How to build Generational Wealth w/ A. Donahue Baker

are just inherent in somebody else. It's not really about like what you studied in school. It's much more about like who you are as an individual. Are you intellectually curious? Are you um? Do you enjoy learning? It's about different things?

And I guess lastly, do you enjoy helping others? Those are really three points that are you know, inherent to anybody that can make them inefficient or sorry except ventry capitalists because in the day, sourcing is a big piece of finding companies and that means do you get excited

by finding new things? Like? Um, you can see that in any industry you can get except by finding the rare sneaker that you haven't seen him out yet, or that new track on spot By you haven't heard yet that excites people, and finding a new company excites venture capitalists. Um doing diligence, So, you know, diving deep forgot you know, what does company do? What space they in? How can

this company get very, very large? That's just learning. If you enjoy learning, you'll enjoy diving deep on a company, understand how it works or the industry that operates in. And lastly, you know, when you're on a board of company or an investor, you're trying to do everything possible to help that company. You know, try to get me as many unfair banages as possible that the founder has less on their play, and they too in their play.

That's all that is really is helping you. So if you enjoy helping you, well, that's a great way to kind of manifest that inherent trade yours to, you know, do good for a company. I'm Will Lucas, Mrs Black Tech your Money. I want to introduce you to some of the biggest names, some of the brightest minds and brilliant ideas. I feel black and building or simply using

tech to secure your back. This podcast is for you, Hey, dommin You bankers co founder and CEO of money Avenue, which provides funding across a variety of products like residential home loans, investment property loans, business loans and lines of credit, and personal finance solutions. An emerging fintech company, they were ranked as one of the fastest growing companies in America by INC Magazine. We talk a lot about generational wealth in our community, but do all the people who talk

about it really know what it is? Is it a dollar amount? How do I know if I've hit it? Or is it a system? So one of the things that that's that's a great question, But one of the misconceptions is generational wealth is just simply making sacrifices in your own personal life that will benefit the next generation. Right, Um, I'll tell you exactly what I did in my family. So I have a three year old son. His name

is Legacy. But when he was two years old, I basically threw a trust was able to purchase six unior department building in North New Jersey. That apartment building is fully paid for and it's gonna do two big things for him. Number one, it's gonna pay for its college education completely at the time when he's ready to go

to college. But number two, let's say he doesn't want to go to college or chooses not to go to college, he's gonna have a monthly income that he can use to subsidize his living expenses or pursue whatever endeavors, whatever has God given talents applied for it. So that's a sacrifice that I made that I can pass on to the next generation and hopefully he does the same. And that's generational wealth. And it doesn't take a whole bunch of money to do it. It really just takes a plan.

So if I say I've built generational wealth, like at what number have I built generational wealth? Or is it an an actual number depending on my circumstances or is it a system. It's a system. It's really a system. So you know, taking taking my son, right it so, uh, he's six unit apartment building in North New Jersey. Each unit gets about fifteen hundred dollars per month, right and inflation and that's rents that haven't been raised through COVID.

Rents are going up. But by the time he's eighteen years old, rents are gonna be even you know, higher than what they are now for sure, right not to mention the inflationary effects that's gonna take place. So it's a system that can be passed on. And that system really is done really only through two ways. Right. The first way that we just spoke about is real estate. That's one way. But also, uh, being an entrepreneur setting up a business doing something like that's that's a that's

another system that we need more of. We need more creators, we need more entrepreneurs, and that's what we try to do it money. Yeah, focus on those two paths, the real estate path and the entrepreneurship path. So when I first started getting like super serious about my financials some years ago, you know, and especially like being a husband and being a father, you know, I started you know, asking people who do this, you know, how about how

they do. And often you hear wealthy people talk about things like insurance and life insurance specifically, and you know, how most of us get introduced to insurance is like car insurance, and but there's you know, life insurance has like funding mechanisms to where you can actually use that

money to do things. And I'm interested in your take on you know, so often we have these conversations about how to fund our business ideas and and get companies going in our community, and you know another communities they can talk about. You know, where you can go raise forty five now is from you know, friends and family and and I don't know where you come from, but I don't know a lot of people with families that can write, you know, those thousands and thousands of dollar checks.

And so I wonder what your thoughts are on what are some less thought about sources of funding to start businesses that we may not consider often. Well. One of the ways that we really like to show creators how to fully become entrepreneurs and establishing businesses is leveraging their business credit. That's one of the ways that really underutilized. Right. So the example that I give is taking our our as president Donald Trump. So Donald Trump has over five

hundred LLC's. One of the things that people do not realize is that in Donald Trump filed for bankruptcy. Uh he actually filed for banksy twice that we know of, the ninety two and ninety one. The same week that he did both bankruptcy filings, he established four new LLCs and leverage the business credit of those LLCs the same week heep filed from bankruptcy. Right. So the point that I'm trying to make with that is that a lot of people don't really understand the power of the LLC.

And when you understand the power of the LLC, that as a separate legal entity, you're able to leverage the business credit of that LLC. So what we do is we help people to set up LLCs and do just that leverage their business credit. So for every LLC that you have, we basically help you get at least five thousand dollars of business credit that is not attached to your personal credit profile. Because most entrepreneurs the first thing

they do is they leverage their personal credit. And we know that nine of businesses fail and that leads you in a worst state than before. So going back to the analogy, we just follow the same thing, the same path that Donald Trump has done. You know, we can also emulate a lot of those business practices, and I think that's gonna encourage more creators to really walk to entrepreneurship path, to take more risk start businesses, at least

use the fifty dollars to prove the concept of the business. Right, that's really the key. Yeah, it's so interesting you say that because you know, for whatever you think about like Donald Trump and how he was as president, like he used the system that the United States has to his advantage.

You know, whether that be you know, you think you're talking about companies like Amazon and Apple and others who you hear these stories about how they pay little to know taxes and you know, whatever Donald Trump did and whatever he paid or didn't pay in taxes and then using the advantages of ll c s or whatever. Um, you know, he used the system that we have in

the United States to his benefit. And you know, our thing is like we wanted to make sure that people are knowledgeable to use the system to to their benefit because our country is set up for business. And so what do you say to that? You know, when you're when you're trying to get people to reframe in their mind, um, what they think about income and taxes and investments. No, absolutely, um.

And one of the things almost with c p A, but one of the things that I've tried to build into our system is how do we really put ourselves to follow the best possible tax strategy? So, um, if you're not if you're not either a landowner which is richest real estate, or an entrepreneur. The system is not set up for you, right. The system is really set up to benefit those that own business owners. So you think about small business and big business. Amazon can make

a billion dollars and pay note net taxes. Right. It's because the system, the i r S, the i r S code gives tremendous benefits for entrepreneurs and creators. Right. And also people that own real estate, they're the ones that really are can structure their path so that they have the minimal tax hit as possible. Right. So I'm in real estate myself. I'm a real estate developer. I

own over five hundred units. I've reached a position that's called well, it's a classification, it's called real estate professional. Once you get to that level, a hundred percent of your expenses can be written off. Right. And and most people, to me, that's the nirvana of of tax strategy, because whatever I do, it's you know what, my whole lifestyle is structured around tax seables and whatever whatever expenses I get this offset against earned income, the rental income that

comes in through my units. As a landlord. You know, I don't necessarily get taxed the same way that someone with W two income is taxed. So yeah, we gotta go in here because when I learned that employees pay taxes first and business owners pay taxes on what's left over, Like, the whole game changed for me because you know, like, yes, it's when you're an employee and you work for somebody and you get that check on Friday. Yes, it's a great day on Friday. But the government Uncle Sam already

then took his out. You know, when I get paid or when you get paid a Donnie Hugh like you get you get the whole check, and then you gotta figure out, Okay, what am I gonna spend this on so that at the end of it I get the full benefit of it and I don't. Then I'm gonna pay Uncle Sam on whatever have left over after I've

squeezed out as much as I legally care. Well, you you hit the nail right on that head with everything you just said, So I know, I know for uh, for example, you know you and one of the things that we do it in money apps give people the paradigm, right, but you you hit the nail on the head. So let me address for those individuals that are listening out there, how to really structure your business so that you have the minimum tax the minimum tax hit right. So number one,

you need a bank account. Whenever you get a check. You should have a business whatever, whatever line of work that your in, start up nonstartup, technology, non technology, you should have a business account. Right now, money app we have free business accounts you can set up it. Really we're trying to disrupt the typical banks. You can set up a business banking account, but your check should come into that account, right, and then from that account you

should have separately a personal bank account. So you have a business account, pay yourself first, personal put that from the business. The check comes into the business account. Then you pay the personal account. But also you should have a business tax account, right. You also should have a business operating account. It's important to separate these funnels of cash flow number one, so you can make it easier for your tax professional to do your taxes at the

end of the year. But also this is the savings. Right. So let's say you get a check for ten thousand dollars goes into your business account. Normally putt of that, so three thousand goes into your tax account. Let's say you want you want to pay yourself, um, you know, ten fient whatever you need to live on. Two thousand goes into the personal account me personally, every LLC that I have. I also have an operating account, right, so I can track my my income, my my who am

I paying? So I'm paying my bills on top my operating accounts account that I use day to day, and I can follow that leedsure and I can see, well this, you know, this is a vendor here. I don't know. I didn't pay that vendor. I can track fraud things like that, you know. So that's the structure, right. So basically, just in any any basic business, that's four accounts that I just mentioned, you should have the business account, which really shouldn't be forward facing. It should be a business

that no one can sue. It could be a holding company, something that only you would know, and then pass when that when that check comes into that, we pass it to the personal account. We pay ourselves, right, then we pass it to a tax accounts when never and a lot of businesses pay on a quarterly basis, but we want to make sure that we fund that tax account so that we're not scrambling at the end of the year to pay a big tax bill. But if you do it right, it the way I said it, you're

operating account. Hand that operating account over to your c p A or your tax professional, and they're gonna have an itemized list what you spend on and what can be deducted from the tax liability that you created each quarter. So if I didn't get to a depth, but that's that's the that's the that's the formula, you know. So there's so much here, so many different lanes we can go in. And I understand this is a podcast and not everything. We won't be able to go like super

duper deep on every topic. So's it's so important that you know our audience UM is number one subscribe to the podcast, but number one following you so that they can go deeper on the topics that you're talking about. And so I will switch scares it a little bit because I'm interested in your conversation on you know, when I learned this principle, UM, it was later than I wish I would have learned it, but I did learn it, and some people still haven't learned it. So you're gonna

learn it. Today, um this concept about reinvesting the profits, because you know what happens too often in our businesses is we will start a business. We will start a company and start you know, making some money, make some check, whether we're working a day job. And then when now we got this side hustle, we make money on that side household, make money on at you know, ten PM two a m business. And then we get that check and now we go spend it because we got money

that we didn't have before. So now all of a sudden were buying advertisers. We didn't use to buy appetizers. You know, we went out to eat. All of a sudden you put in cheese on it. And so I wonder what is your take on this? This way of thinking, like every dollar you can afford to put back in the business helps you to grow the business and instead make sure that you are not um taking the money

out when you should be. If you if you bought it for five dollars and you sold it for ten, put the five that you originally put in, put it back in, and then put the extra five that you earned, and now you've got ten dollars invested instead of five dollars invested and you can continue to grow and scale your business that way. That's super important really, and just as founders or entrepreneurs, we have to take the position that you know, every dollar that you pull out of

your business, you're actually hurting your business. So you want more and more dollars to be in your business so that you could multiply them as fast as possible. Right, you want to get the maximum amount of r o Y business or entrepreneurship. It's better than and wealthy know this. They would rather not have money just sitting in the

bank account. You want that money to be working for you and when you pull it out, like if you have a business describing that means you're probably getting a great r o Y on your money, better than you can get in the stock market, better than you can get by by investing in even you know, uh, aftermarket stocks. It's just a tremendous Entrepreneurship is the number one return, the number one r o Y that you're gonna get on your investment. You do not want to put pull

money out of that. So that's what I tell my clients, and and and really at money you have, we want to help more creators understand that metric. That's one of the key metrics that are out there. So what we do is, let's say, after you've proven the concept of your business, one of the key things that you have to do is scale and you need capital to scale. But the best thing to do is have capital that

is generated from your business. But most businesses that are that have the ability to have high growth, they need external investment. They need people from the outside to invest in them. That's that's one thing that we do that other financial institutions don't do. Businesses that are high growth, we get funding for you in terms of VC funding where we have the Angel Syndicate in which we will invest below two hundred and fifty thousand and businesses that

can scale, But it's the same process. You would much rather um get the money that you need to scale and grow from the business itself. But most businesses, definitely the scale on a large level, need that external investment and we want to show people how to how to do it the best way possible. So what you just said was so important, And and here's what I hear.

And when you when you talk about you know, having money sitting what I hear is what I hear is there is a such thing as having too much cash in the pain. There's the such thing as being too liquid. And when you think about um, because I mean all of us, you know, any of us would love to you know, see that statement. A lot of zeros, a lot of money sitting over there. And but that money is slowly dying number one. But it's stagnant at best.

But it's slowly dying because of inflation and things like that. UM in in the reality of things, and so there is a such thing with as much as you love to see a lot of money sitting in your bank account, there is a such thing as having too much cash in the bank. So what do we do when we have um? Well, actually, at what point should we think, Hey, I got too much on you over here, I need to do something with it. And then what should I

do with it to make sure it's working for me? Really, when you have cash sitting in an account that you can find a better use for it, that is safe. Right, So in my particular business, that operating account on a monthly basis, UM, and one of my projects, I may have a need for dollars. If let's say I'm I'm something great, I sold the asset. I have a big check coming in. I don't need a hundred two hundred three hundred thousand sitting in an account, right, That's just

too much. That's that's being too liquid, right, unless I'm saving up for another move or another acquisition. But you want to you want to have enough cash that you can at least be operational for two to three months and then beyond all that. I think that you're at this threshold where you're not optimizing your cash value. So what I tell people to do, Number one is um once you understand the highest and best use of your r o Y, right, whether it's in your business or

whether it's investing in other businesses. We have. We have r o Y and our business, but one of the great things that we like to do is invest in other business EXX capitals. We like to see those the new up and coming businesses that are on the horizon. How can we put a hundred thousand uh in in in their system to give them a greater r r o I which is gonna allow us to grow even more. Right, So it's really looking for those opportunities where you can

get excess cash and put that cash to work. The wealthy do not have a whole bunch of cash sitting in a bank account, So we definitely don't want to do that. The reason why is very simple. When you have money sitting in a bank account, especially now that we just had a two trillion dollar stimulus that the stimmies that went out. Everyone's talking about the stimmies, but you know, the deflation, every effect of that is significant.

So just having money sitting in an account, you're gonna be able to buy less and less for your dollar. And this is what's gonna happen going into the future. Um, we know that taxes are going to go up, the cost of living is going up in most cities in the US. So it's just something to be super cognizant of, if you know, if you if you're financially literate. So I want to translate what I hear you say, and you can correct me if I've gotten any of this wrong.

But I want to be sure that we understand what you're advising here. So you're saying, you know, if I have you know, two to three months UM worth of runway sitting in the bank account, that way I can cover any you know, household operational expenses or business expenses to just make sure my life is good, you know, two to three months out at all times. UM, then that's enough money, you know, in the general sense to

UM just have sitting in the bank account. But far above that, I should probably be thinking about safe ways to put that money to work so that UM is not again, you know, slowly dying in a bank account, or you know, at best just being stagnant and not you know, generating any real returns. Absolutely well, you hit

the nail on the head one of the things. And I'll tell you what we're really big into right now is the defile space that we're working on a number of different protocols that's going to allow people to get an incredible return compared to the bank. Right we know that the bank doesn't pay a great amount of interests UM. If you get one percent, you're super lucky. But we're looking through defile. We're UM and developing smart chaing UM,

developing smart contracts on the blockchain. We're gonna be able to get people a higher rate of return for their interests. For those people that are closer to retirement that don't want to take as much risk, we have a low risk uh vehicle that's coming up and you know, we'll stay tuned for that too. But I'm excited about it. But that's exactly when you have excess cash you can do. You need to think of things like that and and that's being an innovator. That's what we're looking to do,

is is innovator. So this is a live conversation. We're having a lunch table shout to everybody watching on lunch table in or Facebook Live. And we do have a conversation. A question I'm sorry that came in on Facebook and it asks what industries are most primed to take advantage of for new enterprise. If I wanted to start a business and I don't know where I should be looking for a lot of fresh opportunity, where should I be looking any business? First of all, if you have a

business and you do not have the technology business. One of the things about Afro Texts is that you know, our community, we're so creative, right. So one of the things that I love doing is talking to entrepreneurs and and just telling them, you know, they're getting them to think global instead of thinking locally. Like you may have

a regional business, but in this day and age. If you do not have a technology business, a busines is that scalable a business that you can create a business model in one city, let's say New York, and scale that out to the rest of the country or possibly the globe. You're in a business that's gonna lose eventually because um, the way that we're positioning. If you if you don't have that component, you don't have that technology component, you're gonna it's gonna be big fish eat little fish.

And what's going on right now in this country is there we're experiencing one of the greatest procedures or processes of wealth creation. What's happening in Silicon Valley is you know, do you have people that are coming from the ideation stage just that just having an idea and in three, four or five years they're becoming billionaires, right And it's just that many of them have executable ideas. For many of them, depending on the circles, just ideas are getting

funded and that's creating these huge valuations. And we need to the Afro Tech Fair and everyone else and our two community, they need to tap into that. And that's what we want to do. Provide access to capital, helping them get there, bringing them through the different stages. UM. You know that that's that's key, that's part of our mission and our core values. We got another one in from Facebook and it says, what about retirement accounts for

entrepreneurs or employees with no four oh one K? It seems as if you're without a four oh one K, you're screwed in terms of the limited amount you can fund an i ra A. That is true. So you know, many people that are a lot more mature, older sixty years old, you know, looking at retirement right now, are looking for these vehicles that they can get in and get a less risk averse return right something that basically allows them to just get income to live off of.

I love the defied space, and that's what we're gonna go in through you. I know you wanted to talk

about crypto. I just think that the space is changing so many different It's going so fast that from the first introduction of bitcoin in in two thousand and nine to where we are now, we're at a point in time where it's mature enough where I think that those going into retirement that that can um maybe have a small full one K, can sit back and possibly get somewhere between ten percent of low risk return, and a

lot of people can live off that. You know, you take your I RA, or you take the house, or you take a second home that you probably can't rent and get a decent I R O ion and convert that into these low risk, high yield investments and you can you can walk right into retirement comfortably. So I'm excited about that space. It's still early, there's more developments coming on, but I guarantee you in the next year

we're gonna see some incredible products on the marketplace. So you mentioned something earlier I wanted to make sure I came back to, and that is about crypto, and I wanted to make sure we got into this, particularly because you're a c p A and you're deep into educating our community on you know, opportunities for for wealth generation, and so I want to talk about you know, so for folks who are listening to this and they are new to the conversation of crypto, they may have heard

about it here a lot about it probably but still don't really understand, um what it is, how to get involved safely, and um perhaps still have a lot of skepticism about crypto, Um, if you could as best you can give kind of like a you know, a mini one oh one for folks who are layman and they're not super sophisticated with regards to cryptocurrency, not just Bitcoin, but also like lightcoin, foul coin, um, you know, ethereum, things like that. How what should we understand before we

get in, you know, too deep? What should we understand about what cryptocurrency is and what should we just in general, whether or not we're going to invest, How should we understand what cryptocurrency means to the future of wealth creation and transactions? Period? Absolutely so, Um, crypto is just another asset class, right, So a lot of people, a lot of people hit me, be like, I don't like bitcoin the or theorem or you know these other coins because I can't spend it. I can't go into a store

and spending. That's the total wrong way to look at it. Um. You need to look at it the same way you would look at any other stock. It's just the asset class or golds. Um, it's really a hedge against inflation, right and uh, it's a it's an asset class that is potentially on the precipice of disrupting all all economies as we know it, right, So we don't. It's it's you know, you can take bitcoin, which is you know,

I'm not a huge investor in bitcoin. I like uh theoryum mainly because there's application to it, right there's it's linked to a blockchain that has open source coding and allows for a number of derivative products that going into this next year, you're gonna see everything about to be tokenized. So for the lay person, I think that it's important to day if you're not into bitcoin, please don't be

disillusion and stop there. Dive a little deeper and look at some of these other currencies that are out there. And I don't know why we call them currencies, they're just different asset classes that if you find something that's interesting to you, dig a little deeper. There's lots of scams out there too, and people create these coins and then over and you know, overnight, something that happens um and and and you know, we've seen that, so we

wanna we want to avoid that. But I want people to realize that is an other source of wealth creation. So do some do some research into it? All right, So somebody in the chat I wants you to define because you said this word a few times, defy if

you can define defy for our listening audience. But I'm also gonna add some things to that UM, because I want to understand and I want to make sure our audience understands, like the potential tax implications of UM realizing and upside with regards to crypto So if I put in, you know, a thousand dollars in bitcoin last year and I don't know what is whatever is up to now, let's say let's say forty dollars and UM, so I've had some gains perhaps, UM, what are the tax and

what are the tax implications of when I go to withdraw that money? What does it mean? Like? How how do I know what I'm supposed to pay in taxes? Do I have to pay taxes at all? Is this something I can just you know, keep it moving, know it explain to us the tax implications of realizing and upside with regards to cryptocurrency investments. Yep, I do it real quick. First of all, we'll start with defied. DeFi

is just short for decentralized finance. Basically, it's it's a system that is gonna revolutionize finance as we know it. How you borrow, how you lend um, how you get derivative products. All of that is in the ecosystem of defies. Basically a way in which you can get a contract we call smart contracts with someone that's on the blockchain, so that allows you to to The blockchain is just a ledger of transaction that's on a bunch of it.

It's it's decentralized, so it's on a bunch of computers, meaning that whatever should something happen to one computer, you're able to see this record and everyone is able to verify it. So that's that's it in a nutshell. Now, as far as the tax implications of investing in cryptocurrencies, my strategy is if you have UH, if you hold, if you have a holding for greater than one year,

you get taxed less. You get taxed at a lower rate than if you have a lot of people are in and out of cryptos right, so if you're in for less than a year, you get taxed at your normal tax rate, which tends to be a lot higher. But if you hold it for greater than a year, you're taxed at the capital gains tax rate. Which is a lot lower right, and then the new Biden administration, he's trying to rage it a little bit. I'm not a fan of it. I don't think it's gonna pass

um Congress. But ultimately I think that um, that's the way you want to think about crypto. You want to think about it as a long term gain. And then going back to what we said before, how you structure

your accounts. If you purchase crypto under a business and you know it's set up the right way, you can also the gains can be offset by a lot of other things that you're doing right, a lot of operational expenses or other losses, because if you're investment, just like you're in the stock market, some years you may take a loss and you can write that off if if

you know, if you have that long term perspective. Black Tech Green Money is a production to Black of the Afro Tech on the Black Effect podcast Network and Ihearted Media. Is produced by Morgan Dubon and me Well Lucas, with additional production supported by Love Beach and Marissa Lewis. Special thank you to Michael Davis since the cars of on Yon you know, like the wine. Yes, that's his real name.

Learn more about my guess and other tech that drop is the innovators at afro tech dot com and the video version of this episode would drop the Black Tech Green Money on YouTube next week, so tap in. Enjoying Black Tech Green Money, leave us a firestar rating on iTunes. Gonna get your money, Peace and love the