All right, so you're sitting back saying, I want to build wealth, but I don't want to have something that's complicated. I don't want it to be convoluted. I don't want to be confused. I want it to be simple. And so in this episode of building your money machine, I'm going to break down the four assets I would focus in on if I was trying to build wealth, because if I could only focus on four
assets, these are the four that I would focus on. Now, mind you, when we talk about investing and we talk about what to invest in, you cannot talk about it without it being connected to the lifestyle you want. So it's important for you to realize that the first step in all of this is making sure you have a vivid vision for your lifestyle. That's not what we're going to talk about in this episode. We're going to talk more about the assets, but
assume that it's connected to, to your vision for your life. And what I mean by this is this is that if you want to travel all around and you want to be kind of a nomad and run around, maybe certain assets, like real estate, may not be the right thing for you because you might need to be a landlord or you want to be a real estate flipper. You can't necessarily do it unless you have teams, and that cuts into profits. So when we talk about assets, I want
you to think through the lens of the vision for your life. But I also want you to look at how these assets will help you build wealth, build a rich life to give you the freedom of choice in allowing you to do things the way you want, when you want, and whenever you want. All right, so let's jump to the first one. Okay. And this one's gonna. I don't know, we'll see. But this one might surprise you. But the very first asset that I would invest in is my. Myself. Yourself. You
need to invest in yourself. Here's what I mean by this. You are your greatest wealth building tool. Your knowledge, your expertise, and your ability to earn. The more I can skill up, the more I can create value with what I know, the bigger the shovel of income I have to build wealth. Now, mind you, that can create a situation where you're on a treadmill of earnings, and at some point, I want you off of that. That means that if you're swapping hours for
dollars, that's not a leverageable thing. That is not something that's scalable where it gives you freedom because you have not separated your earnings from the ability to earn it. But this is the thing that might be able to fund the building and the buying of these other assets to give you that freedom. It's exactly what I did. All right. I'm a CPA by education. I had a CPA consulting business where I was valuing businesses, buying and selling businesses,
and doing consulting and advising. So I was swapping hours for dollars. But as I increased my knowledge base, my expertise, and my intellectual property, I got paid more and more and more. So I was able to get a bigger shovel of income to build my money machine with. Now, I don't do a lot of one on one. I don't do a lot of, I don't do any swapping hours for dollars. It's an antiquated model and I refuse to do it. So ive gotten out of it. But it was a stepping
stone to build wealth. So I dont want you to jump over this because your expertise and your knowledge is probably the first place that we should start to build wealth because its going to create a bigger shovel that you can always fall back on. Heres what I mean by this. When I talk about investing in yourself, im going to ask you to look at it through the eyes of your expertise, your intellectual property. What do you know that is specific, specifically connected
to you? You may. You may. In my case, I'm a financial advisor. I do valuations. I also do a lot of speaking. I do a lot of consulting. There are some, some skills. There are some, some talents. There are some, there's some knowledge that I've acquired over the years that impact and can affect people's businesses, their financial lives. And that I have the ability to sell that I have the ability to package
it, if you will, to make that happen. So I'm talking about you being able to package you, to sell you. And what I mean by this is, this is, and this is really important distinction is that, I mean, real intellectual property, knowledge, experience, education that can solve a pervasive need or problem in people's world. Okay, real IP, not the influencer popularity stuff. I don't care how many followers you have on Instagram or TikTok or all
that. I'm not talking about the dancing kitten videos. I am talking about real education, knowledge that can solve problems. It could be solving a problem on fixing a car or a computer or a website or relationships or health or weight loss or finances like myself. Personal finance and wealth. It could be getting your kids to sleep, getting your kids to eat. You may have gone through
a journey. You may not have been educated in it through a formal education system, but you might have been educated in it through a life system. Your ability to get your children to sleep, that maybe you didn't go to class for, but you learned it, because maybe you have three, four children and you learned it, and you can package that and get paid for it. So when I talk about intellectual property, I truly mean knowledge, wisdom, expertise,
experience that can solve other people's problems. Okay? So the process to do this is to ask yourself a couple questions. The first is, what do you know? And I list this out. When I work with my clients, I literally have them list this out. Just make a column, what do I know, and just list it out. And another way to ask to answer this question is, what do people constantly come to you for advice for? What
are they asking you? Because if they're asking you consistently for this type of advice, they think you know it, which you probably do. So what do you know? You start with that, what do you know? Then you ask yourself that. Knowledge, what problems does it solve? What problems does it solve? Okay, because you may know something, but if it doesn't solve a problem, it's not commercially viable, it's not
something you're going to be able to market. So it needs to solve a pervasive need and problem for it to be something you can sell and get paid well for. What do you know? What problems does it solve? And then, then you gotta ask yourself, how can I package it to solve the problem?
Simply, it's important for you to sit back and say, all right, I have some knowledge, whether it's getting kids to sleep, getting kids to eat, training dogs, finances, whatever the question you gotta ask yourself, how can I package it in a way that's digestible, that's valuable, that's unique and distinct, so someone can put it into their life and solve their
problems. What this means is that it's about processes, it's about frameworks, it's about creating something that allows you, allows that to happen. In fact, my book, building your money machine, there's a lot of frameworks in there. What we did is we took the frameworks and use the frameworks to create a visual, to make it easy for people to take and put the money frameworks, the money principles, the money processes into their life so they
can build their own money machine. And so I want you to look at it through those eyes. How can I take the knowledge that would solve a problem and package it in distinct, unique frameworks? And processes that get a result. Now you have to ask the fourth question
is this, who has these problems? And now you have to go find them, because if I know what I know, and I know the problems it solves, and I create a distinct, unique framework on how to fix those problems, how to solve those problems, and I know who has the problems. Now we just gotta put it in front of them and get the results. It's what if you look at any advisor, if you look at any consultant, if you look at a therapist,
if you look at. Look, just recently, just recently, all right, I'm sitting here doing my work in my studio, and my wife comes in from walking the dogs, and she comes in and she says, honey, the front is flooding with water. I go, what? So I go running out there, and lo and behold, it's like the old Beverly hills hillbillies pumping up oil. But it's
water. It's coming up from the ground. And evidently, our main water main, from the street to the house, had a crack in it, and water was going all over the place, so we had to shut all the water down. Now, mind you, you're living in a home with no water, no bathrooms, no showers. No, no. I mean, it's not fun. So what did I do? I looked for someone who had an expertise in solving this problem, and it was a big problem that I needed to solve quickly because we needed water.
Now, I knew a guy because he's done work here before, and I called Leon and I said, hey, man, here's what's going on. I'll be there in the morning, okay? He had a process, he had a system, and he solved the problem. I didn't ask him how much it was, okay? I didn't ask any of it, because all I
wanted was water in the house. And so when you create your intellectual property, your knowledge, your expertise and wisdom, in such a way that it solves a pervasive need, a problem for people, and you package it in a distinct way that gets results
in a simple way, they will pay you well for it. So the very first investment I would make is in myself and making sure that I know what I know and package it in a way that is transferable, sellable, and everything else, because that gives me a big shovel of income to use to build my money machine and give me the freedom that I want. So that's the first asset that I would invest in is myself. Okay? The second asset. The second asset is in diversified ETF's, or indexes. Okay? Index funds. Okay?
Now, we're moving towards more investing, investing versus active services and intellectual property. Now we're talking about investing, investing. Why? Why do I want to start here? If you look at the work that we do, and in chapter twelve of my book, I talk about the wealth priority ladder. This is the hierarchy. It's the recipe of what you do with every single dollar that comes into your life in a way that builds an unshakable financial foundation to
build wealth on. So I want you to get safety first, growth second. And so the first thing that I want to do is if I'm going to invest. So I'm assuming I have no destructive debt, and I've got some other things in place, and I'm up a couple rungs in the wealth priority ladder. But when we talk about the investments, I'm gonna start with ETF's and index funds. I'm gonna start with them. Because, one, they have certain characteristics. One, they're liquid. You have easy access to them. Okay, so
they're liquid and there's easy access. I can get them by going to any kind of discount broker. It can be Schwab, it can be fidelity, it can be TD while TD got acquired. You know, it can be any of them. I avoid, it can be vanguard. I avoid any platform that gamifies investing. Because when you gamify investing, you add dopamine to investing that adds emotion, and you make bad decisions. So I'm not a fan of Robinhood. I'm not a fan of any of
those things that gamified. So I use the traditional discount brokers, vanguard, Schwab, and fidelity, to do that. So diversified ETF's, you have access to them, they're liquid. You have easy access, and you have a history of performance. You have a history of long term performance. And when they're tracking the market, if you're buying into an S and P 500 now, prior returns does not indicate what future returns will be, but it's the best predictor of what will
happen. You look at historical returns on the S and P 500 index fund, it's eight to 11%. Okay? So I know what the historical performance is. It's up eight out of ten years. It gives me diversification. So it gives me some level of risk mitigation. It reduces my risk. At the same time, it allows me to have liquidity because I can buy in, I can buy out, assuming I'm not in a tax advantage account.
The other thing that it has is it's low fees. So you got liquidity, easy access, historical performance, diversification, low fees. And when you do it the way I describe it in the book, where you're using one, two, three or four funds to build a portfolio, you don't need professionals. It's not complicated, it's easy. You have easy access. Here's the
other reason I like this. If all you have is a small amount of money, say you have $1,000 to start and you want to start investing, you can't put that in real estate, not really easily, and get diversification. You don't want to put it in a single stock, because then you're in a single stock with no diversification, which means that you're at higher risk. But you can take the, put it into an ETF, low cost, low fee, and you buy a little piece of 500 companies, of 3000 companies.
And so if one goes bad, you don't lose it all. So, I love this as one of the investments that I would go to. It's my go to. In fact, my portfolio, the majority of my portfolio is built on diversified ETF's and index funds. And doing it from that perspective, because of liquidity, easy access, I don't need professionals. It allows me to get that diversification. So that's asset number two that I would focus on then asset number three, and some people will accuse
me of saying, oh, you don't like it, but I love it. And that is this. Real estate, I think this is a great asset to buy. Why do I say in my book and my work, I say I don't like it. And I don't like it as the first place to stop, okay? The first place to invest, it's not where I would start. And the reason I say that is this. Remember I said, if I'm going to build wealth, I want to build a solid, unshakeable
foundation first. In other words, I don't want to build it in a situation where if something goes bad at the beginning, I lose it all. Okay? I'm trying to make sure that it stays intact. So, safety first. So if I start with a bed, if you will, of diversified ETF's that, that have reduced risk, have liquidity, and I have diversification because, because of the way they're built, it makes, it works well.
But real estate doesn't get that. Because I can't get into real estate with $1,000 necessarily you can, there's some things, but, but by and large you can. If you're gonna buy a property, you're gonna need 20,000, 50,000, 10,000 you're gonna need a lot more money, and you only get one property when you do that. And I want a diversification. So the reason I say to wait on on real estate is I want you to have the foundation of diversification first before we go into it. Now, once we
have that, I want to go into real estate. I love real estate because there are some things in real estate that you don't get in other investments. Okay? This is one of the only investments that gives you four levels of benefits when you invest in it. One of the first level of benefit when you buy a piece of real estate is you have something called equity buildup. Okay? Equity buildup. And so when I talk about equity buildup, here's what I mean by this.
I'm not talking about investing in a home. That's your personal residence. I am talking about investing in an investment property. Multi unit, single unit, whatever, like that. So when I say equity buildup, say you bought the home for $250,000 and you put $50,000 down. So you have a $200,000 loan on it, and you have $50,000 in cash that you put into it. And you put a tenant in there that pays
rent, and that tenant, it pays rent. And let's assume that the real eState, the property doesn't go up in value, so it stays $250,000 for a decade, God forbid. Okay? But just hear me out. The tenant is paying the rent, and then you're paying the mortgage, and that mortgage is going to get paid down. So now the mortgage that started at 200,000 might be at 190,000. So instead of a $50,000 equity, you have a $60,000 equity. Equity buildup because someone else is
paying the mortgage. And so this is the first benefit when you buy real estate. The second benefit that you get when you buy real estate is appreciation. Okay? And that is over the long term, most real estate goes up. So you bought it at 250. The mortgage is getting paid down by the renter. But now the real estate appreciates, the value goes up, and now the value is 275. You've got appreciation. Okay? So you have. Those are the first
two ways you get benefits from real estate. The third way of getting benefit from real estate is cash flow, is, is that the cash flows from the real estate. The rents, if you will, hopefully cover all the costs and give you a little money in your pocket. Okay? So now you're getting cash flow. So I got cash flow, I got appreciation, I got equity buildup. And then the. The fourth benefit that you get is tax,
tax write offs. Okay? And you get a tax shield through things like depreciation and that kind of thing. So it's one of the only investments out there that has all four of those elements. Because if you invest in the stock market, you get, you get potentially cash flow and appreciation. There's no equity buildup and there is really typically no tax reduction or tax impact to it. So it's one of the only pieces or assets that you can invest in
that give you these types of four benefits. Why I love it so much. But I think that strategically you need to put it in place at a certain time in your financial journey to make it, to raise the stake, to raise the probability of success to a higher level. That leads me to the fourth asset. And the fourth asset is businesses. Okay? Now, you can start a business, but you could also buy a business. And, you know, again, this is going to
take a little more capital to buy a business. And I'm not talking about buying a business that's this extremely high growth business. I'm talking about an established business that has a good pattern of operations, profitability and cash flow. So you're buying a machine that is producing cash flow that you can then use. So you're going to end up buying the business, having the cash flow at the same time. This does have also, you get
why I like this is that you've got cash flow. If you do it right, you have tax reduction, because now you're in business and now you have access to certain elements of the tax code that are beneficial for business owners to reduce your taxes, to pay things before tax instead of after tax. So you have the opportunity to use businesses to shield income in a proper way. When you buy the right business that has been in operation for a while and all of that, you have a proven history,
much like the ETF's. You have a proven history of operations. I like to buy a business. If I'm going to buy a business, I want to look for a business that cash flows. But I also want to look for a business that isn't going to. It's not subject to big, extreme changes in technology or the way it works, the way it runs, because those operational shifts can be expensive and you can lose on it if you don't time it right or
you miss it. So I'm looking for something that's somewhat boring, if you will, as Cody Sanchez says, that will grow and have cash flow. And I want to look for an opportunity where I can bring something to the table that does what I call value accretion. Like, I can go and change something, I can modify something, I can combine it with another business, I can change the operations and immediately increase the cash flow, which increases the value.
Now, there's some cautions here. You have to be really, really careful. If you don't buy the right business or you don't buy the business. Right, you could be buying yourself a job, and you're working 1012 15 hours days, and you're getting paid less than you would if you were just working for someone else. So you got
to be careful when you do it. But if you do it right, you could be building an asset that is generating cash flow and is something that's sellable down the road to bring more money in. All right, the other thing with business, I got to tell you, is it is personal development on steroids. If you want to grow as a person, when it comes to leadership skills, marketing skills, communication skills, financial skills, was buy a business. Cause it's gonna force
you to do it. All right, so those are the four things I would literally, I would focus in on is first, I'd invest in myself. Second, I would focus on ETF's and index funds. Third, I would look at real estate. And fourth, I would look at businesses. That's what I would do. I wouldn't do anything else. I would use those things, those the cash flow from those things to continue to build in a way that builds a my money machine to give me
the path to financial freedom. I hope that this helps. I hope that you start to look at things and say, how can I do things in a simple way? It doesn't need to be complicated. It doesn't need to be complex, and it doesn't need to be quick. It just needs to be consistent. And when you do it that way, you will create sustainable wealth. All right, if you have questions, if anything comes up, do
me a favor, let me know. All right? That's what this show is about. That's what building your money machine is about, is to give you a safe place to have conversations around money. Because I want you to master your money. I want to eliminate the financial stress, and I want to give you the opportunity to live a life by choice. All right? Until I see in another episode or on the road, as I always say, always strive live a life. I always you.
Cheers. Thank you for listening to the affluent entrepreneur show. 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 by going to melabraham.com group and I'll see you there.