I get the opportunity to work with successful business owners and real estate investors every single day. I learn from them.
And one of the things I learn is how they make and keep their wealth. I don’t take “trust babies” as clients. Although I know some of my colleagues do. Face it, the money is really good. But honestly, I’d rather work with the person who is building something, not just living off someone else’s hard work, planning or just plain good fortune.
And I don’t work with billionaires. In fact, I turned out a very nice opportunity recently, working as part of a billionaires tax planning team.
I said no because I knew the work would consume me. In essence, I’d become an employee. A highly compensated one, for sure, but still an employee.
I’d rather work with business owners, no matter what stage their business is at. I’d rather work with real estate investors, even if the investment is just one single home. To start.
In working with the people I have for years, I’ve learned a number of things.
One is that it doesn’t matter how much money you earn. Once you go past a minimum subsistence level, it’s all just toys. I had a client once you made over a half million a year and spent every single penny of it. He couldn’t even fund a pension account because there was simply no money left.
And I’ve worked with the guy making $50K a year (when he first started he made NOTHING for a few years) who then went on to sell the business for millions.
It’s not what you make, it’s what you keep.
It’s not what you keep as much as what you do with it.
Sure, you could bury your money in the back yard and provided it doesn’t rot away (paper) or get stolen, it’ll be worth something. But how about instead put it to work for you.
An example I heard recently was a guy in California who bought a duplex in the Midwest for $120K. He put 20% down and he’s got $200 net cash flow every month. If you’re doing the calculation on that, it’s a 10% COCR. Cash on Cash Return (COCR) is calculated as the annual net revenue ($2400) divided by the cash in the deal ($24,000).
Not just that return, he also has appreciation working for him. And thanks to the favorable real estate tax laws, he doesn’t even pay tax on the money he makes.
Another example I heard recently was that the new iPhone is 15% of the down payment for a $200,000 rental and it’s a whole lot less likely to drop a house in the toilet.
I love that! But can you imagine how many people will buy that iPhone and not just one personally, but also iPhones for their spouse and a child or two. I bet those same people won’t put that same amount away for a rental!
Let’s talk about business for a minute. I talk about business a lot. If you don’t have a business, start one. Chances are you’ve heard me say that before.
A business gives you income and the opportunity to change the character of your income.
If you’re an employee, you’re familiar with earned income. You show up, work, and you’re paid for the hours, days, weeks, months, or whatever. But it’s just trading your time for dollars. Period.
If you have a business, you can run it that way too. In that case, you’re self-employed. You don’t just have one boss; you have a whole bunch of them.
You can also have leveraged income. In that case, you have to work a little, but others do a lot of the heavy lifting so you get paid a lot more than you normally would be.
You can have recurring income. I love recurring income. That means the money continues to roll in. It’s not a case of needing to sell everyday in order to make money.
You can have passive income. In that case, you don’t have to do anything at all. You already put the work into creating the product that you sell.
Personally, I’m working on passive, recurring income from my business and another venture. At this stage in my life, I don’t want to trade my time for money as much. I want to build sources of recurring income.
What kind of income are you making? Is your current wealth plan working out for you?
If you want to make a change, how will you do it?
And if you need help putting a wealth-building, cash flow creating, and tax savings plan together that is customized for you, give Richard a call at 888-592-4769. Or you can drop him an email at Richard@USTaxAid.com.