Are you ready to uncover the secrets to not just getting rich, but staying rich? The journey doesn't end at accumulation; it extends into protection and preservation!
In today’s episode, I dive into the often-overlooked challenges of maintaining wealth after achieving financial success. I emphasize the importance of protecting your fortune against bad investments, lawsuits, losses, and even thievery. It’s not just about picking the right investments; it’s about strategic wealth management, tax optimization, and meticulous succession planning.
We explore how to minimize taxes when selling assets, drawing from retirement accounts, and ensuring a smooth wealth transfer that avoids family conflicts. We also highlight the importance of philanthropy, staying active in giving and charitable causes even in retirement, and finding joy along your financial journey.
Are you prepared to build both your earnings machine and your money machine to ensure lasting wealth? Tune in to the full episode now!
IN TODAY’S EPISODE, I DISCUSS:
-Asset protection strategies to safeguard your wealth
-The crucial role of advisors beyond investment picking
-Effective tax optimization techniques
RECOMMENDED EPISODES FOR YOU
If you liked this episode, you'll love these ones:
The key to building the life you desire and deserve is to build your Money Machine—a powerful system designed to generate income that’s no longer tied to your work or efforts. This step-by-step guide goes beyond the general idea of personal finance and wealth creation and reveals the holistic approach to transforming your relationship with money to allow you to enjoy financial freedom and peace of mind.
Part money philosophy, part money mindset, part strategy, and part tactical action, these powerful frameworks will show you how to build your money machine.
TAKE THE FINANCIAL FREEDOM QUIZ:
Take this free quiz to see where you are on the path to financial freedom and what your next steps are to move you to a new financial destiny at http://www.YourFinancialFreedomQuiz.com
Are you ready to uncover the secrets to not just getting rich, but staying rich? The journey doesn't end at accumulation; it extends into protection and preservation!
In today’s episode, I dive into the often-overlooked challenges of maintaining wealth after achieving financial success. I emphasize the importance of protecting your fortune against bad investments, lawsuits, losses, and even thievery. It’s not just about picking the right investments; it’s about strategic wealth management, tax optimization, and meticulous succession planning.
We explore how to minimize taxes when selling assets, drawing from retirement accounts, and ensuring a smooth wealth transfer that avoids family conflicts. We also highlight the importance of philanthropy, staying active in giving and charitable causes even in retirement, and finding joy along your financial journey.
Are you prepared to build both your earnings machine and your money machine to ensure lasting wealth? Tune in to the full episode now!
IN TODAY’S EPISODE, I DISCUSS:
-Asset protection strategies to safeguard your wealth
-The crucial role of advisors beyond investment picking
-Effective tax optimization techniques
RECOMMENDED EPISODES FOR YOU
If you liked this episode, you'll love these ones:
The key to building the life you desire and deserve is to build your Money Machine—a powerful system designed to generate income that’s no longer tied to your work or efforts. This step-by-step guide goes beyond the general idea of personal finance and wealth creation and reveals the holistic approach to transforming your relationship with money to allow you to enjoy financial freedom and peace of mind.
Part money philosophy, part money mindset, part strategy, and part tactical action, these powerful frameworks will show you how to build your money machine.
TAKE THE FINANCIAL FREEDOM QUIZ:
Take this free quiz to see where you are on the path to financial freedom and what your next steps are to move you to a new financial destiny at http://www.YourFinancialFreedomQuiz.com
This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect so you can scale your business, scale your money, and scale your life while creating a deeper impact and living with complete freedom, because that's what it really means to be an absolute entrepreneur. All right, so let's talk about this, because how, you know, if you look at statistics, you will see that there are a number of people that will go through building wealth. Building wealth. They get rich, they get wealthy, and then they end up losing it, and they have to rebuild it. Now, they seem to be really good about building it, making money, and doing the things that get you to the point of being wealthy. But they seem to have a problem with staying wealthy. And it comes back to what some people ask is, hey, Mel, why is staying rich harder than getting rich? And I think that part of it is philosophical in the sense of our upbringing, but also practical as we start to walk through it, because getting rich is exciting. Getting rich is thrilling. Getting rich is sometimes taking risks. There's this energy, this vibrancy, this element to it. And in fact, as we're raised, because we're raised in an environment where they say, go get a job. Go make some money, build a business. And they're so focused on the earnings side of the equation. In fact, my book, building the money machine, one of the reasons that it's written the way it is and what the concept of the money machine is, is that we actually have two machines we're building in our world. One is the earnings machine, which is what we have been raised to do. Get a good job, make a good income, have a good career, a good professional pathway. Build a business, make money, make money, make money. As if that is the solution to all of it. But it isn't. Because if we don't know what to do with the money that we make, we end up having to continually make the money because we lose it all or we spend it all, or we do those things. And that's what's happening. Because staying rich, if getting rich is exciting, staying rich is boring. If getting rich is thrilling, staying rich is bordering on the mundane. There's a different perspective. There's a different environment. There's a different mentality. There's a different skill set. There's a different element to staying rich. So one of the things that we need to do is, as we're trying to build wealth, we need to refine and build the skills of wealth building, which is part of what the book is written about, building your. Building your money machine, and part of what this channel is about. But the other part of this channel is, okay, how do I make sure that it doesn't go anywhere? The idea of the money machine is that once it's built, it isn't just for me. It's for the missions, the movements, the causes. Even after I'm gone, when I'm, you know, God forbid that. That I leave this earthly place, hopefully not anytime soon. The money machine, what I created, the wealth I created goes to my wife, and then to my son and his wife, and then to our grandkids. And part of it goes to charities. And so we create something that we can actually move on and pass on. So what is it? What are the focuses? What are the mindsets? What are the skill sets that you need to have? One, for getting wealthy, and then second, for staying wealthy. And I think. I think, and I'll go to. I'll go to my iPad for this also. But the first thing which I kind of mentioned already when we talk about, if I just. If I just put it here and I say, this is getting wealthy and this is staying wealthy. Number one, getting wealthy is. Is about income. I gotta earn money. So. So what we need to do here is really try to start to figure out what do we. What do we need to do to make money. So at the beginning, what I want you to start to look at is these are focuses. These are mindsets, and these are skill sets that I want you to work on and grow on. If you truly want to do this, and over time, you will have all of them. So you can get. Get wealthy, you can stay wealthy, and you can navigate between the two. But income generation is about a job. It's about a career, it's about a professional path. That's what people will say. It's about a business. I think it's a little different than that. Yes, you can serve time. Yes, you can use your hours. Yes, you can get paid for that. But if you truly want to accelerate your wealth, if you truly want to accelerate getting to wealthy, what you need to start to figure out is how do you focus on not just the skill sets, but the value you create in the world? The value is the solution you provide. Okay. The more complex the solution that you provide, the more valuable the solution you provide. The bigger problem you solve, the more you get paid. The more you get paid. The bigger the shovel. The bigger the shovel, the faster you can get and build wealth. So our income generation at the beginning needs to focus or should be focused on a couple of things. One, skill sets. Okay. What skills can you refine, build or nurture that allow you to get paid well? Okay. Second, okay. Making sure that you are using those skill sets to solve bigger problems. The bigger the problems are that we solve, the more we get paid. Third, like it or not, there is a work ethic to earnings, to income generation. There. This concept of, well, you know, and I, and I see it a lot on the online space. You know, I'll just, I'm just going to do some online stuff. Okay. And I'm going to put a website up and I'm going to put information out there. And people are going to buy it. Yeah, they might buy it once, but if you don't do the depth of thinking, if you don't do the depth of work, if you don't create real solutions, if you don't create real results for the people, they're only going to buy it once and they're gone. You want to look at your income generation from a sustainability standpoint also. Okay, so can I continue this? How can I magnify it? So, number one, in getting wealthy behaviors is really focus on income generation. Okay. Is there an education you need? Is there a skill set you need? Is there contacts? You need all of those things. Okay. Number two, on it. On it is financial education. If you truly want to build wealth, you got to know about it. You got to understand money. Now, I get it. Some people say, I'm not good with money or I'm not good with numbers or I'm a creative. I hear this all the time. I'm a creative. The numbers stuff is boring. I get it. It's boring. I get that. Maybe because you're creative, it's boring. But at the same time, if you don't figure out the boring, you won't have money in the bank account to do your creative. So we got to figure out some of the, some of the boring, which means that you need to educate yourself. That doesn't mean you need to be sophisticated. It doesn't mean you need to know all the stuff. You don't need to be some guru or financial analyst. You don't have to do what I do. Okay, but are you skilling up from a financial literacy standpoint, from a money standpoint, from a management standpoint, understanding the investments you get into. Are you reading things like my book, building your money machine? Are you taking some of the courses? So are you actively participating in growing your financial knowledge and understanding so you can make informed decisions? Remember, even if you hire professionals, even if you have enough money to sit back and say, I'm just going to get a whole professional team, like, I have a professional team, it doesn't mean that you relinquish responsibility. It simply means they inform you. They kind of ballast you. But you still have to make the decisions. And if you're going to make the decisions, you need to be educated and understand it. So during this time, the building phase, the getting wealthy phase, financial education becomes really important. So what podcasts are you listening to? What shows are you watching? What books are you reading? And make it a process so you're consistently doing something to skill up. And skill up. So that leads me to number three. Number three is savings investing rate. Okay? When we talk about this, this is, I talk about the four wealth drivers matrix. And the four wealth drivers matrix says there's four things that you have to manage to manage your wealth, and the first is income. Okay? And we talked about that in. Number one is income. We want to boost our income as much as possible, and at some point, I want to boost the income without taking more time and effort. For me, the reason we create the money machine is to separate the earnings from the effort to earn it. And that's the value of creating a money machine, because it gives you freedom. But the most important element of building wealth during this time isn't as much the income as it is the savings and investing rate, the percentage of income you are putting away for the future. Now, my wealth wealth priority letter that I talk about in, in my book and that I teach and that we use for our clients, the wealth pero letter, we want you to start putting away 20% to 25% of your income. Now, you might sit back and go, there's no way I can do 2020. 5%. I got it. You'll start with 1%, you'll go to 2%. Or you start with 5%, you go to 2%. The bottom line is you got to start somewhere. You got to get in the game. If you're not in the game at all, you're in the stands. Spectators don't win games. If you're saving only but not investing, you're on the sidelines. Okay? If you're sitting on the sidelines, on the bench, you don't win games. You got to be on the field. So what we want to do is push our savings rate, investing rate up as high as possible. The percentage of your income that you put away. Now, we recommend 20% to 25%. If you're younger, you can probably get away with less because you have a longer Runway. Okay. More time, less money needed. Less time, more money needed. If you're older, say you're 50 years old and you feel and you're behind, based on the numbers, you might have to push beyond the 25%. If you're really trying to build wealth, build it from a plan. Okay? That's number three. Number four is investments, okay? Now, when I say investments here, what I'm talking about is your investment strategy, your investment selection, and your process of investing. We have to invest. Remember, I said, okay, spectators and people on the sidelines don't win the wealth game. You got to be on the field. How do you get on the field? You start investing. How do you start investing? You keep it simple, very simple. I don't. It was one of the reasons I wrote the book the way I did. I don't want the complexity. We can create these complex wealth structures. We can create these complex investment structures. They don't serve us because complexity creates friction. Friction creates resistance. Resistance will create, you know, a delay, and you don't get in the game. And also, complexity creates risk. Risk creates loss. All of that is a recipe for disaster. So I think we keep it simple. We get in the game. Investing. I talk about ETF's index funds to start, remember, everything that I do is, is focused on how do we build an unshakable foundation. Safety first, growth second. Safety first, growth second. How we do that is to make sure that we have a diversified portfolio. Diversification is going to reduce the risk. It's going to allow us to not get destroyed if one company goes down or a piece of real estate doesn't get rented or has a big repair. It's why I start where I start. ETF's index funds, low fee, low cost, low expense, diversified liquid. Okay. It has a beautiful combination, and it's simple. You can get one fund, two fund, three fund, four. Fun. That's it. Four decisions. That's it. You don't have to get any more complicated than that. Down the road, you might, but at the beginning. At the beginning, keep it simple. Get in the game, and you can get in the game with little money. So in order to get in a piece of real estate, you might need 1015, 20,$50,000 to get into an ETF or an index fund, you could probably do it for a couple hundred, $500, depending on which one or a $1,000 you get in the game and make sure that you're working from that. Now, the investments you go into, I think, need to follow a certain set of criteria, and I walk through it in the book. But the bottom line is, I want you in a diversified portfolio, broad based, that has low fees, low costs, low commissions, no commissions, and gives you liquidity at the same time. Now, if it's in a tax advantaged account, Ira, you know, Roth Ira, things like that, it's. It's liquid as an investment, but it's not liquid as in the sense of you. You'd have to pay penalty in tax if you took it out early. Totally fine. We deal with that as a separate item. But the bottom line is, if I'm pushing the savings and investing rate up in number three, number four is I got to get it on the field. Working for me, the way you do it is you do it by working with index funds or ETF's low cost, low fee. Broad based. Then number five in getting wealthy behaviors is mentors. It's mentors. Or networking could be the. The other. The other way to look at it is, who are you hanging around with and what conversations are you having? I get it. If you're in this journey early and you aren't used to doing this, you're not used to having the conversations, then what we need to do is get in the rooms where the conversations are happening. Get in the rooms where you can ask the questions safely. Get in the rooms where you can have a dialogue and say, what are you doing? Why did you. And what's more important. What's really more important than anything else is not what they are doing, because you can see what Warren Buffett's doing. It's public record for the most part. You can figure it out. You can see what Ray Dalio does. That's not the value. Where the value is, is when you understand how they think. So the reason you get mentoring, the reason you network, is to get behind the thinking, because if I can get behind the thinking, I can then duplicate the results. Otherwise, you're just mechanically moving the chess pieces based on what they did. And if they saw something in the marketplace and you don't know why they made the decision to make the move, you can't duplicate it. So the five things, if you look at get wealthy behaviors, and then we're going to jump to stay wealthy behaviors, you'll see why there's such a difference. Get wealthy behaviors is about income generation, okay. Magnifying and elevating your value, your ability to earn, the solutions that you provide. Number two, elevating your financial education, your financial literacy, getting acclimated to that. Number three, savings and investing rates, pushing those up 20% to 25% based on the wealth priority ladder. And number four, investing. Getting in the game of investing, keeping it simple, low fee, low cost ETF index funds. And the number five, having, having a network of folks or mentors that you can have real conversations with around this stuff. So if that's getting wealthy, what is the stay wealthy behaviors? And let's do that with. We'll do that with a different color, but stay wealthy behaviors. Number one for stay wealthy behavior is, believe it or not, it's asset protection. And this could be, this could be looked at from the perspective of preservation, capital preservation. In fact, I went through this transition a handful of years ago when I got diagnosed with a cancer. I sat with my wealth team. I said, we no longer, the machine is big enough and the machine is going to continue to grow because we've got critical mass and we've got money momentum and the money's working harder for us than we did for it. Just like I'm trying to teach you all, but I was in a transition point in my life because I was getting, I was moving into my sixties. We had the situation with the cancer. We no longer needed to take a bunch of risks. We had well beyond where we needed to be. So now the focus was, how do we make sure we don't lose any assets? Preservation, protection. So when I say preservation and protection, I'm going to preserve it from bad investment decisions. I'm going to preserve it from bad investment advice, but I am also going to protect it from lawsuits, other losses, thievery, those kinds of things. At this point, in the stay wealthy stage, you're focused on protection versus accumulation. It's a very different perspective when you start to get to this stay wealthy behavior. And a lot of people do not make that transition. And in fact, I was having this conversation with someone just yesterday who was talking about, they were talking about their portfolio and how they want to keep it growing. And I said something about, said, as you get older, you're going to need to shift the portfolio. And they say, well, that seems complex. And that seems like I got to figure this out. And I go, but you should be rebalancing your portfolio on a regular basis anyways, because we want to rebalance based on our current risk profile, our needs that are out there and where we are in our stage of life. The kinds of investments you make at 22 aren't the same kinds of investments or portfolio structure that you're doing at 52. And so some of it is built into the portfolio. In building it from that perspective, number two on the stay wealthy behaviors is wealth management. Okay, wealth management. And what I mean by this is now you are looking at this from a perspective of managing the wealth, stewarding the wealth, making sure that the ship doesn't run ashore, and now you're navigating it. It's not like the ship is growing. So I am, I am, I'm doing this now doesn't mean that you do it alone. If you've built, if you built enough wealth, you may have a team like I do that's assisting in it. They're helping us manage the wealth. I'm making the decisions. They're executing a lot of the decisions for us. But at the same time, it's not just investing. A lot of times the mistake that people make is they think, oh, an investment advisor, and you think that the only thing they're doing is picking the etf and the index fund. I got to tell you, that's not, that is the least thing you need them for. But when you start to build substantial wealth, how do you manage it so it continues to grow, it serves your needs, it creates cash flow, and you have the ability to navigate certain things. Like, for instance, as you get older, how are you going to pay for medical insurance and medical costs? What about transitioning with Social Security or Medicare or things like that? What about long term care? What about tax ramifications and tax planning around this? Maybe there's inheritance taxes. There's all these other nuances that come into play as you start to get in this game that your advisors become extremely important to those conversations. And it's well beyond which index fund or ETF to pick. That's the least of the value that they provide, or at least my team provides. They're looking at tax positioning. They're looking at loss harvesting. They're looking at strategies to maximize the returns, minimize the taxes, and maximize the preservation of the assets so we have more for us and more for the future. Okay, this leads to number three, which kind of goes off of, off of this, and that is this tax optimization. And what you have is this idea of, listen, when I was just having a conversation with a good, good friend who has a piece of property that is worth half a million dollars, half a million dollars. The basis in the property is like 25,000. What does, what does that mean? That means that if they sold the property for 500,000 for half a million dollars, they will pay tax on $475,000 of it. Well, just at, just at 20%. And that's. That's$90,000. Plus they have a 10% state. So all of a sudden, they're paying $130,000 in tax. They think, okay, they have, they have a value of half a million, but they have to pay tax on 475. They don't end up with half a million dollars in their pocket. They have to pay 130,000 in taxes. There are ways to adjust for that. There are ways to minimize that. The question is, are you minimizing it at this stage and stay wealthy? We need to start tax optimizing things like, when do I draw out of my retirement account? Because that's going to get hit with big taxes. When do I sell assets or should I sell assets? Because that's going to get hit with taxes. Are there certain things that I should be doing when it comes to gifting things or transferring things to our heirs to avoid certain taxes? Am I going to be subject to a estate tax? Now, most people aren't current under the current law, but the current law is going to sunset. And all of a sudden, if you build enough, you could lose half of what you own to estate tax because some of the estate tax rates in the past have been 50%. So you need to make sure that you're optimizing taxes. It's not something people want to play, want to even talk about. It's like going to the dentist. But it's a necessary evil. If you're trying to preserve your wealth and stay wealthy is not giving a large percentage off to the government where it gets wasted. All right. And then number four, in the stay wealthy behaviors, we want to do something called succession planning. In other words, if we're going to transfer the money machine, if we're going to transfer the money machine, how are we going to transfer to who? Under what criteria? Do I have a trust? Do I have multiple trusts? How do I make sure it's stewarded? Right? Can I control it? Are those things in place? Do you have a succession plan? Now, here's a more important, more important thing around it. Once you believe you have a succession plan, like, I've got a succession plan in place, Stephanie knows what to do, the two phone calls she makes and how everything starts to move around. But the question is, does everyone else that's in the game understand the plan. Do they know the role in the plan? Are you having these conversations, like having the conversation with my son and his wife to say, here's what's coming your way? Now, I know some families say, I don't want to do that. Okay. The problem, and I've seen it more often than not, is that they are then left to their own devices to believe what's coming their way, and when that is not what they end up with. And I have. You have seen family after family where the heirs thought they should get a certain percentage of the assets, and it didn't happen. And now there's a battle between heirs, between family members, rips families apart. I've been an expert witness in multiple cases where I've watched this happen. The best thing to do is to have open, frank conversations with everyone affected by it and say, here's how this is going to work. Jeremy knows. Jeremy knows. If you don't show that you can steward this machine, if you don't earn the right to get the machine, you will not get it. You will not get it. It will not come to you. There is no silver spoon babies in this family tree. It's just not going to happen. So the work ethic, the stewardship ethic, all the get wealthy behaviors and financial education and mentoring, all that stuff has to be in place. Following the recipe of building your money machine to make sure that it is clear. Now, we have a succession plan, okay? And then part of that succession plan is, this is, number five, is philanthropy. This is the time, and we do it throughout our life. But this is the time where we increase our philanthropy. This is the time where we turn around and we say, you know what? I'm going to give a lump sum. God forbid something happens, or I am going to choose to get behind a movement. I know, frankly, that my wife and I will never, ever completely retire. It's just our nature. Now, does that mean we will be earning money? I'll probably continue to speak for a long, long time to come, and I'll continue to write for a long, long time to come. Okay? But the thing that we will not do is find ourselves sitting on the couch, eating bonbons, doing nothing, when we decide we're in our golden years and are retiring. No, we'll get behind things. We might do some service with animals. We might be doing some stuff with domestic violence and abuse, which is something that's near and dear to. So we do some things with youth, and so there is this level of philanthropy that you can increase to because you have a level of wealth. And it's not just about writing a check. It's about having the option to put your time, your effort, your guidance into those processes. So when you look at this get wealthy behaviors, stay wealthy behaviors, state wealthy behaviors are asset protection, wealth management, tax optimization, succession planning, and philanthropy. And there is one thing that crosses both of these lines that you want to have during both of these, okay. And that is this, okay. For both of these, whether it's stay wealthy, get wealthy, you got to have fun. If you're not enjoying the journey, why are you on the journey in the first place? So if you are so, so driven to build wealth, so driven to get wealthy that you are miserable, that you're a miser, that you can't, you're not happy having any joy, that you. I'm not saying not to be frugal and smart. That's part of the process. But this is why I say that you want to find the one to three joy points in your life that during the building process, you're still getting the joy points, that you're still getting the enjoyment out of it. Because if you do not enjoy the path to financial freedom, you will not enjoy the destination of financial freedom. And then on the other side of that, when you get to that stay wealthy time, where you get to those golden years, learning and being able to turn around and transition from. From building and building to actually spending a bit, because that's a hard thing for people to do. They were so long in the building phase and the saving and the investing that the thought of spending is hard for them. We got to enjoy both sides of the equation. The get wealthy journey. The stay wealthy journey. All right. I hope that this helps. I hope this gives you a perspective. It's not that it's harder to stay wealthy. It's that we didn't take the time to build the skill sets, the mindsets, the focus on the stay wealthy behaviors. During the time that we're focused on getting wealthy, getting wealthy is how we're brought up. Trying to earn income and do that. Staying wealthy, we've never really talked about we need to build both, and I think we need to do it at the same time. All right, I hope that you found this of value. If you have any questions, anything comes up for you, do me a favor. Let me know. Reach out to me. I'd love to hear from you. And if you haven't done so already, make sure you grab my book. Okay. Building your morning machine, USA Today bestseller. And this will give you the recipe. It is actually walking through both of these stages, getting wealthy, staying wealthy, helping you build the machine so you can live a wealthy life, that rich life throughout your life and pass it on beyond. All right. Until I get to see you in another episode or on the road as I'm speaking or just on the streets, may always, always strive live a life that outlives you. Thank you for listening to the affluent entrepreneur show. With me, your host, Mel Avenue. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group, and I'll see you there.
