This is the affluent entrepreneur show for entrepreneurs that want to operate at a high level and achieve financial liberation. I'm your host, Mel Abraham, and I'll be sharing with you what it takes to create success beyond wealth so you can have a richer, more fulfilling lifestyle. In this show, you'll learn how business and money intersect, so you can scale your business, scale your money, and scale your life while creating a
deeper impact and living with complete freedom. Because that's what it really means to be an affluent entrepreneur. Too often I see people that are getting investments and look, I get it. You want to be excited about what you're getting into and investing and that kind of thing. But there's a tipping point where you move from excitement to an emotional decision. An adrenaline
rush, that level of dopamine hit. And what's happening is that we're making decisions based upon that adrenaline dump that don't be hit. All those things around our money, around our investing, around our future, wrong thing, wrong combination. A recipe for disaster. Here's what I know, is that when you start to look at, and I'm not, I'm not a gambler, so I'm speaking just from my observations, more so. So than anything else, there is a very different element from investing versus gambling.
Investing is effectively us allocating funds and, and deciding to commit that money to something like a stock, a bond, a piece of property, or something that's going to generate income or is going to carry a profit or it's going to grow appreciation, if you will, over time. That's investing. And we know that it's a long term game. We analyze it, we review it, we do due diligence. We kick the tires. We make sure that we're making a smart, valid, logical, reasoned
choice. Okay? Doesn't mean we're not going to lose, because trust me, I've lost plenty. But what you're doing is you're making sure that you're mitigating the risk. Remember, when we talk about the four wealth drivers, the four things that drive your wealth, one of them is returns. That's the return on the investment. That's the kind of investments you get into. But you can never talk about returns without
talking about risk. And by evaluating an investment at that level using criteria, like I give criteria and rules for investing in my book, building your money machine, and some of my training and what I do with my clients, the fact is, is that those rules, those criteria were born out of the mistakes I made over the years. Okay? I've lost more money than some people make in a lifetime? I have. But I've been able to recover, and I made sure that I've been able to reduce the possibility of loss
by making sure that I follow a set of rules. That's investing, okay? Gambling's a whole different game. Gambling is basically, you're staking something on a contingency, okay? You're betting, you're wagering, you're risking money on an uncertain outcome, okay? It is really based in, if investing is based on analysis, business growth, profitability, those kinds of things, and assets, gambling is based on chance, okay? And gambling is
what gives us that dopamine hit. Gambling is what gives us that adrenaline dump, that excitement, that adrenaline rush and all that type of stuff. And so what I want to try and do is reduce, actually eliminate any of that element to investing, because if that's what's driving our investment decisions, what's driving our, our financial future is chance, is speculation, a rush of emotion. And when we know is that when emotions go up, our financial
intellect goes down. How did I get caught on Ponzi scheme? It's because he was able to jack my emotions up. He created an aspirational vision. He showed me what was possible. And all of a sudden, I bought into that promise. I ignored my rules. I ignored the criteria. I ignored the voice in my head. I ignored the person that was sitting back here, my little, my little conscience that was saying, too good to be true. Too good to be true,
too. Could be true. But I was sitting there going, this feels good. It's a, it's a dopamine hit. This is going to be great. And what did I do? I jumped in both feet. Jumped in again. Both feet. Me and three guys. Two other guys. All three of us lost over four and a half million. I lost one third of everything I own. Trust me, the dopamine rush wasn't worth it at that time. And we see this in a lot of type of investing. For instance, investing in meme stocks or fad
or trend stocks, okay? And you can just take GameStop. I was just in another, in another video, I just talked about someone that jumped into GameStop back in, back when it first happened. It just happened again just recently. But they jumped into a stock because they were sitting in $3,500 in their Robinhood account, sitting back saying, oh, well, it's not going anywhere. And I'm frustrated. And he read something on Reddit about GameStop. First things first, you do nothing. Do not, do not get
your financial advice. You're investing the advice from a Reddit post or a forum, you have to bring in critical thinking. You got to bring in a process. You got to bring in a system. You want to work with someone because you know nothing about these people. But what they did is that he decided, oh, screw it. Those were his words when he wrote it in his, in his blog post. Screw it. Screw it is an emotional term. So what he did is he was making an emotional decision to jump in. So
he put all his money into GameStop. Not only did he put his money in, GameStop started to ramp up. It got to $60 a share, and it was moving up. He thought, oh, my God, they're right. So he put another $5,000 in. Then it followed up and went to his broker and says, hey, $40,000. Put it on Gamestop. He had $200,000 that was inherited, and he took 40,000 of it, 20% of it, and put it in there into GameStop. And so he put. Put that.
It went up to $480 a share. He was freaking out, saying, oh, my God, I'm up $200,000. $200,000. This is feeling good. He was planning his millionaire life. He was planning on paying the house off. He was planning on paying the car off. He was looking at all the things. This is exactly what happened, happened with me, with the Ponzi scheme. Okay? And then all of a sudden, you know, it closes on that Friday at $320 a share. $320 a share. And now over the weekend,
he's saying, oh, this is good. This is good. And then on Monday, it starts to tank. On Monday, it starts to drop, and it starts to head down. And people on Reddit, the same people that were boosting it up with their talk, said, hey, it's just price manipulation. Don't sell. Don't sell. Don't sell. Don't sell. Why not? Sell? Because it supports them. Because they're the ones that are making the money on it. They're the ones that make
the killing on it. This guy didn't decide to sell until he put a stop loss in at $50 a share. But in the end. In the end, he ended up, instead of $200,000 up, like he was $20,000 lost. He lost $20,000. Why? Because he was on an adrenaline run. It had no business. It had no business model. It had no growth. It hadn't. It doesn't have the profitability to sustain those stock prices. When you invest, we invest for a Business Plan. We invest for Business GroWth, cash flow and
Profitability. In the Long Term, there has to be something behind it. Otherwise, all it is is conjecture, speculation, gambling, and chance. And that's what happens. And that's what happened to him. So how do you avoid it? I think that there's five things to think about in order to avoid this. And so I'm, I'm gonna jump to the iPad. Let's walk through them in making sure that you
avoid this happening to you. And, and the first is this is, is to look at it and say, the first thing I want to do is one, get educated, y'all. Not Reddit. Reddit is not going to educate you. These are a bunch of people. You don't know their background. You don't know their success. You don't know if they're telling you the whole story. You don't know any, and they have no obligation to you. So they're talking about things and you're making choices and decisions. No, get
educated. Pick up books. Get my book. Building your money machine. If you don't have it, you should. It's going to walk you through a simple path to building financial freedom, to build a financial machine the way that I did, the way I've done it for my clients, the lessons I've learned from the mistakes I made. So you don't have to make it. Go through courses, programs, and watch. Watch what they're doing. One of the key things for me is I don't sell
investments. I don't sell insurance. I got nothing to sell you but your dreams. I just want to serve. I want to help you make sure that you make the right decisions so you don't end up like this poor soul did, losing $20,000 because he had an adrenaline rush and an itch that he wanted to scratch, okay? Or me, who lost one third of his net worth because I was clueless. Not, I was clueless. I ignored the rules, I ignored the things,
and it felt good at the time. Okay, so what shows, what podcasts are you listening to, what books are you reading? How are you? You don't need to become an expert, like maybe me, because I eat and breathe this every day, but enough to understand the decisions you're making and why you're making the decision, so you can have some critical thinking around your investments. Okay? So that's the first thing. Number two is long term, you, investing requires patience. Okay? The
market. The market is going to do this. It's going to go up and down in the short term, but look what's happening with the market long term. It's going up. Historically, over 100 years, the s and p 500 has returned 10%, okay, 90% of the time, the market has been at eight, has returned 8% or above, okay. Never below 4%, except for one or two times in 20 year averages. 20 year holding periods, okay. Individual years, yes. It's lost money, but that's why we look long
term. 20 year holding periods, 90% of the time above 80% or higher, okay. 20 year holding periods, okay, at 59% of the time at. At 10% or above. Point being is that we have to look through long term, and if we're going to have long term, we got to have patience. You got to get in the game and stay in the game. There's another reason to get in the game and stay in the game. It's something that I call the wealth creation curve, okay?
It's because we have to navigate something called the wealth flat line, okay? So if you look at it, the wealth creation curve looks like this. And in this section here is something that I call the wealth flat line. This is where you start to have a challenge, because you're putting money in. You're listening to me and I'm saying, put money in. Put money in, and you're not
making much. At the end of the day, you look at it and say, I've been doing this for six, seven years, and I haven't made much money. This is stupid. No, it's not, because you still haven't gotten to the point over here, which is the acceleration zone. But the only way you get to here is a four letter word called time. We have to serve our time. We have to make it work, because this is the subtitle of my book, is saying, we're getting your money to work harder for
you than you did for it. This is the subtitle of the book. This is where your money works harder for you than you did for it. Think about this. I saw this. This calculation done by some dear friends of mine, Brian Preston. He said he put $10,000 away, $10,000 away a year. At 8%, it will take 7.6 years to get to $100,000. Now, $100,000 is the hardest, is the most difficult threshold to get to because it requires new disciplines, new
habits, new choices, new money, things that you've never done before. So the first hundred thousand is the hardest, 7.6 years to make it. It takes you a total of 20.6 years to get a half a million dollars at $10,000 a year. Okay? So now, you've gone 20.6 years to make a half a million. You want to get to a million. The second half a million. To get to that second half a million takes only 7.5 years. It takes you less time to do a half a million than it took you to do 100,000.
Why? Because you're in the acceleration zone. Why? Because your money is finally working harder for you than you did for it. But you had to go through the flatline to make it happen. So. So education, think long term. And then, number three, I want you to be diversified. Okay? Because here's the. The bottom line. If you want an adrenaline rush, get in one stock. Get in Tesla. Tesla goes up, you know, 20 points in a day. Down 20 points. Some of these stocks will fly.
Some of these stocks will tank. But the point is, is that what do we want? We want a consistent increase over a long period of time. The stock market goes up eight out of ten years in any. If you start to look at a ten year period and beyond, 90% chance of it being up. Okay? But the thing that we need to do is mitigate our risk. The way we mitigate our risk is making sure that we don't invest in single stocks. Now, complete transparency. I invest in single
stocks, but I don't. I didn't do it at the beginning. I have broad based ETF's, index funds. That's the. That's the base of everything I own. Low cost, low fee. So the majority of the returns come to me. I'm investing in 500 companies, thousands of companies at a time. So if one company goes, goes south or goes to zero, even, it's going to impact it, but nowhere close to. If I held that company itself. Okay, you
can't. You want to make sure that you have a diversified portfolio because it reduces the overall risk, eliminates the huge fluctuations, and puts you in a place where you have a higher probability of success. Okay. Number four is to follow a proven recipe. For us, it's the wealth priority ladder. It's something that I write about in my book. It's one of the core frameworks that literally tells you specifically what to do with each dollar.
How do you allocate it? Where does it go first? Because otherwise, we're subject to interpretation or temptation. We're subject to emotion. We're subject to the marketing speak. We're subject to what we see on Instagram and TikTok and all the stuff that's going on around us, instead of sitting back and saying, let's follow a system a
system that says, here's the vision I have for my life. And from that vision, I create a plan to make sure the vision becomes a reality, that if this is what I need, then I'm going to make that the reality. And now from that plan, I set the strategy to put the plan in motion. And from the strategy, I define the tactics that make it real. And from the tactics, I set my action steps. And now any financial decisions driven by the plan, driven by the vision, and
I don't get caught in emotional swings. I don't get caught in some dopamine hit that gets me to invest in something that didn't fit the plan. So now, all of a sudden, everything I run through is a system and a process that says, hey, does it fit the process? Does it fit the plan? Does it fit in the wealth priority ladder? Does it? Where does it fit? Oh, I'm not there yet. I can't do that and follow the rules because it has proven to proven
results. All right, and then the last thing here is, this is number five. Have a review rhythm. What do I mean by this? We don't set it and forget it. We don't take a passive approach to our. Our money, our business, our wealth, our financial future. If you do, it will wither and. And fail. It really will. Just like any other relationship. Your money, your wealth is a relationship. And if I take a passive approach to relationship, my wife and I just passed 13
years married. All right, y'all, our relationship wouldn't have lasted 13 minutes if I took a passive approach to it. I had to be active. Now, it doesn't mean that I'm with it every day with my money, but I am checking the pulse on the patient regularly. I'm going to look at my account statements at least monthly. Now, I look at mine much more often because of what I do. And I'm analyzing and doing that. You don't need to, but at least check your accounts. What's
your monthly rhythm? What's your weekly rhythm? What's your quarterly rhythm? What's your annual rhythm? What are you looking at on each of those rhythms? Okay, weekly, I see what my cash in, cash out is. Monthly. I'm looking at all my account statements as balances and performance. Quarterly, we go deeper into performance and trends and are there things that we need to change? At six months, we're doing planning and things like that. At one year, we are relooking at the whole
plan, the strategy, and seeing if we need to make any changes. And along the way, my wealth team's with me. But there has to be a rhythm where you're going in and checking the pulse on the patient. It's. Listen, y'all. Okay? I was checking my money more often and more frequently than I was checking my health. It's just like your health. I had not seen a doctor for seven years, and then I found out that I had cancer. And then I found out that I had a 7.5 centimeter tumor in my
bladder. Had I seen a doctor sooner, it may not have stopped the cancer, but it certainly wouldn't have allowed it to grow to 7.5 centimeter tumor. And so I think that in all aspects of our life, money included health, relationships, all of it. We need to be checking in. We need to have a review rhythm. We need to be looking at it on a regular basis to make sure that we're building towards where we want to go, whether it's your physical well being, whether it's your relational well being or
your financial well being. All right. When you do that, when you do that, the fun won't be in the investing, the fun will be in your life, and there won't be an adrenaline rush from the investing itself. The dopamine hit. The dopamine will be in your life. I hope that this helps. I hope that this gives you a perspective and that you come away from it and say, hmm, I'm going to use a systematic approach. I'm going to follow a proven recipe. I'm going to
get educated. I'm going to think long term, and I'm going to review it on a regular basis, because when you do, you set yourself for a higher probability of success. And finding your path to financial freedom, which is what I'm on a crusade to do, is to light the path to financial freedom for a million families, and I want one of them to be you. All right, I hope you found this of value. I hope that this is helpful to you. And if you have any questions or need anything
from me, reach out, let me know. Leave a comment. All right. Until I get a chance to see you in 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 lose you. See you soon. 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 forward Slash group, and I'll see you there.