreneurs bring their businesses to the world and build the lifestyle that they want.
As a frequent guest on some of the top shows and podcasts and through his popular programs, blog, and show, he shares his thought leadership around financial liberation, affluence, building businesses of impact, and freedom. He’s been called an Affluence Mentor™ and the “thought leader to thought leaders” and advised some of the top thought leaders of our time in their business, money matters, content creation, positioning, and market influence.
Mel is a Certified Public Accountant with over three decades of experience as a financial expert, valuation expert, and business and success strategist. Mel is regularly sought after for consulting and valuation engagements around the country such as family limited partnerships, co-tenant interest valuations, operating businesses as well as various entities. These projects have ranged from small family-owned businesses to large $1.7 billion companies.
In this episode, you’ll learn:
- How a recession is defined
- Why we should lean on human connection during times like these
- How to manage business expenses based on ROI
- How we should measure our wealth
- Why financial stability should be our first priority
- The benefits of having multiple income streams
- The steps to financial freedom
- What types of assets you should go after
Links & Resources:
- The Art of Online Business website
- DM me on Instagram
- Visit my YouTube channel
- The Art of Online Business clips on YouTube
- Full episodes of The Art of Online Business Podcast on YouTube
- The Art of Online Business Podcast website
- Check out my Accelerator coaching program
*Disclosure: I only recommend products I use and love and all opinions expressed here are my own. This post may contain affiliate links that at no additional cost to you, I may earn a small commission.
Mel Abraham’s Links:
- Visit Mel’s website
- Follow Mel on YouTube
- Follow Mel on Instagram
- Listen to The Affluent Entrepreneur Show
- Join The Affluent Entrepreneurs Facebook group
- Follow Mel on TikTok
- Follow Mel on Twitter
- Connect with Mel on LinkedIn
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Hey my friend, welcome to the Art of Online Business Podcast. My name is Rick Mullaney and I’m an online business coach. I’m an ad’s expert, and most importantly, I’m a dad. And this show is where we help established online course creators and coaches create more profit, more impact with less hustle. All right, let’s get into it. All right, welcome to the podcast, my friend Rick Morty here from Rick Mull Radio.com. This is episode number 622 here on the show and what I want to do on today’s episode. So if you heard last week’s episode with Jack Timmons, we talked about essentially how to do some of the things that you can do to recession proof your online business. And I want to I want to continue this conversation around money and your business and your finances. And, you know, amidst all the economic uncertainty that we’re in right now, are we in a recession? Are we heading towards a recession? You know, depending on who you ask, you’re going to get a different, different answer. You know, one thing is for sure is that things are very different now than they were not so long ago. And so my goal here is to help you bring you the experts on the financial side of business and just give you some ideas. Right. Some things that you might want to consider doing or do more of do less of that sort of thing in your business so that you can be set up as as best you can financially in your business and frankly, also in your life.
So this episode is with my buddy Mel Abraham. We recorded this episode at the very end of June. So but it’s completely 110% still relevant right now. It’s actually even more relevant than it was then because so much has happened even in the past 45 days or so. And so Mel is my good friend. He’s also my financial mentor. He helps with all the financial stuff and he’s been on the podcast here before. If you don’t know who Mel is, he’s a global, globally recognized thought leader. He’s a business advisory, a CPA. He’s a financial expert. He’s a best selling author. The dude really knows his stuff. And I asked him to come on here to again continue this conversation and to share some more ideas with you. Right. So for how as a business owner, you might want to be looking at your business in these economically uncertain times and just an overall conversation about money in your business. And he also shares what his wealth building machine is and how you can create it in your life today. Obviously, you need to caveat that this is general information and a pathway to wealth building that Mel shares. It’s not specific investment advice. I was taking notes nonstop during this interview. I hope you find it as helpful. So without further ado, let’s go hang out with Mel Abraham. Mel Abraham. Welcome back to the show, my friend.
Hello, Rick. It’s so good to be here, man.
I really excited about our conversation today because as we were as I was saying before we hit record, this conversation is going to go in a lot of different directions, and I’m excited about that. You know how I do interviews here? I literally have nothing on my screen, no seven questions I need to ask. Mel Abraham, this is like you and I sitting down for coffee, like we often do and chatting about money. And I texted you the other day, I said, This is exactly why I just remembered why I don’t read the news or I try to avoid the news because it is all doom and gloom in my business is failing next next week if I’m reading or if I’m if I’m listening to and going with what the news is is saying. So a lot of topics are going to get into you today for people who have not heard past episodes here on the show with you, can you refresh my audience here on who you are and what you do?
So a MG I’m a CPA by education but have been an entrepreneur actually started my entrepreneurial journey back when I was 11 years old. It was the first time I got it. But but really, in the last number of years, I’ve really been focusing on working with entrepreneurs, online entrepreneurs and other entrepreneurs and thought leaders, trying to help them understand how you can create and optimize your business. But not just the business, but using the business more importantly, to create wealth and freedom in their life. Too often I’ve seen and I’ve been victim to it. You’ve been victim to it where we get on that treadmill and we’re running like crazy and yeah, the business is going, but if we get off the treadmill, things stop. And we’ve got no sustainability, we’ve got no none of that. And so over the years I’ve that that’s where I’ve started to focus. It came. It really was highlighted by the pandemic and some of my health issues, the need to create if we’re doing a business machine, but the need to create a money machine outside the business machine.
This is a topic that I mean, you and I talk about this a lot.
This is a topic that, you know, in in our accelerator coaching program, these are established course creators, coaches, you know, maybe they have memberships. They this is a topic that we started talking talking more and more about because this is a topic that most people don’t learn about, don’t talk about. And I certainly did. I haven’t I don’t think that I’ve made the right decisions. I shouldn’t say that. But for but for, well, true wealth building, just like you just said, the business has done extremely well. I’ve been in business now for eight and a half years. The business has done really well, but at the same time, I don’t feel like I’ve done a good job in true wealth building and I want to define what that means. And I also want to address the elephant in the room. We’re recording this on June 14th, 2022, and there is all doom and gloom talk about an impending recession, you know, inflation or its its highest point in what, 40, 40, 40 years. And if you listen to the news and believe it, like everything’s going to go to crap, right? Yeah. And you said something to me before we’ve been hit record is it is if we believe it. It is if we allow ourselves to take that in. And so why don’t we first start there? Because I think this is a very topical thing, like right. Like today and depending on when people are listening to this episode. You know, things could be different. Things could be, quote unquote, worse. Let’s let’s start there. So we how are we or how can we position ourselves as online entrepreneurs in the environment that we face today?
So let’s kind of touch on the environment so we understand the dynamics of what the psychology of what’s happening to us. The we’ve had as we filmed this, we’ve had basically three down days. We’ve effectively gone in what they call a bear market, at least on the Nasdaq, which means that we’re 20% down from from the high our inflation went up. This last measurement, the feds are meeting tomorrow, probably going to increase interest rates tomorrow. And there’s a question of whether they’re going to increase by. By point five. Are they going to increase by. 75 basis points. And so you’ve got all that stuff going on and then you have all these headlines, you know that that it’s the worst inflation since since 20. Yeah, 40 years gone by. Even the safe havens. Gold is dropping. You know, everyone said that crypto we can talk about crypto another time, but that crypto was the safe haven for for inflation all that it it’s it went from its high at 69. Down to 20,000. So 69,000. 20,000. So we feel like there’s no place to hide. Yeah. But here’s the thing that I think we need to understand. What is a recession? First. They they say it’s it’s a decrease a decline in purchasing in GDP. Goods purchased in two consecutive quarters. And we had a decline last quarter. We’re just closing out this quarter. My guess is that we’re going to confirm that we are in a recession, that we had to decline this quarter just the same.
Okay. Here’s the thing. That means it takes us six months. To define whether we have a recession or not, but the average recession. Is only 11 months long. Other than her weight, which was longer. Mm hmm. So if the average recession is 11 months long and it takes six months to diagnose that we have a recession, then we may only have five more months left. We could be sitting in January. Completely different. I can’t predict that, but I want us to put it in perspective so we understand that I can point to multiple businesses. That have come out of recessions and grown. More millionaires are made during these times because they stayed in motion and they looked for new ways of doing things, new ways to serve people. And and this is the thing that I think we need to look at. Even the bear markets, the stock markets, when they go down to this correction and and a bear market and average bear market lasts 1.3 years. So we could be a year and a half away. But then we go into a bull market, which is the up market that lasts six and a half, six, seven years on average. Average bear market, you lose 38%. Average bull market you make over 300%. I’ll take those odds. Yeah, we just got to hold ourselves tight. And so. This is where I think you need to double down on. The experience you create for your customers, the solutions you provide, and the conversations you’re having.
Conversations you’re having. Be more specific there.
In a time of uncertainty, your customers, the people we serve are family. Yeah. Is starved for certainty. They’re starved for hope. They’re starved for that light. And when we can have real conversation saying, listen, I don’t have all the answers. But let’s work together and we’ll make sure that we get them. Yeah, let’s. Let’s do this.
Yeah. Talking about experiences. I mean, we just did I was telling you before, I mean, you knew of this already, but I was kind of filling you in on how it went last week in again, we’re recording this June 14th, first week of June, we did our first live retreat. For our members in two and a half years since our last refit was finished on that. What was it, March 10th or something. March 12th that like it finished on that on that Friday and then the world woke up to you know.
I think I spoke at that last one.
Yeah, yeah, yeah. So it’s been that long and you know, our members were like just really hungry for that interaction as I was. And that retreat was unlike any one that we’ve done in the past, in past years, and we’ve been doing them for a long time. Just the interaction, the ideas that came away, the breakthroughs, and just like hanging out with people and the conversations and you know, as the person who’s putting it on, I get to just sort of step back and look at the overall sort of dynamic that’s going on, if you will, and people just having fun. And it was so nice to see that experience. And, you know, they were already asking like, when’s it next one? Like, yeah, you’re like, all right, San Diego later this year, we’re it’s already being and they’re just like so excited about that experience and talking about, you know, and one of the big conversations that we had. Is you mentioned like. Listening, like meeting people, serving the needs of the people where they’re at right now.
And that’s been a big conversation lately where it’s if you’re not listening, if you don’t have some sort of feedback loop in place, if you will, to be talking to your audience or the people that you serve. Then you’re missing a huge opportunity to serve them at a higher level. Yeah. You know, what comes to mind is we have several teacher entrepreneurs in our program. And I mean, jeez, that teachers have been through. You know, this is one thing after another. Yeah. And so if like if you’re offering a program, for example, and you’re not speaking to them for where they’re at right now, which is very likely different from three weeks ago or a month ago, you know, you’re missing an opportunity to serve them at the highest level. And so that’s been a big conversation of like, hey, create that feedback loop, whether it’s serving your audience, whether it’s jumping on Zoom with some some, you know, with people just whatever, asking for feedback in some way, opening that line. In addition.
I just live just in the last few weeks, just created a link, a web page and a link where they can record their questions for me. With Speak pipe.
Yeah, with speak pipe. Yeah. Yep. And just because I want and I think that we want we should want to hear from our customers. We should want to have those conversations, even if the responses. Great question. I, I don’t know. Let, let, let let’s figure it out. Yeah. Because as long as. As long as we’re talking, we’re connecting. And as long as we’re connecting. We’re keeping. We’re keeping the relationship going.
Yeah, I was having a conversation on. I’m still actually in the middle of it right now on my Instagram DMS with somebody was talking about a recent podcast episode or what have you. And they were telling me about their business. And so I just started asking some questions like, you know, like, what is it that you do? What’s the biggest challenge right now? And they thought I was trying to sell them. They came back and they said, I’m not at the I’m not at the level for accelerator yet. And I’m like, I’m not trying to I’m legitimately just trying to help you right now. Like I’m not pitching you anything. Yeah. And so it’s I totally agree. It’s that human. Connection, which if the pandemic has taught us many things but one thing like people, we are all craving that human connection. Yeah. And that is certainly one thing that we can really lean on during quote unquote, these times that we’re in now. Speaking of the times. One question, and I’ll be honest, my mind goes to this automatically also, and it’s not always the answer, which is kind of counterintuitive because you can only go so far. How do we how do you recommend that we approach our expenses or business expenses? During these these times.
So let me give you the the formula I think you need to have, and then we can talk about the expenses in general. Yeah. During these times, the recipe or the formula is this is to decrease the expenses that are nonessential. In other words, making sure we can talk more about that, that the expenses are providing an ROI looking for ways. So it’s it’s increasing income decrease expenses plus. Building liquidity. Plus patients. Plus taking advantage of the opportunities as they come in. B When we look at it through those eyes, we’re sitting back and now spending our time. And let’s just talk about the expenses because that’s what you asked first, is to look at all the expenses that we are spending now. I truly don’t believe we can cut ourselves back to wealth. Wealth is about building. It’s about expansion. However. What we can do is be diligent with our expenses, both business and personal, and and understand that especially in business, every expense needs to be an ROI expense as many as possible. And what I mean by this is this if I’m going to put a dollar out something. More than a dollar is going to come back either. Through generating more income. Like. Like an ad. Okay. Or generating more efficiency. Meaning that I have more productivity. Or generating more time. Giving me my time back to do higher valued tasks either in the business or personally. So if we can, and when we’re successful at looking at each of our expenses through the hours of our eyes, of our ROI and defining. That I’m getting a return on investment in either income, time or efficiency. Then we have the ability to logically or analytically decide it’s a good, expensive or or not. And then we can ask, is it necessary for my business? A lot of things that we think are necessary are more desirous and not necessary. There’s a lot of things that we probably have in our business that probably don’t need.
Give me an example of that, because I get all excited. I hit my microphone. What is one thing that you think that is falls into that category?
You know, I think the easy ones are there’s probably a lot of softwares that we’re not using a lot of subscriptions. A lot of things have gone to subscription based models. Yeah. And what happens is that it’s out of sight, out of mind, and we’re spending money and we don’t even realize it. And yeah. And what we do and this is this is something that I’m I’m guilty of is that we grab things that the worst people, the easiest people to sell to are marketers because like all of a sudden, the urgency comes up on a page. You go, Oh, oh,
crap, I’ve got to buy it. I’ve got to buy it. Like you’re just. He’s dragging me in and I’m buying. Go, do I need it? But when we need to get more lean. We ought to examine those things and say, well, I haven’t used it in six months, so am I going to keep paying the $20 a month, the $30 a month or the $50 a month for this software in case I need it? And you might look at it and go, it’s only 50 bucks mil y. I mean, you’re you’re pinching pennies. They go, no, I’m not 50 bucks a month over 30 years invested. Even if you still took that money invested, it turns into $350,000. So. I’d love to.
Do that math in your head right now.
I happen to know the math. Yeah. Yeah.
So it’s like, that’s really quick, man. But most people don’t think about it, myself included. You know, it’s like 50 bucks a month on some tool that, you know, that we might not be using is, quote unquote, a nice to have. We don’t look at it. In terms of what if I invested? You know what I mean? 50 bucks a month, over 30 years, you just said.
This is so here’s here’s the interesting thing. If we understood the true cost of our choices today on our tomorrows, we might make different choices. I You’re like me. I went to get my haircut. I got a barber. I go to Z. Young guy, it doesn’t take long to cut my hair, you know? And he’s telling me he’s like 23 years old. And he go, he says, My buddy just bought a $4,000 watch. You know what he says? A $4,000 arch. He said, Does he make a lot of money? He says, no. I said, How old is. He says, He’s 23 years old. He’s like me. He doesn’t make a lot of money. I said, Why did he buy it? And he said because his friends thought it was cool. Hmm. Wow. I said let’s do some math. Okay. Every dollar you save or you invest in your twenties turns into somewhere between 80 and $90 by the time it’s time to retire. So let’s just call it $80. So he invested 4000. If he did invest 4000 and he saved it, he invested it. And it sat there until he was 60, 60 years old. That would be 80 times that. What does that eight times four is, what, 320,000? I said he just bought himself a $320,000 watch. And that’s the way I look at it. I go Now? Yeah. It doesn’t mean look, you know, I have I have nice stuff. I’ll spend the money on a on a watch, but I’ll do it consciously knowing. That I’m doing it and for what reason I’m doing it. It’s when we unconsciously have expenses going out the door. That it’s robbing our future and it may even be robbing our present if we’re not careful. So the whole idea is that now is the is the time that if we have unconscious spending, that we get intentional, aware and conscious and make intentional choices. Not saying don’t spend the money, actually spend the money. Just make sure you’re aware of it and intentional with it. You know exactly what you’re doing.
Yeah. So you mentioned I love the quote you said that wealth is about expansion, not cutting. Yeah. One thing going back to what we talked about. Right at the top of the interview. Like this is something that we as entrepreneurs, I don’t want to make a general statement, but I know this was for me personally, I only speak for myself. But I also know, like conversations with a lot of our members who are very successful in their businesses aren’t necessarily thinking about the. Bigger picture in terms of their earning potential from the business, like the business funding, their wealth building. Yeah. So I want to kind of unpack that a little bit in terms of let’s let’s start can you define, you know, we often you know, we often think like, okay, yeah, wealth and we all we have a picture of what that means in in, you know, people have a picture of that in their mind of what it means to them. Yeah. And to put it in context for this conversation, how do you define it?
So what I what I look at wealth as a statistic. It’s a number and everyone’s number will be different. What I want people to do is understand that. Rather than look for having a wealthy life, look for having a rich life, a rich with experiences and and those things, and define that because I’d rather us define our wealth or measure our wealth in time than dollars. How much? Because the reality is, why do we want the money? We want the money so we can buy back our time. We want the money for the sake of controlling the moments of our life. And if we looked at ourselves and said, how much on two fronts, how much of the moments of my life do I do I control? I have the ability today to decide whether I’m going to take a client, not take a client to to decide. Like my wife and I, my son and his wife told us, they’re taking the whole month and they’re going to Portugal for a month. And I go, Great. And three days later, we called them up and said, We’re crashing the party, we’re coming to Portugal, you know, just to be able to have the control of your time, Dad. Yeah. You know, here’s what’s going to happen. They’re going to say, love that. Wait, wait. You know, Stephanie and Dad are here. Let’s let’s let them watch the the granddaughter. And now we’re out partying. Portugal. We got themselves.
So. Yeah, but the point is, is that if you asked yourself how much of your the moments of your life do you control? Truly control. That’s the better measurement of wealth in my mind. Because when we have the opportunity to have choice. That’s what we’re looking for now that that also comes with it a number. But what happens is that we all talk about financial freedom. I talk about financial freedom and we say we want financial freedom. And we come up with this number, $5 million, $10 million, $100 million. And it’s this lofty, crazy number that you go know, I’m never going to get there. You know, I’m 20 K and Dad, I’m never going to get there. But there’s stages that we need to go through. And in we need to understand the very first thing we need to do is find financial stability. To be able to generate enough income. Without our efforts. In other words, having enough investments or portfolio, real estate, whatever it is that’s generating enough income that will support our necessities, the roof over our head, our food, all that stuff. And the mistake that I made, the mistake that a lot of entrepreneurs made, I know it’s a general statement. And it’s a catch 22. They go, Look, if I invest a dollar into my business, I can make if I put $1,000 into my business, I can make a lot more than I can in the stock market, especially now or in a piece of real estate or in in these other investments. So I’m just going to go all in on my business and I’m going to put all the money in there because that’s where I get my highest return. The problem with that. What what what they don’t see. Is What if you can’t? What happens if a pandemic shuts you down? What happens if cancer, like I had, shuts you down? What happens when you can’t? What happens when you choose to decide that I’m tired of this, but it’s the only asset you have.
Because you didn’t diversify your income streams. The reason we want multiple income streams is not to have multiple income streams, it’s to diversify them. So if one goes away by choice or no choice. It doesn’t affect you. Think about your income streams like the starfish OC when when one one of the is it an arm or a leg with a starfish. I don’t know. One of the, the appendages on the starfish gets ill or goes away. The others take care of it until it grows back. But if everything is in the business. Then we have no ability. To care for our family, to take care of our legacy, to take care of our kids, to have the freedom of choice, to have options. And so this is why, especially in personal brands and in these types of businesses that are, for the most part, not sellable. We need to create the business machine, which is what you’re doing with them and use the business machine. This machine is never we think the business machine is there to give us freedom and to give us control. And and it was never meant to do that. It was meant to create a solution. It was meant to have an impact. It was meant to generate income, cash flow. There’s a money machine you need to create from the cash flow and your freedom sitting in the money machine, not in your business machine. Hopefully that makes sense. I don’t know if that answered the question.
Yeah, for sure. It does a whole heartedly. And the business machine that we’re referring to that you’re referring to here is that the I don’t want to say I mean, automated income or what have like the income that’s coming in. That you’re not necessarily I don’t want to call it passive income, but it’s income that’s coming in in reference to what you’re talking about in terms of supporting your necessities.
Yeah. So I call it so the money machine is the one that’s the business machine is the online business, right? In their case, the money machine is. So I don’t use the term passive. And the only reason I don’t use the term passive is I believe that. When it comes to money, there’s a relationship there. Yeah. And like any relationship, if we if we’re passive about the relationship. The relationship withers and dies. Okay. You can’t get passive about your money because if you forget about your money, it’ll forget about you. So I look at it as leveraged. How much of my effort and time does it take? Because the objective of the money machine is to take the money you earn and get it to work harder for you than you did for it. And when that money is working harder for you than you did for it, you have freedom. And so so what you want to do is have this portfolio, this machine, this money machine outside that at the first stage is paying for your necessities. That’s financial stability. So it’s your medical, it’s your transportation, it’s utilities, it’s your food is your shelter. That’s all it is. It’s not Netflix. It’s not Manny Petit’s, it’s not technology is nothing. It is your bare survival.
Just to clarify, you’re saying creating an asset that funds your living necessities, your life necessities. Yes. Yes. Okay. And and we’ll we’ll give a real life example of what happened with me.
The next step in that is building the machine to a point where it gives you what we call financial security. Financial security not only covers the necessities, but it now covers your current living expenses. Okay. So it it covers the the movie nights and the date nights and the other stuff, the car washes and all the stuff that aren’t necessities. So your existing expenses. Are now covered. So now I know that my lifestyle. As it is is good. And that’s what I call financial security. Then we get to the third of the four phases, and that’s financial independence. At the financial independence stage. This is where you have a machine that’s generating enough income that is actually replacing 100% of your active income. So let’s just throw some numbers at it. If you’re making $100,000 a year, but your living expenses are only 70,000 at the financial security level, the machine is generating the 70,000. At the financial independence level is generating the 100,000. It’s your right because your income could be greater than your expenses. Hopefully it is.
Sure. Where do where do like I mean, not to state the obvious, but where do taxes come in here?
Taxes are part of the expenses. Okay. So you got to you got to consider it as part of your expenses. So you could say it falls under necessities because you can’t get away without taxes.
Right, right. Right.
But I would I would hate to call the taxes a necessity. It’s just a give it.
Yeah, I just paid my estimated taxes for Q two this morning, and that’s why I’m like.
You’re a little raw. Yeah.
Okay, so we have those those different levels.
And then the fourth bubble is your financial freedom level. So that’s the last stage. That’s what covers your envisioned life. The the life. So so for instance, in my case, Stephanie, I sat back, I said, we want to be able to travel. We want we want to 60, 60,000 a year travel budget. We want this. We want that. And we we created the vision of the life we want. We figured out the price tag. We said we need to build a machine that’s going to fund that. That’s true freedom, because now I have the ability to do exactly what we want to do, when we want to do it, how we want to do it. But we have to pass through the four stages to get there. You’re welcome. And we’re just talking about one.
Just to clarify the term, you know, and I won’t use the language here on the on the show, but it’s the F-you money. Yes. That or the F you number excuse me that a lot of people throw around. Is that different from what we’re talking about here?
It? It is. I think I think that the if you look at the few number, it’s probably at the independence level because now you have the ability to replace 100% of your income. You’re sitting back working for someone that’s paying you 100 grand, but you have a machine outside that’s paying can pay you 100 grand. And you sit back and say, look, you want to treat me badly, I’m out, right? Because I got something else is going to take care of me.
All right. So I want to. I want like let’s can we create specific examples because I know people are listening right now and they’re like, okay, all this sounds great. How do I actually do this? And by the way, like you’re the expert, what kind of caveat? What kind of. What kind of caveat do we need to put to this? This is not financial advice. But you’re a certified.
Well, I’m certified, all right?
I’m just certifiable. Yeah. What? Like, what is the what is the asterisk?
Well, I think the reality is that everyone’s circumstances are different. So what we’re talking about is general information and and a pathway. But you need to create a specific path. I’m at an age where I’m going to be 61. I have no children. I’ve got a wife, I’ve got a puppy, I’ve got one grandchild and another one on the way. Ric has a young, a young, little, little girl, a young little princess, a wife. He’s got a fledgling family. He’s got to think about school. I mean, we’re in completely different arenas, so our expense structures, everything is different. I have a certain level of assets, Ric. You have certain level, that’s all that changes. So I think that we take the information, the principles and the things that we’re doing, and then you have to integrate them into your specific circumstances. So it’s not specific financial advice to you. You’re not a client of mine, you’re not a you know, and and I don’t know your situation. It’s not specific investment advice. That’s probably the best way to say it.
Okay, cool. There you go. Set it. I’ll say it in the intro. Yeah. Carry on.
So with so specific examples of creating each of those. Yeah. Levels if you will. So you’re talking.
About. So the first I think the first first thing is get clear on your expenses. Hmm. And understanding what are the necessities that you have at the base that you need to live. And I mean, getting real with yourself about what our needs and what our wants. So that means getting your bank statements out. That means getting your credit card statements out. That means sitting down. And if you need to grab a glass of wine, grab a good coffee, grab a tequila, whatever’s going to take the pain away, because you might be having to have a real frank talk with yourself on some of these, but to look at them and get the red marker, the green marker, the blue marker out and say, this is this is a need. This is a want. This is a cancel. Yeah. So now what happens is that once I’ve done that, I now have a list of needs. I know what my my stability number is. Okay. I also know what my cancel number is, the things that I’m I don’t need anymore. And so all those things, if you’re spending it right now, all those things that are are are going to be canceled. Here’s what I want you to do. I want you to take every single one of those items. And I want you to take, you know, say it’s $20 for Netflix and it’s $30 here and $20 there and it adds up to $100.
I want to take that same $100 and I want an automatic transfer to go to a high yield cash account. Now, the beautiful thing is with interest rates going up, high yield cash accounts are starting to get back up their above 1%, one and a quarter to 2% you can find. But my point is, is this will start. Building the machine. If I don’t put money away, I can never build the machine. I’ll never have money to invest. And too often we think, Well, I’ll wait until I’m making more money to do this. But the fact of the matter is wealth creation. Is a behavior. And if it’s a behavior, the sooner we start to create the habits of behavior that create wealth, the better it is. So I don’t care if it’s $5 or $105, we move it off the balance sheet to somewhere else where we’re accumulating it so we can then start using it to build a machine. But too often we don’t. We say, I’ll wait till I, I make more money and trust me, it doesn’t happen. Life happens, life expands and we don’t do it. So so the first thing is to get clear on the expenses that are necessities, the expenses that are canceled, and the expenses that you want because they’re desires. And those expenses that you want, that are desires will bring you to the security line. That makes sense. Because that’s your life. Current lifestyle.
Oh, right, right. Yes, yes, yes.
Yeah. Okay. So if you add up, I know this is kind of crazy, but if you add up your expenses that are on the desire column, the expenses that are on your on your necessity column, they should add up to what you’re spending each month because we’re going to cancel the other ones out. Yep. Okay. And and so now you have the idea of what kind of income you need to generate at those levels to at least get to yourself to stability and security. And think about the peace of mind that gives you that. You sit back, say, all right, I know the numbers, and now I can start to build towards it. Then we can focus on the independence line. But until we do the stability in the in the security. Why are we worried about independents? Yeah.
So we you and I started to do this exercise yet with for me and we kind of like we’re sort of in the middle of it. Yeah.
I remember the thought that came up for me is like. And, you know, we don’t have a, you know, a grand lifestyle. And I know. But in looking at the number to be able to create that, you know, that income coming in without that’s outside of the business from an investment perspective, it felt big to me.
And so it was daunting. I was like, Oh, and it’s kind of like that fear of Holy cow, that number, in order to create that, in order to create that level of income. It’s you know, it’s kind of like that. You don’t do anything. Yes, because it’s like, oh, how am I going to get there?
Yeah. So what? That’s why I want people to. Break it down in stages and focus at whatever stage they are at first because it is daunting. And what happens is people just go to inaction and they don’t do anything. And your greatest wealth creation lever is time. Mm hmm. And if you think about wealth creation. It’s it runs like a hockey stick. So it’s really flat for probably eight years of investing. And then all of a sudden the momentum of the money, the growth starts to take on. Why this time in our world is going to become so important is those that have the discipline. To get in the game. And stay in the game, even though it feels like you’re not making the level of progress that you want to make. We’ll look back and go, Wow, why? Why am I saying that? Let’s just go back to 2008 when the recession of 2008. We came out of that recession after a couple of years, so call it 2010. And the people that stayed in the game or got in the game and said, I’m going to do that. Now, granted, it has been 12 years, but 12 years of a bull market that that. People have have made a kill. I’m one of them. I did really well going from 2008 to today, partly because of what I was doing. But by the same token, the market cooperated. And if you have a stock market that has shown eight out of ten years, it’s going it goes up. We might be in the two years that it doesn’t right now, but but eight out of ten years it goes up.
You don’t want to sit on the sidelines and not get in the game. But what happens is that because we don’t see the change as dramatic enough, we don’t we stop doing it. We don’t stay on it and we don’t. And this is why I say out of sight, out of mind, put it away. What will happen if you look at rule of 72, this is just a financial concept. You double your money. So if I make 10% every year, every seven years, my number doubles. Hmm. Okay. Let’s say I had $100,000 put away and I go, okay, it’s 100,000 bucks. You know, in in seven years, that goes to 200,000. In another seven years, it doubles again. That goes to 400,000. And in another seven years, it doubles again. And now I’m at 800,000. But adds, if you never put another dime in again. Yeah. But if you’re if you’re on a continuous. In investing, building the machine and making it a priority that that will work to your favor. And all of a sudden you find yourself in a situation where you’ve got a million or $2 million. Is it going to take time? Yeah, it’s going to take time. And I and I. I know that you can. There are ways to accelerate it, but you need to be mindful and you need to be careful because a lot of times that takes on a little more risk. And. Yeah. And if you are. Go ahead.
Now, the other side of this is this. Many of your listeners are online businesses. Yep. Many of your listeners do launches. I’m guessing. Although I know. I know your thought on this too.
Yeah, my thought on that. Yeah, yeah, yeah. But yes, but the answer is yes for sure.
Or maybe they promote for an affiliate and they have this this windfall that comes in. Yeah. One of the things to consider in your life, in your business, is to make investing in building this machine a line item. Hmm. So, for instance, I have a launch coming up, one of the line items of that launch. And we want to make X dollars. And here’s what our ad spends going to be. Here’s what what the copywriter hears all that. And here is the amount that’s going into the investment. I call it leapfrog funding. So historically, historically, my business as a CPA was valuing businesses. I was buying and selling businesses. So. My income would ebb and flow. There’d be months that I didn’t build a thing, that it would be months that I’d make hundreds of thousands of dollars. Yeah, but if I allowed my life to lifestyle to creep out and go, I got hundreds of thousands of dollars this month. I go spend it in the next month. I got zero. Yeah. What I do when I have lump sums coming in is I take a sliver of it to celebrate because I still want to feel the success. So experience is success. I pay the bills and then I move a lump sum into the investment pool. And that’s what I did for decades. And I still do it today. And I and I tell my clients same thing. When you have a windfall coming in, make sure you have enough set aside to cover you for your expenses for the period of time till you next have the next revenue activity and something to celebrate and then move the rest to build your machine. And now all of a sudden, if you’re able to drop 100 grand into a machine and 100 grand each year is going in, you know, all of a sudden it, it, it leapfrogs up. Yeah. And it grows really fast because now all of a sudden it starts to make sense.
Now we do need we’re at the end of our time where we need to wrap up. However, I do want to make sure and I don’t know if this is a quick I know it’s not a quick answer, but I want I’m going to challenge you, Mel, to make something a quick answer.
And I could say that because we’re buddies.
What type of assets are we talking about? Now, you mention the stock market. That’s sort of like I don’t know, like, you know, like what most people know is that all we’re talking.
About now or.
What other kind of asset classes are you, you know?
All right. So so I’ll I’ll do this quick. But I think that that the assets that you want to go after are going to be are going to be partially dependent on two things. The lifestyle you want to have. And now.
Or later. Or both?
Both. Both. And. And the. The income you need to generate. And what do I mean by that? Your assets, let’s just list them, are going to be asset based types of assets. That’s one category. This would be real estate. Okay. Buildings and trustees, those kinds of things. Now, I have some real estate, not a lot of real estate. And and and the reason for it is I don’t want the call at 11:00 at night saying the toilets clog. You know, go get a puncher. Don’t bother me. Okay. So that’s what I mean by lifestyle. So that asset may not fit my lifestyle if I don’t have a management company or something in play. But so it’s a mix of of real estate. Then you have residual assets. These would be taking your knowledge, your wisdom, the expertise that you have and maybe white label on it. My book, I get paid royalties, those kinds of things where I’m getting a residual income stream, creative ones get paid often and then portfolio assets that stocks, ETFs, index funds. So the two primary asset classes that people will spend focused time on will be real estate. Or equities or stocks. If you’re in the stocks, I’m going to tell you to go to low cost ETFs or index funds at the very beginning.
If you’re just starting out, you use a target date index fund. We can talk about that another time because it does a lot of the work for you in a low cost environment and allows it to grow. And now you’re going to be able to buy it at a bargain because of what’s going on in the market. If it’s real estate, then you’ve got a lot of different ways that you can go, whether it’s individual properties, multi units, Airbnb, investing in partnerships or or syndications and everything. And you need to. But it’s that mix of having that that will generate cash flow that will pay for the bills that you need to be paying without. Without killing off the cow. You’re not selling the real estate, it’s generating the income, and then you can pass that down. So those are the primary assets that I would look at. There’s all kinds of other things that people want to sell you a whole life insurance. Don’t get involved with it. We can deal with that in time, that kind of stuff.
Yeah. Now you go much more deeply into this exact topic of the different layers, the different levels, how to be creating that revenue outside. You’re using your business to fund these assets to be able to generate the types of revenue in your program.
Yeah, I do.
I’ll tell us more about the program. And you mentioned earlier that you’re launching when when I want to, because people are going to listen to this right now and be like, I need to be in Mel’s world. I need to learn more about this. Obviously, your wealth of knowledge, no pun intended. So how do people do that? Tell us about the program.
Cool. So the program’s affluence blueprint, it is my system, my process of how I built my businesses and my wealth. But not only that, for my clients to give you an idea, my son’s 32 years old. His wife is 30. They’ve got their first grandchild, a first child, second child on the way. Using the processes and everything. They have three homes in a multi-million dollar net worth already. It works if you work it. You know, it’s principle based, it’s discipline based, it’s behavior based. It’s, you know, and it’s not like, oh, I want you to invest in these specific things, this investment. That’s that’s a level up. First, we got to get the principals right. We got to get the behaviors right. And so I walk through all of that in in the process, really understanding what your number is, what your vision is for life, how that and carving out the the expenses and how we’re going to get to it and building that and then giving you the tools to make that happen. So that’s that’s the program we are launching in in September. And you know, also, I mean, I have my show that I’m answering questions and I’m helping people. And I, I feel called to do this post cancer post pandemic because I think so many people and now with what we have on the horizon, people feeling that they are going to be now victimized by the economy and that and that it doesn’t need to be this way. And the financial services industry and those folks would love to complicate it and keep you dependent on them. My job is to energize you, empower you, educate you, and set you free.
Bam. If your microphone would was not attached, I would have you drop it right now. Now, your podcast is. Called The Affluent Entrepreneur Show and the Affluent Entrepreneur Show.
And we’ll link that up. It’s on all the major podcasting platforms. However you listen to shows where you’re listening to this show right now, you can find Mel’s show on that platform as well. And Mel’s program, the affluent.
Affluence, affluence. Blueprint is the enrollments opening again in September. So if you’re listening to this, you know, this summer of 2022 and we’re not quite there yet. Check, start checking out Mel’s podcast, start getting a taste of what Mel is talking about on there, and then obviously he’ll keep you updated on when that program opens up. You know that we can talk about this stuff for hours. Yes.
But we do need a ramp up. Thank you, my friends, as always, for coming on the show and sharing your expertise. I’ve been over here taking a whole bunch of notes for myself. And as always, I appreciate you. Thank you, my friend.
Oh, my God. Thank you for for asking me for the friendship and for the things we get a chance to. To serve and do together with my friend.
Absolutely. Hey, hope you get a ton out of that conversation here with Mel today. As you can tell, Mel is he really knows his stuff. He’s a he’s an expert in this. And so go check out his podcast. Go to his website, Mel Abraham. Just kind of get into Mel’s world, if you will, because as you can hear, as you can hear today, he’s a wealth of knowledge. See what I did there? Wealth of knowledge. Hey, also, if you’re a course creator or you’ve got a membership or you’re a coach and you’d like my help in growing and scaling your business while working a whole lot less. If you want my eyes on your business, I’d love to see if I can help. Right. And so too, two different ways to reach out to me. Shoot me an email Rick at Rick Moll Radio.com or you can go over to our accelerator coaching program page and read all about the ways that that I and my team can help you. And that is Rick Moll Radio.com Forward Accelerator. All right, my friends, we’re going to continue in the next episode. Talking all about finances again. We’re going to continue the conversation around money in these economically uncertain times when it comes to your business, etc.. Thank you so much as always for tuning in today. Appreciate my friend. Talk to you soon.