THE ED MYLETT SHOW - Building a Money Machine and Avoiding Pitfalls with Mel Abraham

Episode Date: August 20, 2024

Live Abundantly and Unlock the Hidden Secrets of Financial Freedom! In this deeply impactful episode, I sit down with the extraordinary Mel Abraham, a financial thought leader and a warrior in both life and business. A CPA by training, bestselling author, and a two-time cancer survivor, Mel brings a wealth of knowledge and a unique perspective to the world of financial independence and emotional resilience. Mel brings an unparalleled approach to financial education with his heartfelt insights into creating a life of ABUNDANCE. His insights have transformed many lives, and I know they can do the same for you. We're talking about a transformative approach to money management that anyone can implement, no matter where you are in your financial journey. Are you ready to change the game of your financial life? In this episode, we explore how your upbringing influences your financial behaviors, the critical need for a new approach to retirement, the power of crafting a life vision that encompasses financial clarity and personal joy, and how to make your money work harder for you - than you for it. In this critical episode, you'll learn: The critical mindset shifts necessary for financial independence Strategies to turn passive income into a powerhouse of financial stability Practical steps to take control of your financial future without feeling overwhelmed Why understanding money is crucial, yet so overlooked How to set up a retirement that truly works for you, not against you The real truth about debt—what to keep and what to ditch We're not just telling you what to do; we're laying out the blueprint for how to THINK about money in a way that fundamentally changes your relationship with it. Join me and this master of financial strategy as we unravel the secrets to building your own money machine—a strategy that ensures your finances serve you! And don't forget to SHARE this episode with anyone who could benefit from a fresh perspective on money and life! #MAXOUT Learn more about your ad choices. Visit podcastchoices.com/adchoices

So hey guys, listen, we're all trying to get more productive and the question is, how do you find a way to get an edge? I'm a big believer that if you're getting mentoring or you're in an environment that causes growth, a growth based environment, that you're much more likely to grow and you're going to grow faster. And that's why I love Growth Day. Growth Day is an app that my friend Brendan Burchard has created that I'm a big fan of. Write this down, growthday.com forward slash ed. So if you want to be more productive, by the way the way he's asked me I post videos in there every single Monday that gets your day off to the right start he's got about five thousand ten thousand dollars worth of courses that are in there that come with the app also some of the top influencers in the world are all posting content and they're

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So go to growthday.com forward slash ed. That's growthday.com forward slash ed. My dad works in B2B marketing. He came by my school for career day and said he was a big row as man. Then he told everyone how much he loved calculating his return on ad spend. My friend's still laughing at me to this day. Not everyone gets B2B, but with LinkedIn, you'll be able to reach people who do. Get $100 credit on your next ad campaign. Go to linkedin.com slash results to claim your credit.

That's linkedin.com slash results. Terms and conditions apply. LinkedIn, the place to be, to be. This year Dell Technologies back to school event is delivering impressive tech with an inspiring purpose. Learn how Dell is helping computer aid whose work is helping equip solar community hubs with tech and AI literacy skills

to empower remote, displaced, or disconnected communities around the world. Help Dell make a difference and shop AI-ready PCs powered by Snapdragon X-series processors at dell.com slash deals. That's dell.com slash deals. This is the admiring show. Welcome back to the show everybody. So this week I get to share a brilliant mind with you on a topic that matters, which is your money. And I think you're going to hear some things about money, retirement, saving, mindset, strategies you've never heard before and I would have had him on just for that reason but what you're also going to get to experience is one of the kindest human beings that I know and just a

good man with a beautiful heart and I love him dearly and in the last couple years we've become very very close and he's a tremendous blessing in my life. He's a CPA by trade and he's an exciting one. And so you're just gonna love today's show. So anyway, I'm gonna share with you a dear, dear friend today with so much information. If you can take notes, take it, otherwise it'd be mentally paying very close attention.

So you can write this stuff down later. My great friend, Mel Abraham, welcome to the show, brother. And it's so good to be here, brother, just to get to share time with you, man. Yeah, but we're gonna share time, everybody, about his new book called Building Your Money Machine, How to Get Your Money to Work Harder for You Than You Did for It.

And I love the topic because most people, frankly, they don't think that way. I didn't used to think that way. I just thought about making money. I never really thought about getting my money working for me, particularly because I wasn't making a lot. So I just assumed you had to make a ton of money to ever retire. And you in the book make a case that that's not necessarily true. So I want to start out somewhere though, brother, because in my family growing up, I think about what were the pain

points in my family? You know, what was the stress stuff for my dad, my mom? And it usually came to money. Yeah. You know, if I drew it back, it was like work stress. If my dad had lost a job or something or just money. And you know, my parents didn't love having to say no to us very often. And just money stress. What for you, just to start, because we're gonna get into a lot of principles,

any of that in your family, did you start out, you have any early money memories, anything like that? You know, one of the first stories in the book was really, so I'm a son of an immigrant. My dad came here at 17 years old with nothing to go to school, became an engineer. So we didn't come for money, we didn't really have money, but we had what we needed, you know?

We didn't, we grew up, I grew up not too far from me. I was in the San Fernando Valley, you know? And, but I remember at five and a half years old one day, looking at my dad, who was my hero at the time, for the first time I'd ever seen him cry. And him talking to my mom, I didn't know the details. I knew it had to do with money. And I just remember dad saying, we can't do that right now. And then looking at my mom in tears and saying, I feel like I'm letting the people I love the most

down. And it just for a five-year- you know, a 6 year old it was it it really a part to just see him in tears. But then I didn't have I didn't have any kind of knowledge or anything to deal with it. So I all I did made it kind of mean was hey if you don't money, you're going to let people you love down. And that's kind of the lesson that I took away from it at the time. But that was something that was in our space. So there was this, there was, we had what we needed, but it wasn't like we could just do whatever we wanted. Yeah, funny. I, I thought that was my upbringing too. And it was like most of it, but I have had this weird thing where, I ended up getting pretty wealthy,

but I was never really, that was never my outcome. I was always, even to this day, I didn't wanna be poor. And I always wondered where that came from because I felt like I grew up middle-class, maybe lower middle-class. But in talking to my mom recently, we were on welfare when I was a little boy and I don't have memories of it. But I think a lot of us have some sort of trauma or memories in our life around our parents worrying or stressing

about money. And it is the single subject of importance in people's lives. They know the least about like it's an inevitable topic. You have to know about money. You have to learn the currency of money, how to save it, how to retire, how to plan, how to budget, how to strategize. It's an inevitable thing in life. It's mandatory. Yet 99% of the population doesn't know very much about it. And the 10% that are left, the 1% that think they do have a lot of bad information as well. So one of the things you submit in the book is, you call it like we have a broken retirement system, right? Yeah. What is that, why? What's broken about it?

What do you mean by that? Well, I think that there's two aspects that are broken about it is that we carried with us the old industrial age model into today's world. So back in the day, you would work for a company for 40, 50 years. And then as a gift back for your loyalty, they said, we're gonna give you a pension,

lifetime of income. And so we didn't really have to take care of ourselves in our future years, in our later years, because we were taken care of for the loyalty we gave to the company. Then they came to us and said, no, y'all are living too long. It's too expensive. So we're taking it away, but we're going to give you this instead. Here's a 401k. Here's an IRA. Here's a SEP. Here's all these things. You go do it. But what they didn't tell us is that when they handed it to us, if I had a pension,

all I had to do is work. They took care of everything, the investing, all the choices. But now what they gave us is this retirement plan, but it was a bunch of choices. How much do I invest? Do I participate? Can I invest? What do I invest in? All those things that people aren't educated in and we're not talking about it.

But more importantly, the second part of the broken system is the way that they see retirement. Save, save, save, save, save. Reduce your lifestyle by 20, 30%. Then spend and then pray that your money outlasts your life. And I it's a horrible like I don't want to do that. I like I look at my mom and she's 90 plus years old, six years on dialysis,

her cost of assisted living is 15 grand a month. And there isn't a month that goes by that. She doesn't look at me and go, am I okay on money? Am I okay on money? Like that's the last thing we should be worrying about in those, those years. goes by that she doesn't okay on money? Am I okay the last thing we should those those years. Now th okay because I'm making s like you're due with with

absent that, why are we w up right? We shouldn't be those last years and say do I have enough money to last the life that I have? So so Mel, I always wondered because you know, I was in the financial business and I always thought how is it that our culture hasn't changed where we know we're supposed to save and pay ourselves first after we tithe right? And it's just never changed. And you just explain why it's because really, our parents, parents had pension plans. So they could spend their entire paycheck and they would be okay, potentially. So saving was like a luxury. But it's it's not that message you said has not gotten to families the last 40 years, especially the last 20 years, like, no, no, you get a paycheck, you stick a little bit in your 401k, then you go to

mall on the weekend and get over the heck you want. Then you buy some stuff from Amazon. And at the end of the month, you know, you might have a credit card balance or, and then people are used to carrying debt at high interest rates on credit cards. And it's just sort of the way people live. And then you watch presidential debates, and everyone's arguing over social security, which is going to be a couple thousand dollars a month for the average person, even if it shows up for you. Yeah. And I'm like, wow, this really is broken. So what should someone be thinking if they're 30, let's say right now, or even 20 or

40? What that mindset you said is broken. What should they be thinking in doing? I think there's a couple things, no matter your age, stage or circumstance, it is our responsibility to take care of our future. No one's coming to save us. Okay, if there's social security, great icing on the future. No one's coming to save us. Okay? If there's Social Security, great, icing on the cake. If there's a windfall, great, icing on the cake. But the bottom line is this, if we're going to win the wealth game, we have to be on the field, playing the game. We can't be on the sidelines and we can't be in the stands. And so what we need to realize is that they taught us well on the income

side. Hey, you got to go earn a living. You got to get a, build a business, get a good job, get a good career, a professional path, make money, make money, make money. What they didn't tell us is there's a second journey we need to be on. That's the money journey. See, we think income is the solution to everything, but it isn't, because if it were, then people like Mike Tyson would still be wealthy, or Nicolas Cage, or Burt Reynolds, or we can name them all. They made lots of money, but they ended up broke. So it isn't the money that matters.

It's what we do with it. And what we're not taught about is what to do with it. What's the recipe to take the money that we earn to build the money machine so it can take care of us? Because when, and I learned this as a single full-time dad raising my son, the realization that I will never be free until I have the ability to separate the earnings that I make from the efforts to make it. And that's what the money machine does. That's what you do when we're in the earnings journey. It's it's us you and me on stages doing things to to make the money.

But if we don't do the right thing with that, we will have to do that till we are old and gray. Yep. One thing I want to jump in on it, then we'll talk about the first step. I want to rift off one another here. So here's something that's not said, and it's just it's hard for people because it's counterculture. The reason that it doesn't the income is irrelevant is because in our society, here's what happens. If you make $60,000 a year, you may be renting somewhere, right? Potentially, if you're in California anyway, you're renting or you've got a very small house, depending on where you live, and you've got a Honda in the driveway and car payment and you're doing well.

As you move up, here's our culture. Nope, you got a promotion. Now you're making $85,000 a year. So now you don't have a Honda in the driveway. You don't rent the place. You own a little bit larger house and you have a Lexus now in the driveway, right, and you spend all that money and then a few years later you're making a hundred thousand if you're fortunate, you get to a hundred thousand dollars in income and now you don't have the Lexus, now you get

a four-bedroom house and you got a Mercedes in the driveway, right, and then I've just watched this, friends of mine that then got to 150, now they don't just have that, they have the house, Now they got a lake house plus the Mercedes in the driveway and a boat. And so my point is, is that no matter if you make 40, 60, 80, 150, at some point, the first decision to me is that you are not going to change your lifestyle as you make more money for a window of time,

five or 10 years worth so you can stack paper and start to save money. It's like you don't have to have a nicer car because you make more money. You don't have to live in a bigger house because you make more money. You don't have to eat the best steaks. And what happens is, is that people in our culture, their lifestyle follows their income, and it almost never changes. And so frankly, I have more friends that make less than a hundred thousand dollars a year that have financial discipline in their life and strategies that have money saved than my friends who make more than a hundred

thousand dollars a year. Now there's an exception level sometimes someone gets to 500 or a million where they're just starting to make more than they can spend, but you and I even know a bunch of those dudes and ladies who have no money also. So it's not your income. I have several friends. I have a very good family member who he's an airplane mechanic and his wife is a nurse. They both done well in life, right? Their homes paid off. They're retiring with peace and dignity, they've not ever moved out of the home they bought, they paid it off, their cars are paid off, their homes paid off, they've got money in retirement

accounts, they are living financially very peacefully because they didn't increase their lifestyle to impress people who aren't impressed anyway. So that would be my first step. What is then the next step after that for you in the money machine? So I think that so the the and I love that this this translates to what I think is the first step for everything we do and that is what is our vision for our life because the vision for our life helps us define the plan that we're on, the strategy we need, the tactics that we do with our money. It also helps us do this, eliminate the temptation that you're talking about, eliminate the peer pressure that you're talking about, because now I can look at it and say, well, my vision for my life is this, and if I go and buy this thing I see on Instagram

or try to compete with my neighbor that just bought a Denali, you know, is that moving me closer to the vision? Let the vision inform all of our decisions. Now we are less susceptible to the peer pressure, the media pressure, the social media pressure of temptation and comparison that cause us to expand our life. Do you think there is a great advice? Do you think there

is a an appropriate percentage of your income you should be saving regardless of where you're at or an ideal percentage that someone should be going? Okay, I gotta take this. Does Mel think I should be taking 20% of my income, 10% five? Or do you not think of it that way? I do. So so I have something called the wealth priority ladder. And in there, I tell people that I want you to strive for 20 to 25% of your income to to go towards building your your financial freedom to build your your money machine. Now, prior to that, we want to make sure that we've got control of our liquidity and our debt.

And so we have, so I look at things through the eyes of, hey, safety first, so let's create an unshakable foundation and now growth second. So I'm not gonna swing for the fences when I'm on tenuous ground. I wanna make sure that I've got control of some things. And so I have some liquidity in place. I know that I've got control of the debt. And doesn't mean that I'm debt free. It means that I am in control of it and getting paid down and I have a plan. Now I can start investing. let's let's go great. It doesn't matter what someone's income is. I make $60,000 a year. Let's just say I'm single. Make $60,000 a year. After taxes, maybe I take home, I'm making it up, depending on where you live. $40,000 a year. Okay. So you would like me to be saving somewhere around

800 bucks a month then. Is that about right?. Yes. And and do you believe initially that 800 just guys were just spitballing here, but I'll give you ratios. So that 800 or $1,000 a month that I'm saving people go. Oh my gosh, how would I do that? Well, you need to back out the car payment back. Maybe you need to look at these other things. You're saying first before I go retirement account, I need an emergency fund of is that what you mean? You say liquidity, I should have a certain amount of money liquid in case the car breaks down.

Mom needs alone, income interruptions, whatever it is. Okay. And where do I put that? Well, we're not going to name investments, but is that the bank? Is that a CD? Like we're currently, currently because of the environment we're in, all of my liquid cash is sitting in high yield cash accounts. Yep.

So, so three, three characteristics, 100% fully insured, 100% fully liquid, and 100% expense free. So, so not a CD because that's not liquid. So you'd be in a savings account. That's high yielding at the time. We're recording this 4% is not unheard of in a high yield account right now. 5% in some places. So yeah, it's not unheard of. And it's good enough for now for the liquid funds for emergency. We need to keep it safe and we need it there because we don't know the definition of emergency. We don't know what's going to happen. We need it there. So hey guys, I want to jump in

here for a second and talk about change and growth. And you know, by the way, it's no secret how people get ahead in life or how they grow. And also taking a look at the future. If you want to change your future, you got to change the things you're doing. If you continue to do the same things, you're probably going to produce the same results. But if you get into a new environment where you're learning new things and you're around other people that are growth oriented, you're much more likely to do that yourself. And that's why I love growth day. Write this down for a second.

growthday.com forward slash ed. My friend, Brendal Bruchard has created the most incredible personal development and business app that I've ever seen in my life. Everything from goal setting software to personal accountability, journaling, courses, thousands of dollars worth of courses in there as well. I create content in there on Mondays where I contribute as do a whole bunch of other influences like the Avengers of influencers and business minds in there. It's the Netflix for high achievers or people that want to be high achievers. So go check it out. My friend Brennan's made it very affordable, very easy to get involved. Go to growthday.com forward

slash ed. That's growthday.com forward slash ed. This show is sponsored by Airbnb. My next door neighbor in Florida, every time they leave, they've been turning their house into an Airbnb and it's become a good side income for them. And it's finally got me thinking about doing exactly the same thing. You know what, when you leave your house, use it for an Airbnb, generate revenue. So that that thing becomes an asset and not just a liability. I love doing it and I'm excited about the start of it. Your home might be worth more than you think. Find out how much at airbnb.ca.com. So you know there's a lot of people out

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their five day nutrition program. So go to prolonlife.com slash Mylett. So that's Prolon, P R O L O N, life.com slash Mylett for this special offer. That's prolonlife.com slash Mylett. These statements and products have not been evaluated by the Food and Drug Administration These products are not intended to diagnose treat cure or prevent any diseases or condition Okay, let's talk about that. So Mel's had I was gonna put this in the intro, but I wanted it to be in the middle For those that stay

Mel's had several Difficult times in his life. This is a money topic We're gonna cover now and a life topic and he and I have both talked about this because I've had you know no secret you guys know I've had some some health issues. Mel's a two time cancer survivor. Right. And so that's an emergency. It can be an emergency financially. So describe Mel first and second time. describe Mel first and second time, how it affected you emotionally and potentially financially as well in your life when that happened. What were those moments like for you and did the fact that you had some money saved give you a little bit more peace of mind? Um the emotionally it look it someone asked me me, did the cancer change you?

Which is a crazy question, of course it did. But the fact is that what it got me to realize is so many people told us that your days are numbered here on Earth. And I didn't take it seriously, I just, you know, and I'm not a smoker, not a drinker, no one in my family ever had cancer. It never was even in my thought process that it would happen.

And so immediately what I realized is that, oh, they were right. And the question wasn't about how did I spend my money. The question was about how am I spending my time and starting to look at it and say, wow, if I measure my wealth in the number of moments I can control in my life, am I truly wealthy or am I beholden to the expenses of the demands of the day? Do I get a chance to live by choice? And so that was the psychological element of it, of realizing that I better appreciate the moments

and hope that I have a ton of them and a lot of them left in me, but I don't get a second run at this. And so that's how I started to look at things and say, what are the things that really matter? What are the things that really bring me joy? What are the things that bring me fulfillment? How can I take and allocate my funds and my money and my income and my wealth to allow those to be accentuated and elevated in my life? And so that was part of it.

The other part of it was back when I was, like I said, I was a single full-time dad raising my son Jeremy from five and a half. And at six years old, he came running into me saying, hey, daddy, I drew a picture of you at school today. And I look at this picture and it was me standing in front of two computer screens with a phone in each year. And I go, oh my god, this is a mirror into my soul and at the hands of a six-year-old, that's when I realized somehow I have to figure out how can I get off the treadmill and separate the efforts from the income so I can be the dad I wanted to be.

And so the gift of that from Jeremy is what gave me that journey to build a money machine that I talk about. I didn't understand the power of it until the cancer. Because when the cancer hit, I didn't have to drain a bank account. I didn't have to sell anything. I didn't downsize.

I didn't do anything. We had a machine. And I talked to my wealth team. I said, hey, the money that you're generating in that, send it to me and allow me to focus 100% on healing. So I shut down my business. I shut down my speaking. I shut down everything I was doing. And the

only thing I did was fight the cancer. And everything I did from that moment forward was that and I had to fight the cancer emotionally, physically, medically. But I didn't fight it financially. And it was a gift that came out of a picture drawn by a six year old. That's incredible, man. That's incredible. And you've told me that privately before.

The money, I know people are leaning in now going, okay, so I need some of this machine in my life. So the good news is there's no way adequately on any podcast you're ever gonna get everything out of a book. So I want you guys to go get Building Your Money Machine by Mel Abraham. But what are the elements of this machine like what do they need to know about?

Having this machine that they don't know Mel. What are some of the elements? I think that the the the first thing is to understand there's five levels of income that we can generate And only three of them are the things that are gonna give you your time back So everything I was measuring to say, how do I get time back? So at the very beginning of our life, we get a job. That's active income. We're swapping our relationship between making money and effort is one to one.

Okay. Not scalable. That doesn't give us any freedom whatsoever. Then we turn around and say, okay, so that's level one. The level two above that, I call it business income. It's when we start to pay other people to do some of the things so I can get my time back. It's leveraged in the sense of it gets me a little time back,

but I still am required. It's the top three we need to look at. And this is where we start to look at how do we start to generate income streams from these top three we need to look at. And this is where we start to look at, how do we start to generate income streams from these top three? And the first level is asset-based, real estate, equipment, things that are hard assets that I can buy.

I make an investment once, I maintain it over time, but I get rents over a long period of time. I've got someone that knows, they've got multiple properties, they're making literally $400,000 a year just from rents. Their effort is much, much lower. That's asset-based. The next step up is residual income. This is where we create something.

It's your book, it's my book, it's white labeling things, it could be a downline in a network marketing. It's something, it's songwriters and actors and actresses create something, take the time to invest and create something that will pay dividends and income over a period of time, but I create it once and get paid often. and income over a period of time, but I create it once and get paid often. Yep. And then the final stage of that is portfolio income. It's what we think about in the sense of investing,

stocks, bonds, ETFs, index funds, annuities, things like that. And so I look at them at levels of leverage, but here's the machine. The machine is I can pay for 80% or more of my lifestyle from the top three. Got it, got it. And so I have income streams from asset, residual,

and portfolio, so when I got the cancer, I said flip the machine on, let the income come to me, and now the bottom two I'm not doing anything in. And then when I came back from it, I flipped it on its head. You put it back and you now do one and two again. That's really good, Bill. Do you... This is a hard one. I ask anybody of my friends that are money,

and I just know that this is what people that are in a job right now, particularly, are thinking too. How do you feel about the 401k thing? So, you know, some people think it's just automatic. They should do do it. So everyone let me just set you the stage on this discussion. There's a debate. So 401k without matching that's one way where your employees not giving you any other money that is pre-tax income you're putting into something with exception you're not going to touch until you're 59 and a half 62 and a half depending on what the age is they use. So that is by definition, you could maybe touch it, but you're going to pay some taxes and some penalties potentially. So there's that then there's the 401k where the employer

matches and so and then there's the idea of don't do that because tax rates are likely to be higher. So you're deferring your taxes into a higher tax environment. And the reason this is an important question is the vast majority of people who are have money saved that they call retirement income isn't a 401k, right? It is. And so I'm just curious as to your thoughts overall on that. Here's the thing, anything that's going to get us committed to making it automatic. I'm game four. So that that's one side of it. If there is a match, I'm going to hundred percent take the match because it's it's it's a hundred percent return.

Now some 401ks have high costs, not a lot of options and they can be challenging. Most of them are getting better these days. But rather than not participate, I would first go to the HR department and say, hey, like my brother, I'm looking at the options he's got in his company and we're having a conversation with their HR saying,

can we get more options here? These are too high cost, there's too many expenses and we can get 1% more return to all the participants if we put lower cost things in. So I would do that. I also this idea of, well, I don't know what the tax rates are going to be. I don't. Are they going to go up? Probably. The question isn't where the tax rates are. The question is, where's your tax rate and your income gonna be down the road? When you build wealth, if I do it just in the 401k, then you're gonna be subject to paying tax when you take it out. But what we try to do is there's three buckets. The tax-deferred 401k, my regular brokerage account,

and tax-free. So Roth, those kinds of things. And I now can control the tax level when I go to retire. And many 401ks now, which is what my brother's doing right now with his company, they actually have Roth elements to the 401k. And so I have him contributing to Roth. He's over 50. He can put 30 000 away and a Roth doesn't get a tax deduction for it today but when he takes it out down the road 100% tax free all the growth everything so everybody the reason this matters is this is what a lot of you are my friends are doing so I just want to say this to you you've just walked into HR you check the box I'm in the growth one you'm in the growth one. You don't know what it is, you don't know what it is, you don't know the fees, you don't know the cost, you don't know exactly the match potentially, you don't know the tax implications, and you don't know your options outside of that if you took that money home, paid taxes on it, what you could do with it. The point that we're both making here is, this is worthy of a little education for you. Get to questions answered about your 401k. What are the fees? What are the costs? What are the

options? What's the track record? Right? What are your options outside of that with a Roth IRA, with life insurance, with municipal bonds or whatever they might be, treasuries. I'm not recommending anything here at all. I don't know your financial situation. And I'm not allowed to make recommendations. And Mel's not doing that either. What we're saying is, don't just run down the assembly line like everybody else and go, I think I'm in the income one. I'm in the growth, the income growth. What I don't know, when can you get it? I'm not sure. Right? What if you leave your employer, you need to know these things, right? It's

your money. Yeah. Okay. The other element of it too, and then we'll we'll get out of the granular, but I just think having you here, CPA background, he's written two books on this topic. He's. And our circle of friends, a guy everybody respects and admires. And this is what people that have, you know, significant money. So I get asked all the time, how did I get so much attention on social media in my businesses, email lists, et cetera?

I can tell you straight up, it's been Constant Contact. If you don't know who Constant Contact is, you need to know about these guys. Constant Contact's award-winning marketing platform has helped millions of small businesses, mine being one of them, stand out, stay on top of mine and see big results fast. They've got an easy way to promote your business with powerful tools like email, SMS marketing, social media posting, and they even do events management, what they've done for me in the past as well. You're gonna reach new audiences, you're

gonna grow your customer list big time and communicate more effectively to sell more, raise more, and grow fast on social media. So get going and start growing your business today with a free trial at constantcontact.com. Just go to constantcontact.com right now. Constant Contact, helping the small stand tall. Constantcontact.com. One of the other obstacles to getting wealthy or comfortable, financially independent guys, is obviously the amount of money you save. Taxes is an enemy.

Fees are an enemy. Rate of return can be an enemy. But the big monster in the room for a lot of people is debt. It's just debt. They're spending money on credit cards, high interest loans that are non-tax deductible. They're spending money on car payments, student loan debt, you know, you name it. And so what about debt? What advice counsel would you give just about everybody listening who's got, you know, there's data now that says the average American that's 30 years old has more debt than savings. So and that's consumer debt. So what's your advice about that?

So, so first things, I'm not one of those that says all debts the devil. But I do say that all debt has two personality traits. They both, you've got destructive debt and you've got productive debt, but both of them will cost an interest and both will stress. They stress our psyche and they stress our pocketbook. I think we ought to be avoiding destructive debt. Destructive debt is the debt that is for consumables, stuff, you know, that we can't afford. Here's why we get into debt.

Marketers are great about this. Why do they give us credit cards? Not so we could have credit. It's to remove the friction from the buying decision. And when they remove the friction from the buying decision, the buying decision, they know this. And so it walk on a car lot to go b what payment do you want? they can, they can get yo

the math game and they go 100 bucks more. And so th dangerous, dangerous, you you're walking on. And so the payment game is a dangerous, dangerous, you know, cliff that you're walking on. And so I always look at things and say, can I pay for it in cash, especially if it's a consumable? Okay, he just said something no one's ever said on the show that I want you all to hear. If when you tell somebody that you got a good deal, and then you tell them it's your payment, your payment on your electric bill versus your solar bill, your payment on your car payment versus another one,

your payment on your appliances, somebody has been playing a game with you, which is the payment game in sales. You actually wanna know what you paid for the item, what the interest rate is, and when that payment is done being paid, and whether or not that interest is tax deductible. It is not a good deal based on the payment payments are easily manipulated.

And it is a sales game and I'm letting you in on something. And so is he right there that is a and I would say more and more those strategies Mel and I don't mean this to knock anybody who does it. Those strategies are typically used more aggressively of people of lower or middle income than they are with wealthy people. Would you agree with that? I agree I agree the the power of compounding can be a tool to create wealth or a weapon to destroy us and we have to be we have to understand which side of that equation we're on and if we're on the debt side

it's destroying us especially at the rates on credit cards that we have today you can't get out from under it at 28% you're all hearing this guys this is the best stuff you're gonna hear on money in a long time. What about fear? I have lost some money based on fear. More than once. Now, a couple of times my fear has protected me from making a mistake, which we'll talk about afterwards. But you have any experiences with fearbased decisions and it costing you money? So I lost I lost one-third of my net worth in a in an investment that turned out to be a Ponzi scheme What? Yeah. Yeah me me and two buddies. We lost over four and a half million dollars. Oh My goodness, you mind elaborating a little bit on it. Yeah. Yeah, so wow

and and these people Yeah, yeah, so wow and and these people And I use the term lightly people they're parasites that play these games and everything They're really good at it You know he he knew how to stroke the emotions the aspiration the desire the picture of what life could be like I got into the investment now. I'm a I'm a financial dude. I should know better. And, and I put the rules away. I stopped the voice from listening to the voice. I didn't do my due diligence. I just started doing the math and saying, God, if I get this return, and I started

investing, and it was too late. By the time I realized this is, this is not real, I was already invested. And so we lost it all. And what he was doing was basically, and he showed everything, he had reports and everything, but he was basically saying, I'm buying distressed assets from distressed companies, and then we're selling them at auction and we make 20% return.

And it sounded great. And he showed me the reports and everything. So shame on me, but it's what gave rise to the rules, the criteria and the due diligence that I have today. But here's the thing about fear and emotions. I find that when our emotions get involved with our money and we start to make more emotionally charged decisions with our money, and we start to make more emotionally charged decisions with our money, our intellect has gone out the window. So we make less smart decisions when emotions are involved when it comes to our money.

And so this is why you want to put a space between the choice. People, the markers know this. Hey, it's going away tomorrow. Good. If it goes away, it goes away. I'm okay. I'm not making a rush decision and you want to keep that calm to merit. If it's a great deal and you miss it, so be it. But if it is a bad deal and you miss it, you're far better off. I'd rather leave money on the table and know that I have money in my pocket

than make that mistake again. Incredible advice Mel. Let me just say, so the health is better than you do too. I'm also a money person and I had somebody completely take advantage of me as you know in the last two years and never thought a human being was capable of such destruction or yeah, I'll just leave it at that. And so if Mel and I are capable of being prey to predators of ill intent, you are as well. And this notion that you just said, Mel, of just had someone this week say the funds closing this weekend. I like well then it's closing because I'm not ready and it's so any of that at the end I don't like and I also totally agree with you I'd rather miss a good deal than lose money in a really bad deal and I think you all should just heed that

advice from two middle-aged dudes who have been all over financially government financially and he's 100% right. It's even like I look at it this way. I go to Las Vegas. I don't gamble, right? Because if I win a hundred bucks, it doesn't feel that good anymore. But losing a hundred still hurts really bad, right? I'm with you, man. You know what I mean?

I'd rather go to a show. Who would I? I'd rather just enjoy myself. What about, let's give the good news. You have some percentage in the book about millionaires being first generation Yeah, and this is great news for everybody I think it should give all of you hope if you're not saved any money yet And you're 40 or you're you know, maybe you're down the road a little bit and you've saved a little bit give them these percentages

Here, this is awesome. I think this I think this is great. So there's a study of 10,000 millionaires 79% of the millionaires were first generation, meaning that they didn't win it, they didn't inherit it, wasn't gifted to them. They created it in their lifetime. So y'all, eight out of 10 people created a million, became a millionaire in their lifetime. That's good odds.

Now compare that with something else that's in the same study. 31% of them never made much more than $100,000 a year. So it isn't about the amount of money, it's what they did with it that allowed them to get to the millions, and it's huge. And this is a thing that I think- What percentage don't make $100,000? 31.

That's crazy, That's awesome. Yeah. Yeah. The millionaire next door is a real thing. It really is. Here's the thing we don't realize, because we think that wealth creation is linear. It's not.

It's an exponential curve. There's something called the wealth flatline. And during that time, this is when you're investing, investing, investing, and it doesn't feel like you're making any, any, any gains. What you're doing is compressing a spring. Watch what happens. If I put $10,000 away at 8% a year, $10,000 away a year, it's going to take you 7.6 years

to get to $100,000. Okay? So it's going to take a little bit to get to 100,000. The first 100,000 is the hardest. It'll take you 20.6 years to get to half a million at that rate, but to get to that million, that last half million only takes seven and a half years. It takes you less time to make the last half million

than it did to make the first 100, thousand. That's why getting in the game, getting on the field sooner than later and staying in the game is the most important thing to your wealth journey. Yeah and what he said earlier everybody, this is so good, understanding what compound interest is. Both the negative on a credit card and understanding the benefits of staying in that game and what about also, we haven't talked about this, it's not in any of my notes. I'm just curious, like if you're in a 401k or you're investing the idea of dollar cost averaging over time, do you still believe in that? I do.

I myself, so full transparency, we are buying every month. So my team is buying every month in my, I have a defined benefit, I have a cash balance defined benefit plan or 401k and profit sharing. So we're buying in all of those every month. If we get a big dip in the market, we'll double in and we just keep going. Here's the thing.

If you look long-term, 10 years or more, 94% of the time the market will be up. So as if we're talking about, hey, I need the money in three years or five years, different conversation. But if we're looking long term, your probability of winning goes way up. So sit back saying, let's just keep going. That's so good. I didn't know that stat by the way. That's a really good stat. You say, I'm trying to get people some mindset stuff here.

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But say you're gonna bring in you're gonna hire ten employees You bring them into the conference room their first day of work you look at them and you say hey Welcome to the company as you notice we do things different around here. You don't have an office You don't have a job description. You don't have a title. You don't have a role I'm not gonna give you goals and I'm not gonna set tasks Let's go ahead and let's double the business in the next 12 months. Like, you think it's going to happen? And the answer is no. And the reason for it is this is what we do with our money. Too often we let the money come in and we don't have a job description. Every

dollar should have a job description. Every dollar should have a job description. Every dollar should know is this for the mortgage, for rent, for clothes, for food, but here's the power of it. Should have a job description before the dollar is earned. So before I ever make it, I should have the plan for it so it takes all the decision making and the emotions and temptation out of the game. So some people will call it a budget. I call it a permission to spend. And so now we get a chance to say, hey, I know your job. You're going to come into my life and you're going to take care of this.

There's no question. There's no there's no discussion. There's no temptation. We don't. And and it also gets rid of shame, guilt of spending. So if I have $250 allocated for my night out and I go spend it, it was in the plan. That's really good. Yeah, that's really good. Because that's the other thing when you become such a crazy saver, then you

feel it's almost like someone who's a crazy dieter. Then all of a sudden, you're having a piece of cake, and you feel horrible, you don't even enjoy it. So your point of having every dollar designated before it comes in, now you can enjoy the stuff you're spending and splurging on. That's so good. Actually, I want my kids to my my kids hear that part of the book, too. I'm gonna give that to my kids. I want my kids hear that part of the book too. I'm gonna give that to my kids. Oh, there was one other thing that I think I wanna be really clear on, because obviously people will say, don't do anything, you can't do anything until you're completely settled. I don't believe, if you don't enjoy the path to financial freedom,

you won't enjoy the destination of financial freedom. And so when we create the vision and the plan, I have my clients that say, I want you to find two to four max joy points of your life. The things that are long, long, sustainable joy. Like my wife and I love to travel. That's our, we make memories, we create experiences. So in the plan, it is there. So we make sure that I'm going to allocate to

some of those things that truly bring me joy, not momentary pleasures, but truly bring me joy. So on the journey, I'm doing two things. I have joy along the journey and I'm learning, because believe it or not, this is difficult for some people, to enjoy the money and the wealth I'm creating. Because if we spend all our years, save, save, save, invest, invest, invest, believe it or not, people have a problem transitioning to a spend mentality to enjoy it in their golden years. I'm saying, hey, let's enjoy the trip to the golden years and the golden years at the same

time. Wow. Do you think, that's enjoy the trip to the golden years and the golden years at the same time. Wow. Do you think, that's so good, what do you think of someone who's got a job and says, do you think more people should be considering side hustles, secondary income, things of that nature to accelerate the process? How do you feel about that? I used to think it was a luxury.

I actually think that multiple streams of income is a requirement now. I think that if the pandemic proved anything, it is to make sure that there is no concept of a safe job or something like that. So if I have some additional income streams that I can fall back on that supplements some of this other stuff, it gives me some latitude and it gives me some peace of mind. So I like the idea of side hustles.

What I don't want it to do is you gotta ask yourself, what's the sacrifice? If I've got like the picture that Jer know, if I'm not present, here, but if I'm not pres Stephanie or with the kid were out this weekend and there, then then the sacr

much. So I think we got t if I can get some add income streams, especially to build that the leveraged income streams in those top three categories of the five incomes, it starts to give you a little more flexibility and peace of mind down the road. So good, Mel. This has been so good. It's flying by. Really, really good. Okay, last question for you for today. First step for everybody. We're gonna go first step.

First step, go get the book. Go get Building Your Money Machine, it's gonna help you. I've read it, I read it a long time ago. I was one of the first people to read it. I was gifted a pre-copy. But let's give someone an actionable step. They're listening today, they're like, all right, I got it, I got a new focus on this.

What do I do next, Mel? I'm gonna grab the book, I listen to the show. What's my next step? It's gonna be an odd step, but I think the next step is if you're in a committed relationship or intimate relationship, I actually want you to have a conversation with your significant other. I want you to get yourselves not on the same line, but on the same page of the vision you want for your life. It's not a conversation about money, it's a conversation about your dreams, and that will inform the roles you have to play

when it comes to the money that we can talk about next. But I think without that, you have, I see too many relationships where you've got one person handling the money and the other person's along for a ride or doesn't know. I want you all on the same page because this journey to creating a life together can be one that brings you together.

Money doesn't need to be a separator. It can be the glue that keeps you together and the tool that allows us to live the life that we want. So I think the first thing is to actually open up the dialogue with the people that you care most about in your life. Okay, and then anything money wise right after that? You said you wanted to say one other thing after that.

Yeah, so right after that is I would look at first, what are the things that actually matter to me that I want to make sure that I have in my life that are going to cost me money? And I'm going to allocate. I'm going to put a plan together. The bottom is what I'm doing. So I'm going to allocate, I'm going to put a plan together, bottom is what I'm doing. So I'm going to say, this is where the money's going, I'm going to be deliberate about it,

and put it away. It could be, and part of that is pushing to the 20-25% of your income. I'm going to give you out on this. If you're sitting back saying, there's no way I can do 20-25%, here's what I want you to do. I want you to start at 2, 3, or 5% somewhere in that range. And then every quarter bump it up a percent. And all I want you to do is this, is that every week or every time you get paid, that percentage goes into a high yield savings account. Out of sight, out of mind, no temptation. You don't have to make investing decisions. You don't have to do anything. I just want it out of there it'll earn you four or five percent right now and just get in the habit of

doing that keep pushing it up once you have a thousand or fifteen hundred dollars in that account then the next step is I want to tell you to move it into something of an investment some broad broad-based, low-cost index or ETF. Something easy, simple, that doesn't require a lot of analysis, doesn't require a lot of understanding, S&P 500 or total stock market index fund is fine. If you're in a 401k, then I'm going to tell you the first thing to do is to make sure you're getting the match.

If there isn't a match, then you can decide whether you want to be in that 401k or do it outside the 401k. It was great counsel today, everybody. You're welcome. That's all I could say. And I'm grateful to my friend Mel for being here today. Building Your Money Machine is his book. Share today's episode. Almost everybody can get something out of what we covered today. A savvy investor to someone who's just beginning, children, teenagers, retirees, you name it, get something out of today's conversation. Thank you Mel and everybody. God bless you. Max out.