All right, so you're on the path. You're sitting back saying, I want to be financially free. I want to be able to master my money. I want to eliminate financial stress and money stresses. I want to be able to take care of my family and to have a life that's driven by options and choice instead of a life that's driven by the daily demands or the expenses that I have. And so you get involved with
personal finance, you start to understand. You start to invest in the 401K, or you start to use other investments, and you're building wealth and you're doing all those things. But here's the thing. I know it literally takes one big mistake, one mistake, and you could wipe it all out. I mean, let's face it. In 2005, I made an investment that turned out to be a Ponzi scheme. It wiped out one
third of everything I own. Okay. Well, into the seven figures, me and two friends lost over four and a half million dollars. Okay. Could have wiped me out. Now, I was able to recover. It took a little bit, but I was able to recover, surpass it. We tripled it within 18 months and have continued to grow since then. Now, the thing is that one of the things that I tried to do is avoid certain things that could put my wealth, my financial freedom, my family's lifestyle in jeopardy. And
I want to walk through ten of those today. These are the worst things I think you can do with your money as. As you're trying to build wealth. And they can get in the way of your ultimate vision, your ultimate destination of financial freedom, of being in control, of mastering the money and having that freedom. All right? So let's jump in and let's make this thing happen. Now, before we do, I do a lot of this stuff. If you have
not subscribed to this channel, I want you to subscribe to this channel. In fact, I want you to share it with someone else, because doing this financial freedom journey is always easier when you have someone else to have the conversations with. So subscribe, share, let people know. Let's light the path to financial freedom. All right, for as many people as possible. Okay, let's
do this thing. So let me jump in. I'm gonna jump to the iPad, and we'll start off with the very first thing that I think we need to think about. This is the things not to do. All right? So, number one is investing without a plan. And I see this a lot, because here's what's happening with. With folks. They will come to me, and they will say, mel, I've got $10,000. Where should I invest it? I don't know. I honestly don't know. I don't have an answer. There is
no in the box answer. Each person is at a different age, stage or circumstance in their life. And depending on your age, stage and circumstance, that defines what you should do. Here's the challenge. When you invest without a plan, it's haphazard. It's not
moving you towards something. This is why in my book, building your money machine, the very first part of the book is us defining your life, defining what it is you want out of your life, because it's important to me, and it should be important to you that you're living your life, not someone else's, not what the media says, not what your parents say, not what your siblings say, not what the social media says, not what your neighbor's doing, but yours. And so we start off with the vision in our
life. That vision will then define the plan to make the vision a reality, because that's where we want to go. It's just like planning a trip. This just happens to be a financial trip. We figure out the destination. We figure out why that destination is meaningful and appeals to us. Then we put a plan in place. Now, the plan will then define the strategy. The strategy will then determine the tactics. The tactics are our investments. See, if we start investing first without a plan, we might have
great investments, but they're the wrong ones for us. So investing without a plan doesn't get us necessarily to the vision of our life. So the key is investing with a plan that was driven by what it is you want. Now, the other thing that happens is that if we do this without a plan, we have the tendency and the possibility to take on more risk
in the investments than we might or should. But when you have a plan, part of that plan is going to be looking at the, the risks and the kind of investments you should be in. So number one. Number one is when we turn around and we are investing with our plan. So that's a, that is a don't do. This is one of the worst things you can do with your money, is sitting back and saying, I'm just going to invest and I don't have a plan. Okay? This is going to keep you out of trouble.
Now, number two, these top two are huge, okay? And number two is prioritizing consumption over investing or savings. And here's, this is about living for today, and I hear it all the time. Oh, Yolo, Yolo. You only live once. No, I'm going to live it fully today. I get it. What are you going to do tomorrow? Tomorrow's coming. Your future is coming. If we don't save for retirement. There's a study out there that says that the, the expected rate or amount necessary for, to retire is $1.46 million.
$1.46 million. Yet the average savings is like, at 89,000. I mean, like, we are way off from, from where we need to be. And part of it is, is prioritizing consumption over savings. Now, some of it also may be, gosh, things are just more expensive. I don't want to be tone deaf to that. And we got to figure that out and we got to manage it and we got to figure out our income. There's a lot of things that go into it. But what I'm talking about is, what's your mindset?
Is your mindset one of short term gratification and I'll deal with it tomorrow and kick in the can down the road? Or is your mindset one of. I'm going to make sure that I do what I need to do today, but I'm going to prioritize my. Tomorrow. I'm going to prioritize investing. I'm going to put it in a place that I'm going to build habits and decisions and behaviors that will build my future as well as allow me to live at a level in my
present. Okay? And I get it. You've got limited income. Well, that's great. We got to manage our expenses, and we have to figure out how to elevate our income. It might be side gigs. It might be side hustles. It might be asking for a raise. It might be simply owning the value you bring to the table. It might be skilling up. It might be getting new skills through education,
training, certificates, all those things. But we have to, when we prioritize consumption, which is typically stuff over investing or savings, we then put our financial future in jeopardy. So number two is prioritizing consumption over savings and investing this number three, which may sound odd for some folks, is not tax planning. I think taxes are despised as much as root canals. That's about it. You know, but here's the thing. Taxes are a requirement. They're a
necessity. You can't avoid them legally. You can't avoid them. Okay? And if they can cost you $25 to $0.50 on the dollar, depending on what state you live in, it is really important for us to get a fundamental basic understanding of taxes and how they impact us and to look at it from that perspective. So I have the opportunity to minimize how much the government's taking from me at $0.30 on the dollar to $0.50 on the dollar. You may be required to pay taxes, but
you're not required to overpay taxes. The tax law, the tax code was created to be used, and it is not illegal. It is not
immoral to use it for what it was meant to do. And if you have the ability to take advantage of the tax code in a legal way, to take real deductions in a legal way, why not do it to use tax advantaged accounts like Roth, like 401 ks, to take deductions that maybe apply to you, like the Augusta rule, all those things that will reduce how much goes to the government, because if I can reduce how much goes to the government legally, I increase how much stays with me
and grows my wealth in the future. So I get that it's not a fun topic. I get that it's not an easy topic because the tax code is complicated, but it is a necessary topic to get involved in. And so one of the things that I think is one of the worst things we can do is neglecting it, to disregard it, to just think that we have no control over it. Now, if you have a business, you have much more control of what can happen than you
would as a w two. But even as a w two, there's some things you can do with how you use your retirement accounts and other other deductions, charitable donations, and things that you can use for planning that can help. So the point is that you got to get involved with taxes at some level. Okay, number four. Number four is ignoring the impact of fees, not looking at the fees that you're paying. Okay? There some investments, managed funds, managed
accounts, can have extremely high fees. And you got to look at it from this set of eyes. Every dollar you give to someone else is a dollar that you don't get to yourself, that you don't get not only the dollar, but you don't get the growth on that dollar. So it can cost you dramatically if you're not careful about fees. And the fees can sound very small. It's just, you know, 1%, 2%, which
doesn't sound like a lot. But when you take the one or 2% and then you compound it and the growth of it, and you do it every year, it can. It can become a very large number. Now, I am not one that says, I don't want any fees. I have advisors. I pay them a fee, and I gladly pay them a fee because they provide a level of service that is necessary for where we're at. They do a lot of other work. They're not picking just investments. And
in fact, I am involved with all of that as it goes. They do a lot of other things to compensate them for, and that's why the fee gets paid. But there's also expenses inside. If you buy a mutual fund or index fund, you could be paying high expenses in there on high fees that you're unaware of. I just looked at a 401K for someone and saw that the expense ratios on some of the investments that they have for their employees is
astronomical. And if we could just replace the funds that are available to them, we could literally put 1% more into the pockets of the employees. And so it's important to sit back and not just ignore fees, to not be blind to them and ask, are these fees making sense? You should be able to invest in low cost, low fee index funds that are really, really significantly low. I mean, they're not 1%, one and a half percent fees. They're far less than that. They're a fraction of
a percent in fees. And most of that, it'll take you from paying $150 per 10,000 in fees to $4. That's the dramatic impact of it. And you think about it and you say, one hundred and fifty dollars to four dollars, it's $146 left to you on every 10,000 every year. It adds up. And as, as it grows. And so I think it's important to not ignore fees. I am not saying to avoid fees again. I just want to make sure that I'm getting some economic value
out of it and everything. I'm just not being it. I'm not being naive and saying, well, it's just what the fees are. And if you happen to be in an employer plan that has high fees, go to your HR, have a conversation with them and say, look, is there a way for us to get a lower cost alternative, lower cost options in our plan? Because then we keep more money in our pockets, which gives us more financial stability and security, which gives us more financial wellness and peace, which allow us
to be more focused at work. All those things come into play to make that happen. All right, number five, the number five thing to, which is the, one of the worst things to do is this to follow trends or fads. I've talked about this before. Listen, market trends and fads, they are, they are fleeting moments, memes.
And now it's so easy to get caught up in. When you think about the whole GameStop thing, they talk about it on a Reddit post, it starts to drive the price up, but there's no economic basis for it to go up other than the chatter about it. And then when they stop chattering about it, it tanks. And the people that bought last, they get hurt. Is the
epitome of a pyramid scheme. What I want you to do, listen, everything that I do, the way all the frameworks, the processes that I use with my clients, and I teach on this channel and in my book, all focused on an unshakable financial foundation first, safety first, growth second. Okay? And so what ends up happening is when we start to. To move into trends or fads or memes, we tend to take on more risk because we don't understand it.
We're trying to jump on the bandwagon. We are making an emotional decision to jump in the game. And so you end up in the game, typically too late, and you get out of the game too late, which means you get hurt. You want to make sure that what
you're investing in has some. Some history, some foundation, some business model, some cash flow, some growth has the makings of an actual real investment that's supported by its operations, by the economics, and not just driven by some meme, some talk, some trend, some fad. I put in rules, and they're the rules I teach, they're the criteria I follow. And it's all because of that. The Ponzi scheme I got caught in and I lost one third of everything I
owned is to make sure that I'm safe. And if it doesn't satisfy the criteria, if I can't follow my rules, they don't get my money. Even if it could have made me a billion dollars, I don't care. I'd rather leave some money on the table, then watch it go to the core of the earth. And I want that for you, too. So we don't follow market trends and fads or memes like that. Now, number six, number six is not looking at liquidity. In other words,
not looking at what you need in cash. There is a reason that in chapter twelve of my book, building your money machine, we talk about the wealth priority ladder. And in that wealth priority letter, starts off with giving you that unshakable foundation. And part of it is liquidity. Having the cash to sustain yourself if something happens, having the cash to take care of you if you can't work. Having liquidity available. So not 100% of everything you have is tied up investments.
And you can't get at it. Then you end up becoming investment rich and cash poor. And you cannot live that way. Because if you need the cash. And you have to cash out investments in a hurry. The investments might be down. Or you have to take a discount to get rid of it and get the money in. It's important to plan for liquidity in the process. Not just for emergencies, but also for opportunity. Markets go up and down. Whether it's the stock market, whether it's real estate markets, whether
it's opportunities. And opportunities come and go. You want to have liquidity, what we call dry powder, if you will. That is on the sidelines to one portion of it to take care of emergencies. But the other portion may be to take care of opportunities that come in our way. And too often we overlook our liquidity needs. Especially when the market's going up. Market's going up. And you say, oh, gosh, I don't want it in cash or a high yield savings account. I'm only
getting 5% on it. Okay? But you got to remember that every dollar that comes into your life has a job description. And some dollars are meant for investing some dollars. Their job description is to pay your bills some dollars. Their job description is to give you the peace of mind of knowing that you have the liquidity to take care of yourself. Allow each dollar to do their job. And don't move it to another job. Okay? So overlooking liquidity needs can. Can be a problem. Number seven.
Number seven. Okay. Is too much leverage or debt. Look, and we're in a high interest rate environment, as I'm filming this. But when we overlever. Now, I am not a believer that all debt is the devil, but all debt, it has two personality traits. No matter whether it's productive debt or destructive debt. Now, I do believe you absolutely avoid destructive debt. You avoid the debt that
you're using to pay for a lifestyle that you cannot afford. You avoid using debt for the lavish vacations, the depreciating assets, the stuff you're trying to buy on credit. That's consumption. And its consumption is worse. Because not only is it consuming, but it's also doing it on debt. So you have this interest cost that goes with it. The two personality traits of debt is that all debt costs. Whether it is productive debt or
destructive, it costs. It's called interest. And if you're paying someone else interest. That means you're not getting it. That means you're losing out. The other thing is, the other person I trade is all debt stresses. It stresses us financially because it is a burden on us, but it also stresses us psychologically because it's a burden on us. So it is important to sit back and say, let's do debt. Smart.
Even if it's productive debt, it needs to be smart. There are people out there that were over leveraged in real estate in 2008 and they thought they're still good because it's real estate. Real estate always goes up and you were getting loans easily and they were, they were doing 100% financing in
some cases, and no income qualification. And when the market turned and the values came down and they couldn't sell the properties and they couldn't get tenants in the properties, they couldn't cash flow the properties, they had all this debt that they couldn't carry, and properties got foreclosed upon. We have to be smart with our use of debt and leverage. Otherwise we could put ourselves in a very precarious position when or if there is a market downturn or a flattening or a problem. Okay,
leads me to number eight. Not rebalancing. What do I mean by this? Not rebalancing your portfolio so you have an investment portfolio. Every single person is very different in their, in what I call their risk, their risk profile. Their risk profile is built on three things. Their risk tolerance. In other words, how much they can stomach, their risk capacity, how much logically and mathematically can they carry, and their risk need. What risk do they need
to take on to achieve the goals that they need? And that intersection is going to define their risk profile. I call it the risk triad, and I walk through a lot of it in the book. But the thing is that everyone's different. Your age, your stage, your circumstances in life will change. If you're 23 years old, you're different than someone that's 63. If you have five kids, you're different than someone that has no kids or is an empty nester. If you've got college
bound kids, it's different. If you have aging parents, you have to take, it's different. So what we need to do is we build a portfolio based upon your risk profile and what we're trying to accomplish. And everyone's portfolio is different. Here's the mistake that most people make. They go through the exercise and they do their risk assessment and they understand it, and they build the portfolio and they never look at it again.
So maybe they built their portfolio structure. The percentages of investing in equities and internationals and all that stuff, and real estate in their thirties now they're in their fifties, they can see on the horizon retirement, they can see things that they need to do, but they never change their allocation, their asset allocation, and rebalance their portfolios. And what happens is that, one, your risk profile changes as you get
closer to the needing the money. But two, as the portfolio grows, you have stocks that go up, you have stocks that go down, okay, you've got investments that go up, investments that go down. They become different percentages just because of the sheer growth of the portfolio. And now all of a sudden, things are skewed and you might be in a portfolio that is far too
risky for you, for your age, stage and circumstance. One of the things that I do, I sit on a pension plan committee of a company, and we manage, effectively, a $50 million pension. And as a committee, we look at the percentage, how much percentage in equity do we have? How much percentage in fixed income do we have? When the market goes up and the percentage in equity goes above a certain threshold, we rebalance. We adjust to keep us within the parameters, to
keep us within the risk profile. Most of the time as individuals, we don't do that, and it puts us at a higher level of risk without us even knowing if we're not careful. So my suggestion to people is, you want to look at your portfolios at least once a year to say, do I need to rebalance? Do I need to adjust anything? Do I need to do something a little different? This leads into number nine, which is kind of similar, but that is not looking. Disregarding diversification.
So, disregarding diversification can be a problem for you, because if you are concentrated in a single asset or a single type of investment, if you have a lot of stuff in tech, or you have one stock, or you have one property, and you have all of your eggs in one basket, if you will, or a class of baskets, or a sector, an industry, you take on a skewed level of risk. There is a need for diversification. Now, I know that there's some people that say, no,
no, just go all in. I think it's a mistake, because remember what we're trying to do, unshakable foundation of safety first, growth second. I will give up a little growth to make sure that I'm safe. But because what I know is when you swing for the fences too many times, you will strike out more often than
not. And so what we need to look at is making sure that we have a broad based, diversified portfolio based on our risk profile, and make sure that we stay in that realm and that we're not overly concentrated in a sector, an industry, a company, an asset class. Okay. Disregarding the diversification is number nine, then number ten. Ooh, this one's a big one. Being impatient. Oh, man. Wealth creation, it's a long term game. Wealth creation requires you to
get on the field, stay on the field, and keep playing the game. Long term. The longer the term your view, the higher the likelihood of success is. There was a study done with s and p 501 year returns. One year returns, on average, you would win about 70% of the time. A little over that. Okay? It would be up. If I went to five years and said, I'm going to hold it for five years. A little longer, it goes over 80%. When I go to ten years or more,
it goes to 94%. The longer we look at things and be patient, the higher the probability of success is when we follow the other rules, the other criteria, and the other investing principles to do it effectively. The other thing that happens is this, and you've seen me talk about this repeatedly, is that wealth creation is not a straight line. Wealth creation doesn't do this. It does this. Okay? And what happens is, too often people don't have patience down here because they're in something called
the flat line. The challenges. And the subtitle of my book says it's. It's getting your money to work harder for you than you did for it. And the only time you do that is when you pass the tipping point and you end up in this acceleration zone up here. But too often, we don't have the patience when we're down here and we cash out. Well, the only way to bypass this is time. And if I cash out, I start the clock running again. We have to get in the game and stay in the game long
term. Why did I get caught in that Ponzi scheme? Because I got impatient. Because I thought I had a quick win, because I thought it was gonna. It was gonna be the answer to my prayers. I was gonna be able to. I literally created a spreadsheet and started projecting out what was gonna happen. If your investing gives you an adrenaline rush, because it is. It's, you know, get rich quick, and it's up and down, and this net the wrong investment. You're investing long term,
your wealth creation is a boring journey. It is systematically long term, and you will. I talked to someone else that. That I think four or five years ago. Try to remember when he, he rolled out his 401k. When he rolled out his 401k was a little bit over 400, $440,000. He didn't look at it. He didn't rebalance, he didn't do some of the things and just started looking at it, and all of a sudden, it's at over $800,000,
y'all. That's what I'm getting at. Get in the game, get on the field, play the game, and play it long term. Stay in the game, be patient with it, because time will be your friend. Okay, so those are the ten. The ten things that I think are the worst things to do, and other advisors think of the worst thing
to do with your money. Avoid those ten things, and it'll put you in a better place for your journey to financial freedom, for your ability to master your money, for your ability to eliminate and reduce the stress around money, around finances, around wealth creation. Okay. I hope that this helps. I hope that this gives you a perspective and gives you something to consider, maybe even something to discuss with your family, your loved ones, and how you want to approach
things. My job here is simple. I want to light the path to financial freedom for a million families. I want one of those families to be you. I truly believe that financial freedom is a birthright. They don't want us to talk about it because that's the way we were raised. But I want to talk about it. I want to help you claim it. I'm not selling investments. I'm not selling insurance. I'm not selling any of that. I'm going to sell you on the possibility of
your dreams. If you're willing to do the work, if you're willing to follow along, if you're willing to get the behaviors and be in the game, I'll be here to guide you. I'll be to light the path. All right. All right. Until we get a chance to see each other, another episode or on the road or out there while I'm speaking, as I always say, always, always strive to live a life that outlives you. Thank you for listening to the affluent entrepreneurship with me, your host, Mel
Abraham. If you want to achieve financial liberation, to create an affiliate affluent lifestyle, join me in the affluent entrepreneur Facebook group now by going to melabraham.com group, and I'll see you there.