the bossbabe podcast - 387. Get Your Money To Work Harder For YOU with Mel Abraham + Natalie Ellis

Episode Date: June 11, 2024

Let’s talk money + wealth creation. The amazing Mel Abraham joined Natalie today to go deep on how to build your money machine - all without sacrificing the rest of your life. Real talk… wealth gives you choices and the ultimate currency is actually your time, not your dollars. This episode will give you the tactical + practical insights you need to start getting smart with money and set yourself up to make more without working harder. Press play and let’s dive in!  TIMESTAMPS 00:00 - Introduction 00:56 - Balance vs Harmony 04:15 - Controlling Your Time + Cash Flow 7:47 - Wealth Creation + Making Decisions with Dollars 9:37 - Every Dollar Needs A Job Description 11:06 - Wealth Priority Ladder  13:51 - Stress + How Much Is Enough? 18:56- What Is Investing + How To Do It 29:23 - Cash On Hand + Liquidity 36:20 - Mortgages + Assets 42:12 - Define Your Vision 43:37 - Building Your Money Machine 45:54 - 5 Types of Income 51:37 - Transactional Decision Making 57:21 - The Currency of Time + Joy RESOURCES + LINKS Save your seat for James Wedmore’s totally free, 3 day training: Rise of The Digital CEO at bossbabe.com/rise  Join The Société: The Place to Build A Freedom-Based Business Get Our Weekly Newsletter & Get Insights From Natalie Every Single Week On All Things Strategy, Motherhood, Business Growth + More Drop Us A Review On The Podcast + Send Us A Screenshot & We’ll Send You Natalie’s 7-Figure Operating System Completely FREE (value $1,997)  Pre-Order Mel’s Book & Start Building Your Money Machine FOLLOW bossbabe: @bossbabe.inc Natalie Ellis: @iamnatalie Mel Abraham: @melabraham9

Welcome back to the Boss Babe podcast. You guys know I love talking about money and building a business that creates true freedom in your life. And today I am really excited because I got to sit down with my friend Mel Abraham to talk about how to create true wealth and build a money machine that works for you. We dive into so many topics like how to control your time, the importance of cash flow, why every dollar needs a job description, how to invest, the five different types of income, and so much more. I feel really passionate about women getting access to this type of information so they can get money working harder for them, not the other way around. So without further ado, let's get into the episode.

Mel, welcome to the Boss Babe Podcast. I'm so excited that you're here. Oh my God, it's so good to be here and get a chance to share this time with you. Oh my goodness. So I'm holding your book. I have been through it and I've like dogged so many pages that we get to talk about. I was just saying to you on the podcast, I talk about money a lot. I love talking about money and making money. I was just saying to you on the podcast, I talk about money a lot. I love talking about money and making money. I think we should be doing that, especially women. We should be more unapologetic about it. I don't talk about what to do when you've made money. And so I'm so excited to get into the sensible stuff. So the title of your book is Building Your Money Machine. I mean, this to me sounds like an absolute dream. So just to kind of take it back a

little bit, I want to understand what your philosophy on money and wealth and that as a vehicle for living a good life, like what is your philosophy on that? And where did that come from? So we'll go back a little ways because actually a lot of how I started to look differently at money came at the hands of a six-year-old, believe it or not. I mean, here I was. So I'm a CPA. So I'm a financial guy. And I'm an entrepreneur and I'm building businesses, that type of thing. But I became a single full-time dad. My son came to live with me at five and a half years old. I think that I'm doing things right. All I know is I'm working hard to build the money and to get all the earnings and generate the income. And then he drew a picture of me and he comes home one day and says, daddy, daddy, daddy, I drew a picture of you at school today. And I'm thinking, oh, cool. This is going to be us

playing ball, this and that. And I look at this picture and it was me standing in front of two computer screens with a phone in each ear. And it was that moment where I had a choice and I had a decision to sit back and go, well, I could look at him and go, hey, kid, man, we need this. I got to do this to keep the roof over our heads, to do the things that we want to do, to have the life that we want to have. But in his eyes, we weren't having that life. You know, I could have said, look, the profits really matter. And he was going to, if he understood what profits were at six, he really would have looked at me and said, I don't need your profits, dad. I need your presence. And that hit me hard. Um, because the greatest gift I was given was to be a dad at the time and I was failing it. And so I had that, that was the shift to get me to say, okay, how do I do,

how do I do business differently? How do I do money differently? Because what happened is that people were asked, they, everyone got in my ears and said, well, Mel, the problem is you need work-life balance. And the fact is that as I struggled to figure that out, I said, I think actually balance is a myth. This idea of balance means that you've got a tug of war going on because you've got a weight on one side, another weight on the other side. And on average, we're okay. And I don't think it's balance we need. I think it's balance we need. I think it's harmony we need. And harmony, I realized, came from intentionally deciding what I did with my time each and every day.

And allowing that to come through. And the only way that I could figure out, because I was, look, I was an accountant at the time. So I had the worst business model ever. You know, swap hours for dollars, get on the treadmill, keep running, you'll make money. You get off the treadmill, no more running, no more money. You know, it's like, it's horrible. So I had to look at it and say, okay, in order for me to control my time, I actually, it isn't about the earnings. It's actually about the money. And I needed the money

and to control the money side of it so I can control my time. And so that's when I, that's the whole concept of me realizing that, hey, we're all taught to earn. We're all taught to make money. We're taught to create this earnings machine. But we are also given this misconception that the earnings machine becomes our wealth, that the earnings machine becomes our freedom. And anyone that's been in business very long, you realize it isn't. It isn't your freedom. It isn't your wealth. What happens is that they don't tell us that we need this money machine.

Because the earnings you create was meant to create cash flow, was meant that the work that you do was meant to solve a problem, to have an impact. But it wasn't meant for freedom. It wasn't meant for control. It wasn't meant for legacy or wealth. What we do with the money in creating this money machine, this thing outside of us where we separate our ability to

earn from the efforts we put in is when we all of a sudden find the freedom, the control, and the legacy. And that's where I started looking at it. How do I separate myself from the hourly rate, from the hours? And the only way I could figure out how to do it was to build something outside of me that would work without me working it. Hence the subtitle, getting your money to work harder for you than you did for it. Oh my God.

Everything you've said there, I'm like, yes, yes, yes. We do sometimes think that what we earn is our wealth and that's so not the truth. And so much freedom of time will come from having that wealth We do sometimes think that what we earn is our wealth and that's so not the truth. And so much freedom of time will come from having that wealth because that wealth will give you choices. I'm so all in. So what did you end up doing and figuring out?

And for someone listening who is in that place where they're like, okay, you know what? I'm making a good living. My business is successful. I'm making good money, but I don't really know what I should be doing with the money. And what does it mean to have a money machine? Yeah. So two things. I think first I became ultra intentional with my time and realized that the ultimate currency was time and not dollars. And so for, so one of the things I did, it has nothing to do with the money, but it does have to do with the quality of life. I don't think you separate money from life.

When we're talking about money, we have to talk about how it impacts our life. And so one of the things I did when I said harmony comes from intentionality is, is like with Jeremy, we created a calendar. There was red zones in the calendar. He knew that those were his because I was traveling. I was speaking. I was doing all kinds of things. He knew that the red zones were his well in advance. And you'll see how this compares to your money too. And, and then he also knew that any other color on the calendar, if he needed me, he just needed to change it to red. And I was there. And it shifted our relationship forever. He's 33 now, two little girls, beautiful bride, doing well. They've got three homes and a multimillion dollar net worth. So the brainwashing

worked. But my point is that when we become intentional, we'll actually make some choices because your wealth creation and this whole idea of a money machine is less about the money we make and more about the behaviors we have. Because we make choices that we think we don't have a choice, whether it's career choices, whether it's I went and got this college degree, my spouse, my siblings, my society expects me to do these things. And we make these choices, but these choices get us results. And if we want different results with our money, we just need to make different choices. So rather than sit back and say, I just got to make more, we just need to understand how to do that differently first and know that it is a behavior.

It is a habit. It's a decision that we're making with every dollar. And one of the mistakes that I think we tend to make, and this is how that whole calendar thing plays into the money side. Also, imagine for a moment, you have a team, but imagine you want to hire 10 more people on your team and you turn around and you say, I'm going to hire 10 people. So you put an ad in the paper. I don't know we do ads in papers anymore, but okay. So you put an ad out for these 10 people. You bring them in. They're in the conference room their first day.

And you say, listen, here's the deal. I have no job description for you. I've got no tasks. I've got no goals for you. I have no title for you. I want to double my business in six months. Let's have at it. And I'm like, no one would do that.

You wouldn't succeed. But yet what happens is we actually do that with our money. See, every dollar, just like before you hire an employee, you create a job description. You create a role. You create values, you create tasks, you understand what they're there to do before you hire them. The same thing with every dollar. Every dollar that comes into your life must have a job description. And you got to give it the job description before you earn the dollar.

So now some people would sit back and say, oh, you're talking about a budget. I said, no, I'm actually talking about a plan. And the plan, because budget has this feeling like a diet, you got to suppress things, you got to deprive yourself of things. No, it's a permission to spend. It's a permission to do something because you've already allocated it. The dollar knows that when this dollar comes in, it's for the mortgage. When this dollar comes in, it's for childcare. When this dollar comes in, it's for food. When this dollar comes in, it's for my financial future. It's already done. The decision, the friction, the complexity is gone before we ever get the money. And that's the first step in creating the decisions, the behaviors, and the habits is to know that what we need to do is give a job description for every single dollar.

And is this part of your wealth priority ladder? Like when you're, yeah, when you're thinking about a job description for money, so let's say, you know, listening, I'm like, okay, but I don't even know what jobs I would have. Like I know some of the expenses and let's say someone listening is like, okay, I've got my expenses covered. Now with the excess, I don't really know what I'm supposed to do. That's like textbook smart with my money. I just know I have some leftover money. Is that where that priority ladder comes in? That's exactly how the wealth priority ladder was created, was sitting back and saying, okay, is there a recipe or a way to look at this and say,

every time I get a dollar, can I easily decide where it needs to go? And that's what the wealth priority ladder is. It's basically these phases and these stages that you'll find yourself in and you sit back and say, oh, this takes the decision out. Now I know the first step of the wealth priority ladder is really just to give you some breathing room. 60% of people these days are living check to check. They cannot sustain themselves with an unexpected expense of $1,000.

That's a problem, okay? You have a medical expense and you can't pay the deductible, those kinds of things. So what does that do? It puts us into debt. It puts us behind. It puts us under stress and it affects the quality of our life. It's not your emergency fund, but it is. So if something makes a left turn on you, which it will, you're okay. It's to give you that breathing room, not allow you to put yourself in a ditch or in debt or in a problem. And so the very first thing, and people go, well, how do I do that? And I go, look, don't tell my wife. But if I just went behind me, there's so much technology in that closet that I am not using. If I needed $1,500, I could put it on Facebook Marketplace and get it in an instant. Just there's ways to do it.

It's a choice. It's a decision. But the whole purpose is to give you breathing room. There's a 2022 study from the American Psychological Association. 72% of people said that they are stressed about money. That's almost three quarters. 22% said extreme stress. It's affecting health. It's affecting relationships. It's affecting productivity. Let's relieve that. Oh my goodness. There are so many places we can go with this. And the stress, I want to get into the wealth priority ladder, but let's talk about that stress piece because, okay, one of my thoughts

that I have on this is in our society, it's constantly, I want more, I want more, I want more. Never being satisfied or happy with the status quo, what's current, even if, you know, bills are paid, money's in the bank, there's always more. You know, I've seen this in people I know and I look at them and I think, you have everything you could possibly need. Why are you still pushing and sacrificing what's really important to you for more?

How do you think about that stuff? So here's the real side of this. I actually didn't at first. So we'll go back to 2009. And I was in a bad relationship. I was trying to build some things. I got on a bike. I was angry. And I was biking down to the gym just to work it out. And I'm coming down the hill and my shoelace gets caught. Flipped the bike. I clipped the brake. I clip the brake. I flip the bike.

I end up on my head. I end up with a grade four concussion. I can't, I'm stuttering. I have no feeling on the right side. And a dear friend of mine who retired at 30, 36 years old. Three days after I get out of the hospital, I'm in a neck brace. He picks me up. He says, I'm taking you to lunch.

And he looks at me as we sat down with our sandwiches and he says to me, how much is enough? I go, dude, man, I just hit my head. I got a grade four concussion. And now you want to talk philosophy? And he says, no, seriously. He says, you have no clue where your finish line is, do you? He says, it could be miles behind you. It could be miles in front of you and you still wouldn't know. And so what I know is going to happen is that you got in this bike accident because you're angry, you're distracted, you were running, you were running and running. You'll heal yourself from this. And if we don't know where, what the enough, if you don't know what your finish line is, then the first thing you're going to do is you're going to get back on the bike or worse, you'll be in a car and you will do this again until you can't do it again he says you need

to know where your finish line is not not to sit back and say i'm done but to sit back and be able to appreciate what you have done and that's when it the light went on. I said, oh, we, you know, the whole concept of start with the end in mind, that one of the first parts of the book is actually sitting back and say, hey, where are we going? Let's define your vision. Let's define the why, because you're right in society today, especially with the comparison and social media, we see people and they go, oh, I could get that. But are we living our life or someone else's life? And when we get clear on this idea of this is my life and it is a tent in Montana or a yacht in Monica, whatever the definition is, okay. If there's any question,

we'll do the yacht. Um, you know, so if there's any question of where you're going, then what happens is that we will, we will be chasing something financially and we'll never know when we arrive. And it isn't about settling. It's about being content and grateful more than anything else in the world. And so, look, my finish line has changed and I've moved it repeatedly and I'll continue to move it. But the level of gratitude, appreciation,

and understanding of where I am and what I've done isn't lost anymore. And it was lost before. I love that we're talking about this because I do think that's such a big piece when we talk about money and wealth and freedom. It's like you won't be free if you don't know what your, you say your finish line is you'll never find that freedom because you might have everything you've ever wanted but you're not willing to spend your time the way you've said you wanted to spend it because you're going for more because you haven't sat back to acknowledge it I feel like I had such a breakthrough around that and it just changed the way I did everything I was willing to do anything I love that okay so digging into the

wealth priority ladder we're not going to go into every single element of it but I have questions on it that I'm so curious on so you talk about having a peace of mind fund and things like that and then you talk about freedom moving up this ladder which I by the way I love all of the um the graphics and pictures in the book I'm like oh my god this just makes it so easy for my brain to conceptualize I'm like give me a roadmap and I know my audience are the same like just show me where I'm going so going up it's the fourth step it's freedom and you say 20 to 25 percent of your income goes to investing can we talk about what that means when people hear investing they're like wait am I investing in like companies, the stock

market? What does investing mean? And let's say someone is in a place where, you know, they don't have debt. They have that peace of mind fund. Well, not inside the book. It's like specific of what it should look like, but okay. We moved to investing. What is investing? How do we do this? So here's, here's the way I look at it at my job. First, I want to keep people safe. So my choices that I make from investing and from a wealth creation standpoint is what's the safest pathway to get you there? Because we can swing for the fences all the time, but we're going to tend to strike out more often that way. So when I think about investing, I ask myself, how do I maximize what I can get out of it without taking on a lot of risk?

At least in the US, the first thing, and this happens in other countries too, the first thing that I want people to do is to take advantage of any free money they get. So we're saying 20 to 25% is where we want people to start putting money away. But then the question is, okay, well, where? What do I do with it? What accounts do I go into? Well, for instance, in the US, we have 401k plans. Now, we can participate in a 401k because we can put $23,000 away this year. But the question I have is, does your employer match? Because sometimes the employer will match your first 4% that you contributed. They'll match that 4%. So the first step is that, okay, can I get free money from my employer? Okay. And I need to put that money in first because I get 100% return immediately. So the very first thing I ask myself at the bottom level of building

the freedom is, is there any free money I have access to, either through an employer match? Like my wife, she works for a public company, and she actually can buy the company stock at a 15% discount. So we put money in that, buy it at a 15% discount, we can sell it, we made 15% discount. So we put money in that, buy it at a 15% discount. We can sell it. We made 15% immediately. Okay. Now there's a tax on it and all that stuff. I get it. But the first thing that I want to capture is the free money first. And if I have access to it now, if you don't, if you don't, that's fine. Then you just kind of go to the next step, the next stage. But the first, we don't want to leave. If I came in, because I hear this all the time, so many people, like I sit on boards

of directors, we're just having a conversation with employees. And I said, let me ask you something, because a lot of these employees were not participating in the 401k. I go, if I came in the door and I started dropping $100 bills, how are you all going to pick it up? And they go, all of us? I said, great. Why are you not doing it?

Because the company's dropping $100 bills for you. In order to pick it up, you got to put $100 in. They give you $100. And they go, oh, we never thought about it that way. It's free money. Go grab it. So that's the first step is to look at it and say, okay, I'm going to put it, I'm going to see, can I get free money? Now, maybe you are an entrepreneur, many of your audience is probably entrepreneurs, so

they don't have that. Okay. So we don't worry about that. The next step is, okay, are there tax advantaged places to put the money? For instance, the next step up that I tell people is let's maximize a Roth. Okay. And so the Roth right now, a Roth IRA, you can put $7,000 in. And what a Roth is, why this is so magical, if you qualify, is you don't get a tax deduction up front, but it grows tax-free.

And when you take the money out at retirement, all the growth, everything's tax-free. How big is this? Watch what happened. Peter Thiel, okay? Smart dude. Here's what he did. He bought, you know, he put his money in the Roth, a couple thousand dollars in a Roth. When it came to buy the stock of PayPal before it went public, he bought it inside the Roth

for a couple thousand bucks. Oh. Guess what? His Roth IRA and everyone is in up in arms. Any of us could do it. He didn't do anything wrong. But they're all freaked out because the value of the PayPal stock inside the Roth is a billion dollars with a B. And when he takes it out,

he pays zero tax. A Roth is powerful for long-term investing if you do it right. So that's the next step that I try to get people to do is say, let's see if you qualify for it because there's income levels because the government knows this is really, this is a sweet deal. So if you make too much money, we're not going to let you use it. Now there's a backdoor way to get in, but, but, and backdoor not meaning that it's illegal, it's legal. But that's the first, the next step is that, hey, are there things that I know that I can, that I, that I can get into and make my investments and let them grow completely tax-free? Most of your investments in the stuff that I'm doing right now is stock market investing. Okay.

And the reason for it is this. I can reduce my risk by diversifying my portfolio. I can buy a basket of 500 stocks. If I have $50,000, and this is important because a lot of people will say, well, what about real estate? I love real estate. I don't love real estate at the beginning. And here's why. Remember I said I want to keep people safe. If I have $50,000 to invest, I can put it as a down payment on a property. The problem is I get one property. And if that property has a bad tenant,

that property has a bad repair, that property has any issues or a tenant that doesn't pay and you can't get them out and you got to go through an eviction process that takes two years. You're still having to pay the mortgage. At the beginning, if you do a bad real estate deal, it can destroy you because you don't have the cash to carry it. So I don't like real estate at the very beginning because of that. It's the same reason I don't like real estate at the very beginning because of that. It's the same reason I don't like single stocks. I don't want people to invest and say, well, which company should I buy? And I go, I don't know. Here's a guy. This was a true story. Reddit on Reddit, this guy posts, when First Republic Bank, First Republic Bank was over $220 a share. And a couple of years ago, they had some issues. He had invested $250,000 in First Republic Bank. And when it got

to about $100 a share, he posts in WallStreetBets, Reddit, he says, first things first, y'all do not get your financial advice from a forum. Okay. But he asks, what do I do? It's down to half of what I got. Then he posts again, just a little while later, it's down another 50%. So now he's lost 75% of what he invested, 250,000 that he invested in First Republic. I don't know if he got out, but here's the scary thing. The last line of his second post said, this is everything I had. If he didn't get out, First Republic went to zero. The reason I say that we invest in a basket of stocks through an index fund or ETF at the very beginning is because I don't want a First Republic or a bad real estate deal to crater your financial future. It's to be safe. So at the very beginning, whether you're doing it in a Roth or you're doing it in a brokerage account,

at the very beginning, I want people to go into a low cost, low fee ETF, exchange traded fund, or index fund. So you're not paying fees. You're not paying commissions. You're not creating complexity. You're not creating a lot of effort. And you do it really easy because I want to remove as much friction from the investing decisions as possible to make it as easy as possible to get you in the game. I need you on the field. And what that does is if I buy an S&P 500 index fund, I'm buying a piece of 500 companies. Now, amongst the 500 companies, there's probably going to be a First Republic Bank, but there's also going to be an NVIDIA that went up a thousand percent.

Let's take a quick pause to talk about my new favorite all-in-one platform, Kajabi. You know I've been singing their praises lately because they have helped our business run so much smoother and with way less complexity, which I love. Not to mention our team couldn't be happier because now everything is in one place so it makes collecting data, creating pages, collecting payment, all the things so much simpler. One of our mottos at Boss Babe is simplify to amplify and Kajabi has really helped us do that this year. So of course I needed to share it here with you. It's the perfect time of year to do a bit of spring cleaning in your business, you know, get rid of the complexity and instead really focus on getting organized and

making things as smooth as possible. I definitely recommend Kajabi to all of my clients and students so if you're listening and haven't checked out Kajabi yet, now is the perfect time to do so because they are offering Boss Babe listeners a 30-day free trial. Go to kajabi.com slash Boss Babe to claim your 30-day free trial. That's kajabi.com slash Boss Babe. So I'm not exposed to a lot of, to the level of risk I would be otherwise. So everything in that freedom section, especially at the very beginning, is built on saying, how do I diversify away the risk? How do I make it as easy as possible?

And so the first place I'm gonna put you in is taking care of free money, tax advantage money, and then regular accounts, but we're gonna invest it in index funds, ETFs, low cost, low fee, low complexity, and remove the friction that's holding you back right now. I love how simple you just made that. It makes so much sense. So are you saying, so I'm curious, in your book, we talk about eliminating debt, having your expenses, having a peace of mind fund, and then starting to invest,

do you think there's a certain percentage of cash we should hold versus money that's invested? How do you see that? This is a great question, especially right now. The easy answer is right now when we can get 5%, 5.5% on cash in a high-yield savings account, it's easier to say, hey, you can keep a bit in cash. You're getting 5 and a half percent, whatever. The problem is when interest rates drop, and they'll drop, we won't get down to where we were for a while. But I think mortgages will come back down to about 5%. They'll level out in 5%, 4%. But that also means that what we're going to get on savings accounts is going to go down. So now all of a sudden, you're going to get 2%. So it's not as magical

to have a lot in cash. But let me go back for a couple of reasons, and then we'll talk about the percentage. Remember I said that every dollar has to have a job description. So that means that the dollars you allocate, or your peace of mind, the dollars you allocate for big purchases, say you know that you're getting married in a year and you need to save for the wedding, or you know that you want to buy a house, or you know that you're going to have a child and you need to put money aside. That money, you never want to put at risk because the market goes up and down. And if I invest it, and when I need it, the market's down, I take a loss. So the job description for those dollars is to give you peace of mind and liquidity to take advantage of the things you need. So it's serving its purpose. Its job isn't to make a lot of money. Its job is to be safe

and keep you safe. And when we understand that, we're okay with putting it in cash. Now, why do we have cash? I need it for liquidity. i need it for peace of mind i needed if things happened look i got in 2019 got hit with a diagnosis of cancer shut everything down now we had the machine if i didn't have the machine but had the the peace of mind fund i still would have been fine but the machine took care of us i didn't need the peace of mind fund as much. So things can happen. And so I say that I want to have somewhere around nine to 18 months, depending on your age or stage of life, and we'll talk about how that goes, in liquid cash. What's that for? It's for emergencies and opportunities. Markets go up and down. There's opportunities out there. And the greatest time to create wealth

is when people are living in fear. And it sounds like we're taking advantage of it, but we're not. And when markets go down. But in order to do that, we need liquidity to do it. So I'm sitting, honestly, I'm sitting on probably 30% cash in a 5.5% fund. We're making plenty of money on it enough. And I'm in a place where I don't need to take risks because I know that there's going to be opportunities and we take opportunities and we do that. Now, here's the other way to look at it. Why do I have so much in cash right now? There's a difference between you and I. I'm going to be 63. You're nowhere close to it. The number of years or the desire to work, I love what I do and I'll continue to do it

as long as I can. And I intend to do it for a while, but I realized that my runway is shorter than someone else's. And when that runway shorter, I might have a bit more cash available to cover me. If I'm in my twenties and I'm just getting out of college and I'm living at home, I probably don't need anything and I don't need that much. So I might cut it down to three months. If I'm in my thirties, we call the thirties the messy middle because that's when family transitions and you're buying stuff and all of a sudden expenses get out of hand and you're thinking of adding kids to the mix and all that stuff, you're going to probably go further and say, Hey, I need, I need a good nine months of, of runway in case something happens, or I decide to take a maternity leave or paternity leave or

whatever that you have. The, the whole idea of doing this is to have choice and not have it forced on me. The beautiful thing with me going through my cancer journey is that I had choice. I could spend my days going through the therapies and all the treatments and everything I needed because I didn't need to worry about going to a nine to five or a job or do anything. I want everyone to have choice. So that will start to push the cash up a little bit. If you're in a job, if you're in a job, and most of this I'm talking about is how I would coach someone depending on,

on where they're at. And we refine it. If you're in a job that is a very unique job, that is hard to replace, but there isn't a lot of jobs out there, you might want to extend it a little bit because if you lose the job, getting another job is a little harder. If you're in a family with two incomes, then maybe you don't have to extend it. So there's a lot of factors that kind of go into it. General rule, I tell people nine to 18 months, call it 12. I know the customary thing is to say three to six, but entrepreneurs, especially our businesses can take a turn really quickly. If it is dependent, if it's a personal brand that is dependent on you and you have a situation like I did, you need that, that runway, you, you need that runway. You need that runway. And so three months is nowhere

close to enough. Six months is, eh, that's why I'm saying 19, 18 months average, call it 12, gives you the space to make some moves, some space to do some things and to make sure that you can cover things in the process. And so I think especially personal brand entrepreneurs need to think through that because it's so reliant on us and being able to be part of it. Yeah. It's such a different ball game for entrepreneurs as well. I remember when last year I bought out my co-founder and I was in a place where the business wasn't't an amazing place I needed to take a beat to figure things out and it's nice to have money set away so that you're

not having to make really rushed short-term decisions that actually aren't going to serve you in the long run I think exactly what you said have choices to be able to breathe and to take space another thing that you mentioned on the ladder is accelerate payments on mortgage. And I'm curious your thoughts on mortgage stuff. Because I've talked about this a lot on the podcast of how I have a house in the UK as well that we spend a little bit of time in.

And I decided to buy that in cash. And a lot of people are like, that is the silliest decision. Like when it comes to finance, such a silly decision. For me me I did it for peace of mind like that's just me like I'm a peace of mind person above anything else um but I have a mortgage on my current house because my mortgage rate whatever I got was very low and like you say in some of your investment accounts for cash you're getting like five percent return so in my mind like, oh, it kind of makes sense that I have a mortgage, but here you have accelerate payments on mortgage. And so I'm like, okay, what does this mean? Like, what's the best way to do any of this?

Cause I feel like I just make shit up as I go along. I'm like, this feels good. It makes sense. Yeah. So God, and I love this question and just full transparency. Got a mortgage on our place. All right. But so there's things that I differentiate here. One and Stephanie doesn't like it when I say it. This is the absolute worst investment we could have made. If I just looked at the numbers. Right. But there are those assets that are financial assets you make. They're investments you make. Then there's those assets you buy that are fulfillment assets. And the reason we purchased this house on the beach was not to make money, but I saw what she felt like and what it made her feel like when she stood in the big room and she stood in the kitchen and she looked at it and I said, that's the currency that I'm trading here. And when we identified, I go, now we just don't overextend ourselves and do it that way.

And the same thing. Could we have bought it cash? Yeah. But we got a 2.75% rate. OK, can I pay it off? Absolutely. But we're not because I'm getting 5.5% somewhere else. Yeah. I, if when interest rates

as interest rates are up six, 7%, that's a different game. I might push people to say, Hey, as you start to get toward those latter years, I want you to be mortgage free. Okay. But in a low rate kind of environment, like, like you're in, like I'm in, I look at it and say, I could write a check, pay the helm off. So the capacity to pay it off is the same as having it paid off in my mind. And so I still have that peace of mind. Now, what that might do is extend out the prior conversation and say, so I'm going to have a little extra cash just in case.

And then, you know, in my situation, I have a life insurance policy that, that if God forbid something happens to me, pays the house off and she's free and clear and she doesn't have to even use the cash, you know? So, but I think that when I say accelerate the mortgages, if they're not low-rate mortgages, then I would start to try to pay them down because at some point, I want you mortgage-free. There's productive debt. There's destructive debt. I don't believe all debt's the devil. But all debt has two characteristics, no matter whether it's productive or destructive.

The one characteristic is it costs interest. The second characteristic is it stresses. It stresses your finances. It stresses your psyche. So we need to know that there is a cost to doing it. But me, I have the peace of mind of saying, well, I can write a check tomorrow. So I'm okay with it and everything. If it was a 7% mortgage, I'd have a different perspective and I'd be really pushing to get out from underneath it, especially at 63 years old, almost 63. So when it comes to accelerating the mortgage, if I'm in a low interest mortgage, I may not accelerate it unless I'm coming up into my fifties where I know I want to be completely debt-free. And even then, like I am, I have investments in cash available to pay it off at a stroke of a pen, then it's as if it's

paid off and I'm okay. And I, so I'm not accelerating it at all. We're paying it on time and, and we're, we've got the other money safely invested in, in, in generating more than what we're paying on the, on the loan. And I'm just going to leave it alone. And at some point, we'll make the payment or we won't, and just let it go and do it that way. Because it's below 3%, because it's at a lower interest rate, it makes sense to do it that way. But to be transparent, we do have a mortgage. Yeah. I love that description. It's like, there's not one size fits all, 100 percent on the fulfillment. It's like, what are you doing any of this for in the first place? If you want that freedom to make choices, but then you're scared to make the choice. That's one full conversation. And then the other is,

yeah. Like if, if the math isn't mathing, don't do it, but if it is go ahead. So it's, it's so interesting as well, just because I'm sure in the next five years, we're going to see interest rates change a lot and the answers are going to be different, but it's the principles that are staying the same. And I think that's what's really important. And that's why I tried to build everything on principles.

So it transcends time, it transcends geography. And we realized that there's a reason we call it personal finance, because it's personal, because it's specific to you. That's why generically, we can't just put everyone in the box. You've got a young child. I've got a dog and another one on the way next week. Amazing. So, you know, you do that. And I think that we need to craft the plan personal to you. Start out with the vision for your life. Start out with your, then your current reality, create the plan absent what society says. Define your success. Define

your journey as you and your partner and the people that really matter want. Then go live it. We're not here to live someone else's life. We've been gifted this existence. We've been given a gift. Our job is to give the gift back to the world and to do it fully, fully immersed. And that's the hopes behind all of it. Yeah, that's the big thing I'm going to take away from this conversation too, is that freedom element. Know exactly what it means to you.

What does wealth look like for you? What is that vision? And craft something around that. Something else that I want to talk about, and again, I just love how easy all of this is made in the book, but you talk about building your money machine. Now, one thing I heard that you say when you had your cancer diagnosis was you got to be fully present in your treatment and getting better because the machine was generating for you. So for beginners who are like, well, what's a machine? I don't understand. Can you explain a little bit about that and what that looked like?

Because I think in everyone's vision, wouldn't that be incredible to know that you can handle what comes at you, even if it's the worst case scenario, you can handle it and you can have the freedom to tackle it head on and have that machine. But a lot of people are like, but what does that mean? What is a machine? Yeah. So great question. So here it is. Bottom line is what we're doing is we're going to take our income and we're going to buy assets. We're going to buy things that will go up in value and generate cash flow. The machine is something that generates cash flow. So not picking on it, but the UK property is not part of the machine because it doesn't generate cash flow. Our residents, your residents, it's not part of the machine, but our investments are. It could be rental. And this is the magic,

is that you get a chance to decide how you want to build it based on your lifestyle. Because there's some people that I know that I've worked with that love real estate. They got their critical mass, and then they started investing in real estate. So they got a bunch of real estate. That real estate's paying rents to them on a regular basis. If they don't need the money, which I didn't before the cancer and I don't now, is that you allow that income to buy more assets. It becomes this cycle, and the machine keeps growing and growing and growing on itself and just keeps compounding. It could be real estate. It could be white labeling

products. It could be residual income. It could be portfolio income, which is really your stocks, your index funds, your ETS. That's where I look at things because when we start out, I think that there's five types of income we can generate. And I hear people say, you know, I want passive income. Let me break the news to you. There's no such thing as passive income. Your relationship with your wealth and your money is a relationship. And when we take a passive approach to any relationship, it withers and dies. So the question isn't how passive it is. The question is how

leveraged your time is. So I look at it through an eyes of leveraged income. And so at the bottom level, there's this idea of active income. It's where we all start. We're swapping hours for dollars. It's a one for one relationship between my efforts and my income. There's no leverage there. There's no money machine built there because it requires me to do it. Then the next stage up is business income. This is where we start to bring staff on and team on. And it's not as dependent on us, but it still requires us. The majority of my income has historically come from active and business income, but that's not leveraged. I can't necessarily walk away from it. And if you're believing down the road that you will sell your business for a huge windfall, I can tell you from professional experience, it doesn't happen as often as you might think.

Okay. So you don't, again, I want to be safe. So you may sell it. That's great. But let's not make sure that that's the only way out. Okay. So then there's three levels of income above that. And this is where your machine is built.

Okay. Just above business income is what we call asset-based income. That means we're buying hard assets, real estate, equipment, stuff that I can rent to people, buy it, rent it, get cash flow. It requires much less of our time, but it still requires time. If you own a bunch of real estate, you might be the landlord, you might have a management company, but it still requires your time, but far less than the other two. So this is where you start to build things in these three levels. So asset-based income is buying assets like hard assets. I mean, I mean, stuff you can touch that you can rent and make money on. Okay. Then just above that is residual income. Residual income is typically create something once and get paid for it on a regular basis.

It could be in network marketing. It could be your downline, okay? In the creative space, like my book, create it once, make money on it over and over again. So you've leveraged your efforts and all that, creating courses, online stuff, that type of stuff, if it's done right, can create and white labeling your stuff to other people. They do the effort and you make the money. You've leveraged yourself out of it. Then the third above that, the top one is portfolio. Stocks, index funds, ETS, this is what I would call paper assets that you have. That's the ultimate in leverage because

I'm looking at account statements. It doesn't take a lot of time when it's done right. So in order to build your money machine, and it's a long way to get to the answer, is that I want to be able to generate a minimum of 80% of my lifestyle income from the top three assets, residual, and portfolio. The mix of it depends on your lifestyle. If you love real estate, a lot of people will have assets. If you're like me, I love real estate, but I don't want to be the person getting the call saying that the toilet's clogged. So I invest differently in real estate. The majority of my assets are in portfolio or in residual. So you can create the mix, but I want to build enough assets that I can generate enough income to cover 80% of my lifestyle or more. Right now, we cover well over 100% of our lifestyle.

Now, because I'm still working, because I'm still doing the things I'm doing and generating income, I don't need that money. So all that money is going to grow the machine bigger and bigger and bigger. And then the machine will then pass on to Stephanie and pass on to Jeremy and Cammie and the grandkids and do that. So what you're really looking to do is acquire assets, either hard assets, residual assets, or portfolio assets that can generate cash flow with a lot less effort than what you're doing right now. That's what the machine is built on. So the paper one sounds like the easiest, the portfolio one. That sounds like the easiest way. So when that's generating cashflow, is that, let's say

your investment portfolio is just gradually growing, you get that percentage increase, is that the money? And this is just like super dumb basic question. Does that money then just go back into the portfolio and it keeps growing? It's not money that you necessarily take out and off spending. Yeah. So my recommendation, and this is what we're doing, is that I'm not living off of the machine right now. Right. Okay. I am living off of everything else I'm doing.

So what I tell the team is you take all the money from the machine and reinvest it to build a bigger machine. Right. So they get dividends, they get income, we buy more assets and we keep buying more assets. And you say, okay, how much is enough and everything, but it gives us margin for error. It gives us room for growth because remember, I've changed my number. I've changed my finish line. And so there's times like, and when life changes, when, when the first granddaughter was born, things changed, you know, when the second

granddaughter thing changed, you know, there's things and you never know. Like my mom is in a, in a, in assisted living. She, she needs dialysis three days a week and she needs a lot of care and, and everything it's costing $16,000 a month to keep her there. She's got the best care available. Choice. And so I sit back. I didn't plan on that. I didn't think about that. But because we allowed it to continue to grow, it gave us choice.

It gave us the opportunity to serve and do things and take care of the people that we love. So when you're building it or when you're still in your earning years, let it build, don't drain it, don't take it out. Because that's the magic of growth. Because now all of a sudden, I will make more money inside the machine that I will outside the machine, because it is working harder for me than I did for it. That's the driving force is that when we get our money gets this momentum, this acceleration after a while where it's just generating, generating, and you can't even keep up with it when it gets up to that point. Now, if you need it, so let's go back to the cancer. I needed to focus on healing. I went to my team and I said,

I said, I'm shutting everything down. So I took all my income from the business and the active, and it paid for maybe 15% of our lifestyle. That's it. And I went to the team. I said, flip the switch on the machine, give me the cash. So they're paying and it wasn't a hundred percent of the cash. So the machine was growing still, but it was growing slower, but I was living off of that. The difference was I wasn't selling things. I wasn't draining things. And then when we came out of it and I said, all right, don't need it anymore. Shut the machine off, let it keep growing. Then the machine actually grew during that same time. Our lifestyle didn't change and we didn't drain assets. It's why at some point, the peace of mind fund doesn't matter because the machine is big enough to carry it. But we need the peace of mind fund for now. But I don't want to sit back,

save, use it, save, use it. That's a different kind of roller coaster. So I'm trying to build something where I never have to worry. Stephanie never has to worry. And so that's how I look at it is I'm going to allow it to continue to grow, not use anything from it as long as I possibly can. And if I need it, you flip the switch and you use it and go from there. And I have an illustration in the book where it shows exactly what I did during the cancer. It's so, so good hearing it explained like this because I feel like you're making it simple. You're making it very, very simple as here's what you do with your money. And it's very much, here's how you're going to get that peace of mind.

You know, you can dip into it whenever you need to, but here's how you can build something that's going to take care of you over the long term. And so now I'm curious, knowing that you have this money machine, how do you think about your time? I'm sure it's very, very different to when you didn't have a machine.

How do you decide what's a yes and what you didn't have a machine. How do you decide what's a yes and what's a no? And yeah, how do you think about that? Oh my God. This is such a cool question because it has changed. There's so many, like I get called for projects and stuff and I just kind of look at it and go, yeah, I have no desire. Here's the thing. I shifted away from transactional decisions far greater now because I don't, I used to, if I would get a project, I'm thinking transaction, it's 50K, it's 100K, you know this it's good money and i would sacrifice to get there um i don't anymore i look at it you know we plan our year out stephanie i know our vacations and we know what we're doing and those times blocked and i look at it and say how much of my life

force is it going to cost me it's given me the the luxury. It's a blessing. It's a luxury. It's a privilege, however you want to phrase it, to be able to say no to things. Because if I say yes, I give a slice of my life away. And the cancer taught me that actually we do have finite slices of life and hopefully they're a lot. And so I'm always looking at it through, is this going to energize me? Is it going to excite me? Is it going to cause me to grow? And, and if those things, and is it with people I love, is it doing the things that I get to do? Then I sit back and go, there's, there's beyond the money, there's a currency there that i that that is more powerful and so i'll say yes to those things look you see me with our our friend with brendan you know i go to all those events don't get paid but i do it because of what it gives me and what i get to give them

and because of our friendship and everything. And I've got the luxury to be able to, you know, I don't have to get PTO. I don't have to get permission and take time off. I just get to do. I get to go. And so I'm looking at things through the eyes of a quality of life now, more so than anything else. And it goes back to that whole thing of why do we want the money because we want the choice and i've got that choice now and we can make those choices um and so i don't take on in fact i made a decision to

stop doing certain things as of the end of last year. I basically said, I'm done. And partly because we had a scare with a cancer that turned out to be a false alarm. But it shook me enough to say, what did I let back in my life that stressed me out that I kept away during the cancer journey? And it woke me up again to say, oh, we got to formally cut the ties and make sure that the things, and this all came from a conversation with a doctor that said to me this. He said, yes, stress causes problems in your body. He says, but the mistake is you think that

lack of stress allows you to grow. He says, stress is on a spectrum. He says, if high stress is at a 10, lack of stress puts you at zero. There's no growth at zero. He says, you got to go past zero in order to grow. He says, and what gets you past zero is joy, is love, is appreciation, is gratitude. He says, so it's not the fact that you have stress in your life that's causing the problem. It's the fact that the stressors in your life don't come with joy, love, appreciation. He says, you can do stressful things, but as long as they're paired with the joy, the love, the appreciation, and all of that, you're actually on the other side of the line. And that's when I started to look at things and go, oh, is this just simple stress, transactional stress? Or is this, like, look, doing a multi-day event is tiring. Like 18,000 steps a day, we've clocked it, you know, and everything. But there's a level of joy, like at the end,

you're exhausted, but exuberant at the same, you're just like excited and buzzing at the same time. And I go, so yeah, there's stress, but there's so much joy in it too. And I think that when you start to understand that mix, the choice points come from the joy points. Mm-hmm. What a great place to end this podcast on. I've taken away so much from this. It has very much reaffirmed what I always, well not always, what I firmly believe now is that money isn't wealth. Wealth is your ability to have choice. Wealth is your ability to choose how you

spend your time. That peace of mind, that's the real wealth and money is great at getting you there but it's what you do with it and your ability to build that money machine um this book is phenomenal I honestly anyone listening get your hands on this it's inside of it what I absolutely love is how easy like I love the graphics I love um the frameworks I love how easy it is to digest and understand because money is one of those things like sometimes like I hear all the roths and the iras and the four I'm like oh my what am I doing? But to just see it laid out, um, it makes it so easy. And I got to write the forward for it, which I'm so happy about. My goodness. Um, it's incredible. Mel is where's the best place for everyone to go and grab their copy of the book. The best place is to go to your money machinemachinebook.com. Your Money Machine Book. It's the best place. And I think you hit on a really good point.

It's why I talk about richness versus wealth. Richness is how we experience life. Wealth is a statistic in the bank account. Ben Franklin had it right. He said, wealthy life isn't those who have it. It's those who enjoy it. And I think that's really, really what this is about. Living our life, we get to the end of the days of our life to look back and go, that

was a good run. So yeah, yourmoneymachinebook.com. I'd love, I think that my core belief in the whole book is that financial freedoms are birthright. You just got to go claim it. I love it so much. Your money machine book dot com. Everyone grab a copy. It is a freaking phenomenal book. And it's changed the way I think about money completely and definitely gotten me smarter and more intentional with it. So, Mel, thank you for writing it. Thank you for this podcast, too. It's been so, so helpful. Oh, my God. It's a blessing and an honor. Thank you for writing it thank you for this podcast too it's been so so helpful oh my god it's a blessing and an honor thank you for having me on