Transcription
Hey, guys, Toby Mathis here. And today we're going to talk about how you build a system that allows you to become very wealthy and stay that way. I want to kind of go over in, in detail the different boxes that things like income, expenses, assets, liabilities go into and what type of rules, what kind of percentages you should be allocating to certain things so that you can avoid being stuck in the rat race. So you can avoid being in a situation where you feel like your lifestyle is always creeping up, and you're never able to save money. So that sounds like you stick around because I'll show you the formula that wealthy people use in the system that wealthy people use over and over again to be successful.
And by the way, I know there's a ton of stuff out there on the internet where people say, hey, live off of less than what you make and save the difference and data. I get that, and that's actually true because that's actually really good advice. Like, hey, you want to lose weight, move more, eat less, right? Or eat the right types of foods. Like there's some simple rules that you can follow. And so I'm going to give you a really simple way to conceptualize things and where to put the assets so that you too can be wealthy and have a great retirement, or have a great life where you can do what you want to do. Because that's my interpretation of financial freedom is being able to do what you want to do when you want to do it. Having the freedom to be able to go visit people when you want to, not always having to ask for permission. It doesn't mean private jets. It means, hey, I have the ability to take care of myself and my family and see the people I want to and enjoy my life while I'm here.
So let's go over this. Number one, we always look at our income boxes, our expense boxes. Our asset boxes and our liabilities. Separately. I say that, and I always like to use like this. A lot of people just think, hey, my income goes straight to my expense. That's how I. That's how I live. That's all you're doing. And if that's all you did, then you're just going to be running in place your entire life. You need to involve assets into the mix. A lot of people are really good about doing the liabilities. In fact, there's something I call the losing loop, where your liabilities start to pay for your expenses and your income. Goes down and covers that in. Start hitting those liabilities. This is how people end up in bankruptcy. When you find yourself in a situation where your income is going to mortgage, car payment, credit card payments, other consumer loans, things like that, hey, I had to take a heat lockout on the house as well to cover your expenses, and you're going backwards. That's where you wake up at 40 and you end up in dire financial situations.
So I'm going to give you the rule of thumb that I see work over and over for people to get themselves out of that scenario. And you really want to be in a situation where your assets are covering this. You want your assets to be covering your expenses at some point. That's where the truly wealthy are, and that's where you see multiple streams of income coming in. And it's almost always the top five. It's rent, royalties, dividends, interest and capital gains, short term capital gains from things like selling options or those are great. But you oftentimes see this with the wealthy where they have 3 or 4 different income streams not based off of their W-2 income. The asset is paying for the expense. In order to get there, though, we need to be disciplined. So we need to know what amount should be going to our expenses. And so I'll put a little question mark and ask you guys, what do you think is an appropriate amount of your take home pay that you should be living off of your set expenses? Because I see this over and over again, I know that I love Dave Ramsey and all that, but he's always so focused on lowering your expense as opposed to increasing your income. And so if your expense is a number, what percentage of your income should that number be? I'm going to suggest that you put 70%. So hey, if my expense is $7,000 a month, I use round numbers. You need to have take home income of 10,000. If your take home income is 7000, then you know, hey, I could either lower my expense and I'm. If you're living off of seven grand, to cut that significantly down enough to where you're making up that difference where you can drive that down, you're talking about a considerable amount of cutting. And I'm not saying don't cut. It's easier just to increase and start doing things on the side that can increase your income. And if there's no shortage of ideas out there of things that you can do on the side side gigs right now, side hustles, you can make money, especially in real estate. Great ways to get involved there. Wholesaling. Sometimes people are. I'm not saying be a flipper of traditional real estate, but I know folks that flip mobile homes and things like that. They may they bring in that extra money so that their expenses at that 70%.
So what do you do with the other 30%? Well, easy enough. A lot of times we're doing 10% of giving. And that's going to sound weird to some of you folks. You're going to say, Toby, are you telling me to tithe? I'm saying no, give 10% if there's any way you can. Because what I've seen over the years, I've been doing this for close to 30 years. As a tax attorney, I see tax returns of a sixth of wealthy people, successful people, lots of investors. And you know what? The people that do well consistently over and over again have in common? They're voracious givers. And so I'm just going to throw that in there. I would put 10% as a standard rule. And then by the way, if you're struggling and you can't do 10% giving give time. So I don't want to hear an excuse of saying, well, I can't give. There's no money. I don't have any money, Toby. I see that all the time. I'll see that in the comments again. No, when I was in college, I didn't have any money. I was running in place. I still found time to give time away to organizations that I cared about. So if you can't do the money, then at least give the time. But I would say mark that down. If I have 100% income, 10% goes to giving, 70% goes to my expenses. And now here's where the real magic sauce comes in. 10% is going to go down here to liabilities. 10% is going to go to paying down, not the expense. Hey, the monthly payment, things like that. No to paying down the principal. See if you can actually see that there's a little one in there hiding. 10% goes to debt, 10%. Goes into assets.
And I know some of you guys are going to say, okay, but what should I invest in? I have a simple rule. And if you guys didn't know, I wrote a book called Infinity Investing, I will absolutely put a free PDF link if you guys want to go read it. It was an Amazon bestseller. You can go look it up right now. They'll put a display of it. You can see the cover and all that fun stuff. It was a it won a gold medal, the Global Book Awards, it bestseller on Amazon, but it breaks down how to build up perpetual income sources. Infinity income having income. That's something you can create for your lifetime and actually bequeath to other people and give it doesn't run away. It's kind of like the golden goose. You can keep laying eggs, but what we use is what's called 30, 30, 30, ten, 30, 30, 30, ten. And in a nutshell, what that means is that I'm putting 30% in income producing stocks. Stocks where I can make money 3 or 4 different ways. So we use something called the wheel strategy. We use cash puts to get into a position on a position that pays dividends. We write covered calls against it to make another type of income. And when we get called out, we make capital gains. We're making income for different ways on stocks. And if that is something that appeals to you, by all means go under the show notes and get the book and start reading. And, we'll make sure that you can get other, materials as well. So you can actually watch some videos on it. And how it works. And come to one of our events. We do free events all the time that teach the wheel strategy. So here you are. And that's the first thing you're putting your money into that and cash sounds weird. We're not big cash buffs of just sitting in a checking account, but a high yield savings money market, something where you have access to it easily in case there's an emergency. But we want to have 30, ten, 30% in stocks, 10% in cash, cash equivalents. And that's the first bucket we start to fill up. So originally you're dumping all your money into 10% into cash, 90% into the stocks, which can be turned into cash pretty easy too. But you're doing income producing stocks. We don't just go out there and do the growth stuff. We're trying to generate income off of these things. We want to, again, 3 or 4 types of income off of one investment. And that's where we start. 30% goes in real estate or real estate equivalents, which for most of you guys, if you're just starting out, it's REIT I it's trades just like a stock. I can go in there and buy it and get access to real estate. For those of you guys who are larger, you're already worth, over. I would say that I would use the 33rd and 3010 for the first 150,000 of of your building of wealth. I would start with 50, 50, 50 and, all the time putting 10% into cash as well. But I would just say $50,000 per bucket. So once you're over $150,000 of assets, then you're just using that as a percentage. And you're probably getting to into single family homes, duplexes and things like that. When you're in that second bucket of real estate. So we have income producing stocks, then we have real estate or real estate equivalents, which there are those reeds. And then that third category is managed money. You're either mirroring somebody else's portfolio or you're hiring somebody that actually manages it. A lot of times you could just go in, follow somebody who's portfolio recommended portfolio. There's lots of different groups out there, dividend groups and things like that that I like to watch where I'm like, okay, I can just follow that. If as long as you're not the one sitting there pulling the trigger on the strategy, the whole idea is to protect yourself from yourself. And also there's professionals out there that are actually very, very good at it.
So that just tells us that that 10% is drawing into the asset bucket eventually, if you do this, that debt bucket, we're going to end all of our liabilities eventually. If you're putting 10% every month to paying down debt, in addition, like it's not just the payment, if I have a mortgage payment, I'm paying 10% to start to knock it off until it's gone. Eventually that's gone, and this 10% just moves right over here so that then you're doing 10%, 10%, which equals 20%. And for some of you guys, you're like, hey, I love giving my time. You might even set up your own charity if you're around me. You know that a lot of people have done it. Thousands of people have done that, and they're going out into the community and they're doing things that are actually making change, but they're not necessarily given the money. You could actually get this to where you have 30% going over here into assets every month, month in and month out. And now here's what happens. That assets, those assets, they start producing cash that's going to cover your expenses. If you're living off of 70%. And all of a sudden now again we'll use our example. You have 7000 a month that you're living off of. And those assets start kicking off 1000 or 2000. You know what's going to happen. You're going to have extra money. You're not going to be living off a 70% anymore. You're going to be living off a 60%, 50%, 40%. Then this can go up. And eventually it gets really weird because your assets are literally doing this. They're creating a circle. You're buying more assets from the money that the assets are kicking off, and it's continuing. Go woot woot. And then eventually it's covering your entire expense. And when you do that, you know, what we call that infinity. That's the whole reason we have infinity investing. The idea of infinity investing is that you have enough money coming in off of those assets that it covers all your expenses. Voila, you don't have to work anymore. Now, it's not saying you quit your job and you stop me. We just have the ability if you wanted to. A lot of people I found when they hit infinity, they actually work harder because they found that this side is actually way more fulfilling and way more fun. I give you example after example, I'll use one of our guys that works with with us, Aaron Adams. What did you do? He ended up becoming a volleyball coach. He built a facility with his nonprofit where all these club teams play, and he competes for the the state championship every year with the high school that he coaches. He likes to do that. Well, he didn't have to do that. But he said, hey, you know what? That led him to that point where he was doing this, that he liked this a lot more. And so that's what these things allowed him to do. And that's what I hope you get out of it, too. It gives you a whole different perspective on life. You end up getting to do things that you really like to do, but it all comes with this formula. Our income has to be greater than our expenses. We have to get it to a percentage. I recommend doing 7030, so 70% goes to cover your expense, 10% for giving, 10% for paying down debt, 10% goes to assets. Eventually, when your debt is paid off, you move that to assets eventually. Eventually you start saying, hey, I don't have to give money. Maybe I'm working my own organization. I move that money into creating more assets so I can do even more for the community. Doing all these great things. And then the money goes 30, 30, 30, ten so that as the money that goes into that asset column, starts to flow in there, you have buckets that, you know, it's going to go into. So if you have $100,000 windfall that comes in and you're already allocated, you know, that, hey, 30,000 of that is going to go straight into income producing stock, 30,000 of it's going to go right into real estate or real estate equivalents. Maybe I'm buying some reeds. 30% is going to go to a managed portfolio or you're going to mirror portfolio. You're going to dump it into that 10%. It's going to go into cash. Cash equivalents. That's your gold, your silver Bitcoin in U.S. dollars. And you know exactly where every dollar is going. And you know that you're building up these assets that are producing ranch royalties, dividends, interest and capital gains. And voila, you hit infinity. Yay! Touchdown. Good luck guys. Like and subscribe. Share this with anybody you want and go get that free version. It's an E version of Infinity Investing. And in the comments let me know if you like it. Thanks guys.