All right. Financial freedom. It is the thing that so many people talk about, that are dreaming about, and I actually think it's within grasp. I get it. You might be sitting back and saying, my circumstances don't allow for it. My, I was born on the wrong side of the tracks, or I have a lot of debt. That's okay. That's okay. The key is that we get you on the path to financial freedom, and we get you to understand the things that start to drive freedom in your life. The freedom
of choice, the ability to do some things. This is the thing that came for me, is that I learned about this, or this was highlighted for me at the hands of a six year old. I remember as I was building my business as an entrepreneur, I was working like I was supposed to do, like everyone told me to do. I was on the treadmill. I was running, running, running. I was getting clients. I was speaking, I was consulting. I had projects. We were getting money coming
in, things were going well. And he comes running into me and he says, daddy, daddy, I drew a picture of you at school today, and I kneeled down thinking that I'm going to see a picture of us playing ball, having fun, you know, traveling, doing the things. The note was a picture of me with a phone in each ear and one on the desk, ringing in front of two computer screensh. And in a moment, a six year old boy taught me one of the biggest lessons I could learn about life, about
money, about entrepreneurship. It's what began my obsession to understand what does it take to live a life that's free? Because here's what I knew in that moment. I knew that as long as I stayed on that treadmill, I would be beholden to the treadmill. You might be feeling that, too. You might be sitting back and saying, I'm beholden to my job. And I get it. We have to pay bills. I had to pay bills, and so I had to work. I had to be on that treadmill. But the
question isn't about staying on the treadmill. The question is what the treadmill is giving you. This is where I look at this idea. This is what was the birth of the money machine. What I talk about in my book, and all of my training is to help you, whether you're an entrepreneur or a wage earner, to help you navigate building your own money machine. Because here's what I knew
in that moment. I said, until I have the opportunity to separate my earnings from the efforts to earn it, I will always be beholden to the treadmill. Okay? And that is what I strive to do, is to sit back and say, how do I separate my earnings from the efforts to earn it? And that's what rich people do. That's when you talk about financial freedom, that's ultimately what you're doing, is that you're separating the efforts to earn the money from the earnings themselves. And when you
do that, you get to live a life by choice. And so when we start to look at it through those eyes, you start to see a common thread for all the people that are out there that you see and say, God, they're free, they're rich, they're doing well. They get to have a choice in their life. Why? And I think that it's because they have nine of these assets, these nine assets that most people
focus on when they're trying to be rich. Now, it doesn't mean you have all nine of them, but these are the assets that will give you freedom back, that separates your earnings from your efforts. All right. All right, let's go back to the show now. Let's talk about the nine assets that make people rich, that give them the freedom in their life. And so let's talk about them one at a time. Let's jump to here. The first one, okay, is gonna be surprising. Maybe, maybe not
cash. Okay? Cash. The first asset is cash. Most rich people that are doing it right will have cash. They have cash for liquidity. They have cash for safety. They have cash for opportunities. We talk about it in the wealth priority letter in chapter twelve in the book, where we are trying to build what I call an unshakable foundation. And part of that unshakable foundation is to avoid
destructive debt. I while at the same time building liquidity, cash in right now in a high yield savings account, maybe a cd ladder or something like that. But it gives you liquidity if you have an employment separation that lasts a long time, or maybe you have a health issue, like I did. How do you navigate that? Because if we don't have liquidity to carry us during a downturn, then the only option we have is to go into debt, which buries us in a hole.
So most of the rich people will have a store of cash for emergencies, but they also have a store of cash for opportunities. Because when there's volatility in the stock market or when there's a downturn in real estate or something like that, that means that there's opportunities. Things are on sale. In fact, we recently had an 1100 point drop in one day in the stock market. What did I do? I took some of the cash I had, talked to my team. I said, go invest it. And we jumped in and it went back
up and we picked up that piece. So what I want to do is make sure that you have cash on the side for liquidity and for opportunity. So that's the first asset that they invest in. The second asset that they invest in is bonds. And these could be government bonds or corporate bonds. Okay, now, what is a bond? Okay. A bond is loaning money to the government, if you will, or to a corporation. Say it's Google or something like that. You invest for a period of time into a bond, and they're going to
pay you interest on the bond for a period of time. The bond will mature. Maybe it's a year, ten years, five years, sometimes even longer. But the bottom line is that there's a term to the bond, just like there's a term to the loan. So that means that during that term, they're paying you interest, and at the end of the term, the maturity, they'll pay you that money back. Now, that doesn't mean it's very. It's no risk. There is
risk involved. Now, most of the government bonds are backed by the government, so they're very much lower risk. And that also means that there's a little bit. There are lower interest rates, lower returns on them because they're low risk. There's also, some of them might have some specific tax advantages if they're municipal bonds or fed bonds and things like that. So you have
that. Now, corporate bonds, on the other hand, they can go from aaa rated, really good quality bonds to what they call junk bonds. So you got to be careful as to what you're getting into. Many, many rich people will have a bond portfolio that's producing income on a regular basis in the form of interest payments to allow them to live and allow them to pay their bills, which I have a client, actually, that has a bond ladder. So
they live off the interest payments from all the different bonds. And then one bond will mature once every year or every other year, and they'll roll it over and they'll use that to live on at the same time. So bonds is one of the other assets. But the next asset that we see people own here is stocks. Now, stocks are effectively owning interests in publicly traded companies. When you buy a stock, you're basically buying a piece of a company. When I buy Apple, I own a piece of apple. Okay. Google
B of A, I own. I own. When I buy a share of stock. I'm an owner of it now. I don't own enough to control anything, to have a say, to have a voice, to walk into the store and say, I own your stock, apple, give me a discount. None of that stuff. Okay. But here's what happens with company stocks. What causes the stock price to go up and down? What does it do? What causes the. Why do we invest in it? We get into a company that we think is going to grow.
It's performing. Its profits are going up. Its sales are going up. What. And that makes it more in demand, and that drives the price up. So as the profits are growing and the sales are growing and the company's growing, the stock price goes up, our wealth goes up. Now, some companies will just reinvest all the profits into the company growth. Other companies will pay some of it out in the form of what we call dividends to the shareholders to give a piece of the profits back to the
shareholders. But the bottom line is that those people that are wealthy and rich will invest in stocks, and they will use the stock portfolio to generate dividends on one side, or they'll take a loan against it, like Elon Musk has done, or they'll sell the stock. But either way, what's happening is they're getting stock that appreciates. Just so I'm clear, I do not recommend people go into individual stocks when they're first starting out. I think that they're too risky. I think
you're too exposed. I think that it's hard to judge that. You could get a stock that goes rockets to the moon. You could also get a stock that goes to the core of the earth. There was a person that posted in a Reddit post in Wall street bets. It's horrible. But he invested $250,000 in First Republic bank, and when it was about $200 a share, it dropped to about $100 a share. And he posted in there saying, I lost 50% of my investment. What should I do? First
things first. You don't ask a forum what to do. You do analysis. You have principles. You follow someone that. That understands and is doing. You don't just ask a bunch of people that you don't even know to get advice. Well, I watched it. Then a week later, it's down at 40, $30 a share. He says, oh, my God, it's down here. Now. I don't. What do I do? And then there was a sentence in there that said, by the way,
this is everything I had. This guy took $250,000 of his hard earned money, put it into a single stock, thinking it was going to go to the moon, and First Republic bank ended up bankrupt. Now, I don't know if he got out, but even if he got out, he got hurt really badly. It's the reason that I sit back and say, do not at the beginning invest in individual stocks. It's too risky. I want you, at the very beginning, I want you to build a foundation, unshakable foundation of safety,
and a place where you can grow from. That means that I'm going to have liquidity. I'm going to have diversification in the portfolio. Which leads me to the fourth asset that these folks will invest in. And that asset is mutual funds, or more appropriately, index or ETF's. Now, they're very, very similar in characteristics, with some nuances there. I don't do a lot of investing in mutual funds, primarily because the cost structure and expense structure is much higher. And two, I don't like the
statistics on actively traded mutual funds. Long term, they never beat the market. So most of my investing, my clients investing is through index funds and ETF's that follow a market index because it's easier. Now, mind you, if I was going to invest in meta today, it's going to cost me. I'm looking at it, I'm looking at it. It's $512, no, $526 a share today. If I had $2,000 to invest, I'm going to get three and some change shares, three and a quarter shares or so
of meta for $2,000. If meta drops or goes up, I'm beholden to it. I could be like the guy with First Republic Bank. I don't like that. But what if I had the $2,000 and I invested into an ETF that had meta as one of the holdings, but it also had 300 other companies in there. Okay, that means that if one goes bad, I don't go bad with it. It doesn't hurt as badly. I've got the power of diversification to reduce my risk. I have the power of liquidity in an
ETF fund. I have the power of low cost, low fees in doing that. And so what ends up happening with this is that I end up owning these ETF's that have a basket of stocks to do that. So that's asset number four. Asset number five is real estate. Now, I love real estate. I just don't like it. At the very beginning of your investing journey, here's why this is similar to the stocks. First is going to get me, it's going to cost me where
to get into the real estate. Okay, so in order to get a piece of property, it might cost me 10,000, 20,000, 50,000, depending on the location. Let's say it costs me $20,000 as a down payment to get into a property. It's probably more than that. And then I take on a loan, and I buy a piece of property. The problem is, that's probably all the money I had, and all I have is one asset.
One asset. I have no diversification. Just like if I bought a single stock, I have no diversification, and I probably have no liquidity if I didn't do it. Right. So what happens if I purchase a piece of real estate and I can't get a tenant in it, so it's vacant for a while, I have to carry the loan. How do I pay for it? What happens if I have a tenant in there, but the tenant decides I don't want to pay, and I got to get the
tenant out? Heck, in California, a tenant could be in a property for two years not paying if they play the game right. So it's not a fun game. And now you gotta carry that, and you can't not pay the mortgage. You got to continue to pay the mortgage. How do you support it when you don't have the renting coming in? Or what happens if. And this happened to a friend of mine. If you buy a property and you find that there is a repair that
you didn't plan for. In fact, what happened was someone came in, they were going to do some work on the roof, and they found out that the roof had asbestos in it. And because it has asbestos in it, they had to remove all of the tenants from the building, spend $150,000 to remediate the asbestos, then do the repair work, and then get it re rented. And during that whole time, they had to carry it, plus carry the expenses of the
repairs. Not a good game to play. And so I'm not a fan of real estate at the beginning for that, but once you have. Once you have critical mass, I'm GAme. I'm game, because here's why I think real estate so powerful, real estate is one of the only investments that has a four prong benefit. OkAy? The first prong is this. You buy real estate, you put a tenant in there, and there's equity buildup. What do I mean by that? Say I buy a property for $200,000, and I put a loan against it
for 160,000. So I put 20% down. I have $160,000 loan. I have a tenant in there that pays rent, and that rent pays the loan down, even if the property stays at $200,000. Even if it stays at $200,000, the loan is getting paid down. So now the loans at $150,000. So I have a property that's 200,000, a loan now at $150,000. That started at 160. I gained $10,000 in equity buildup at the hands of my tenant. So the first pronged benefit is equity buildup. The second prong
benefit is appreciation. That's when the $200,000 property now becomes 225,000. So now I have $25,000 and an increase in value, and the equity build on the debt paydown. So I got a bigger. A bigger gain in there. That's number two. Number three is tax write off. You get a tax shield with real estate in the form of depreciation and accelerated depreciation if you do a cost segregation study, those kinds of things that come into play. So you get a tax shield along
with it. So that's the third prong, and the fourth prong is cash flow in the form of rents. And when we get the property right and we buy the property right, we have cash flow that's coming out of it, that's paying all the bills and giving us a little bit of cash on the side. Plus, we have the equity buildup, we have the tax write off, and we have appreciation. It's a wonderful investment,
but you got to buy it right. You got to do it in a way that doesn't get you in trouble, especially at the beginning of your financial and wealth journey. And this is the way that I look at it. So that's number five. Number six is commodities, commodities, or it could be precious metals. Now, most of these, they don't pay dividends, so you don't have a cash flow from it, but you will buy and sell
them based upon gains and losses. And so it's just another investment vehicle that some of the rich people will invest in to build wealth. And it, in often cases, it's counter to the market. So it's a ballast, if the market's going down, to have some of these other core products or commodities or precious metals to help out. I don't do a ton of precious metals or commodities investing. I have some through an ETF, but that's about it. But that is one of the assets
that. That people will invest in to build wealth and give them the freedom of choice. In their life. All right? That leads me to number seven. Number seven is collectibles. I don't do any of this, all right? Although my wife thinks that I collect technology, which is probably true, and t shirts, but this could be artwork, this could be cars. This could be things that are vintage or collectible that have value, and the value
goes up, and I don't do a lot of that. But there are a lot of people that will have collections of collectibles that they will buy and sell that will give them the cash to be able to have the choice to do things differently. Now, then, number eight is actually equipment. So it could be like, I have a client that owns a bunch of jibs, okay? These are the big arms that they put the cameras on. They get these epic sweeping shots of audiences or action
scenes and things like that, and he just rents those. I have another client that rents transportation equipment and trailers to the movie industry. So, is there equipment that you could buy and rent that allow you to create a cash flow stream without you having to do a lot of work for it? And so this is. This is something that a lot of people will do. Now, number nine, this is. This is the last one, but I have a bonus one for you, too. Okay? Nine is intellectual property,
IP development. And this, y'all, this is something we actually take for granted. I. It is probably the highest value of some of these assets, if done right. This is patents, copyrights, trademarks and things like that. This is where you can license it. You see this in songwriting and movies and logos and formulas and things like that. White labeling things to people where you're licensing and getting paid for it on an ongoing basis. There's a name out there that
I'm sure you probably don't know. His name is Michael Buffer. Michael Buffer. You probably won't. Don't know the name. You probably won't even know the face, but you sure as heck will know the voice and the words. He is the boxing announcer that came up with the phrase let's get ready to rumble, and he copy wrote that phrase. He trademarked that phrase. And do you know, since he trademarked that phrase, he has made over $400 million in royalties for the use of that phrase?
Okay? So there is ip all around us if we're careful about doing it and put it out there in a way that we can get paid the royalties for it? All right, now, I said I had a bonus one for you. This is the last one, and I think this is the biggest one of all. Number ten is the bonus. And that is you, the rich people in you that they have to invest in themselves. They had
to grow. They had to get into training and courses and skill up to put themselves in a position where they have more value in the marketplace to be able to get paid more, to allow them to invest more. So the question would be, where can you invest in yourself to make you more valuable? From a skill set, a knowledge set, a relationship set in the marketplace that can pay dividends over the long term. So these are the nine assets that make people rich, plus a bonus
number ten, which is all about you. Here's the key to all of this. I don't need you to go through all of these and say, I got to get all these things. No, you just got to get one, two, maybe three of them working. Keep it very, very simple, and only get involved in the things you understand. And if you don't understand, this is where you invest in yourself. If you don't understand stock investing, if you don't understand
real estate investing, you got to get in the course. If you don't understand stock investing, grab my investing simplified course. Okay? Go through it. I break it down for you. I show you exactly what I'm doing, what I'm looking at. I give you cheat sheets. I give you all of that. Just go through it. Bottom line is this. You keep your investing simple. You keep yourself consistent. You follow a system and a pathway that is proven. You follow the
recipe. The recipe will give you the outcome that you want, and you do it consistently over time, and you make sure that you do it with the things you understand. And if there's complexity, confusion, or adrenaline, it's probably the wrong thing. All right? All right. Remember that the whole purpose of this is to find the assets that separate your ability to earn from the efforts to earn it, to give you the freedom of choice in your life. That's true financial freedom.
That's what I want for you. I think it's your birthright. Let's go claim it. All right. Until I get a chance to see you in another episode or on the road, I hope that you found this of value, and I hope that you'll share this. I hope that you will subscribe if you haven't, haven't done so already, and I hope that I get a chance to chat with you until I do. Always, always strive for the like. Thank you for listening to the affluent entrepreneurship. With me, your host, Mel
Abraham. If you want to achieve financial liberation to create an affluent lifestyle, join me in the affluent entrepreneur Facebook group now going to melabraham.com group and I'll see you there.