Transcription
I believe getting wealthy is simple. I believe the wealth formula is actually only three steps. What we're going to do in this video is we're going to lay out each and every step, and we're going to have the three amigos poke at it, prod it, say where it's wrong, where it's right, what could be done to enhance it perhaps, and of course, we will look to them to help me improve the messaging.
Dion, how you doing, buddy?
Howdy. I'm doing good. I'm excited about this. I believe it is simple but not easy. So I want to see what this, the three steps are for your process today.
Awesome, Matt, and welcome to the show, buddy.
Thanks for the support. How are you?
Of course, doing great, and I agree with Dion. It's it's actually quite simple, but it does take hard work.
All righty. So here it is: Three steps to get wealthy.
Step one: I believe step one is all about creating on-purpose discretionary income. And if we really want to get careful with discretionary income, it's growing discretionary income. So, let's get some definitions out of the way first, and then we could talk about the ways that you can do that. So, what is discretionary income? Uh, I like to say it one of two ways. There's the math way, and then there's the life way. We'll do the life way first. It is money that you can light on fire at the end of the month, and nothing changes in your life. What is it mathematically? It is gross income minus taxes minus all living expenses, and it's the money left over at the end of the month. Some of you out there actually have a negative number. That means you are living on credit. Some of you that number is zero, which means you have no discretionary income. And some of you have hundreds of dollars at the end of that. So, uh, I will stop there first. Again, step one: have and grow discretionary income. Dion, uh, you joined first. What do you think of step one so far?
So, this is uh, it's really hard to articulate this in a way that people understand. Uh, the other day, a friend of mine, Robert, posted uh, basically talking about how time is money. If you make $25 an hour, you know, the the $100 meal out costs four hours. This iPhone costs however many hours. Like, I mean, he broke it was a breakdown of all of these things. And and that didn't include the burn rate. Right. So many people think, "What do I make an hour?" And and and they'll maybe they'll go to the next step and go after the government takes a portion of it. What do I have left? But but where you live usually, unless you're house hacking, takes a portion. You have to eat, takes a portion. Your healthcare contribution takes a portion. Your deductible is going to take a portion. Like all of these expenses go through. That discretionary income being what's left. Not too many people follow that through. And that's why so many people are paycheck to paycheck or credit card payment to credit card payment. And so once somebody understands what discretionary income is, it it becomes a really powerful lever because a small impact to gross has a massive impact to that net.
Absolutely. And when you can see those changes, you might actually start paying attention.
No, you're absolutely right. That's the big thing about I had a, you know, a $99 get your money right course, and that's one of the three lessons I try to teach is stop telling me how much you make an hour, $25. Tell me what your disposable or discretionary income is because that I, you know, that $100 meal is not four hours. It's probably 20 hours because you're only you're dealing with discretionary income. Uh, so I love that. Matt, what do you think of step one so far?
Yeah. So I think I think it's discretionary income. I think there might be some people that are lost in kind of how to get there, right? And so how do you get to discretionary income? It's knowledge and effort. So start creating knowledge and recognize that you're going to have to put in effort. Um, that's the purpose of the $99 course, you know, of getting your money right, which is you have to create a new knowledge base that you currently do not have today. Then you have to make effort to that end because you know that the next, the most important step to getting to step two is having that discretionary income. So you have to have that knowledge and then make that effort in order to create that discretionary income to then get to the next step.
Love that. So let's let's continue with step one because there's kind of a part B to this. The good news about step one is uh, a you should understand it. And if you don't know what your discretionary income is each month, shame on you, but fix that, right? Go back and look at what you spend and figure it out. But the beauty about discretionary income is there's only three ways to grow it. Only three ways. You can A reduce expenses. B, to Dion's point, you can grow topline, aka income, revenue, whatever you want to call it. Or do both. Right? Those are the only three options you have. And um, you know, I think there's a lot of power in that. Matt, we'll go reverse order. What do you what do you think of kind of part B of step one?
A thousand percent correct. I think far too often people only look at the revenue generation side of things, or they're built differently, and they look at only the cost-cutting side of things. Correct. And I think that you vastly uh increased your chances of success when you do both. When you do a push and a pull, not just pull. So I think people need to recognize that when once you've created that knowledge base, you've made the effort to that end, you understand what it takes to then create that discretionary income, then it follows up as being the next step of okay, what are the ways, what are what are some uniques but specific ways that are actionable that I can actually then create that discretionary income. It comes down to what your topline revenue is and what your expenses are and being able to work both.
Love that, Dion.
So I think Matt nails it with, you know, of course you focus on both. We can only save 100%. And that's if somehow you're living for absolutely free with every aspect. Your parents are taking care of every expense. No limit to how much your increases. And I think we're in the time where it is the easiest to develop some type of side hustle. Yeah. And changing companies, we're finding, you know, most people are finding that's it's a, you know, companies will pay more to steal you from competition than they will to keep you.
Oh, yeah. So there's a a lot of ways to look at it there. I think a lot of people make a mistake of when they look at cutting their expenses, they go to that latte factor that gets, you know, a lot of clicks and not thinking what are my biggest expenses. You for most of us it's the same too. Where do I live and how much does the government get? So, the more you make your money from a way that isn't taxed as much, and if you consider something like house hacking, whether it's just adding roommates or buying a place that reduces or eliminates your housing expense, the discretionary income can grow exponentially. But then it comes down to what do you do with it? Do you invest it or do you pay off debt? And and uh, that's that's a whole another class all on its own. But once you create the discretionary income, you avoid the life creep. You have to think, okay, I'm doing this for a reason.
Yeah. One of the things that I'll talk about this step, we'll move on to step two in just a minute. Is um, and I, you know, I've shared this formula with true entrepreneurs like Ryan Pana, Pace Morby, you know, all of these guys. And those guys always focus on the revenue. That's just where their mind goes, right? I want to grow discretionary income. I'm going to make more money. That's just how Pace and Ryan are wired. But as somebody who did this as a W2 employee, I I'll tell you this much. You make you can make the most immediate change. Immediate meaning 24 hours by cutting expenses, correct?
Right. Do you need seven streaming services? Do you need this? Do you need that? So, Olivia and I went through a year-long audit of needs versus wants. So, again, I believe cutting expenses is the most immediate and most rewarding step to grow discretionary income today. I agree that increasing revenue uh is is way more beneficial because as Dion said, you grow the top line a thousand bucks and you don't adjust spending. It all falls to the bottom line. That's how discretionary works. X taxes of course, but um it takes time to do that, right? Very few careers or things allow you to grow revenue in 24 hours, right? Today, as Dion says, it's never been easier to get side hustles and all of that. All true, but I still believe doing a personal audit of needs versus wants is the most im like you can make changes in 24 hours by whacking some stupid expenses.
All right, so that's step one of the wealth formula: Know what your discretionary income is and grow it.
All right, step two. I actually got this vocabulary from you, Matt, so we'll go to you first. I don't care what your investing vehicle is, be it, you know, single-family homes in my buy box, whether it's stocks, whether it's crypto, whether it's classic cars, wine, trading cars, whatever it is, but pick your thing and become elite.
Mhm. That is step two. Have have a thing, become elite. And I I say that because of all the millionaires and decillionaires that I interact with on a weekly basis, um, they all did it in one thing, right? They didn't get distracted by trying to become experts in three different things. They had a thing first. And yeah, maybe today they're diversified in multiple streams of income and all of that. But everybody I know that became millionaire self-made millionaires, right? People who became self-made millionaires in a decade, they did it by becoming elite at something. What do what do you think of step two?
Yeah, I mean that's, you know, that's uh, you get elite at almost anything, and it pays like literally whatever it is. If you get actually elite where it's always like I don't know the answer to this question, I'm going to call this person, you know, and that's be why are you calling them because they know more about that than anybody else that you know, and so I think that you know, you look at, you know, sub two is what built Pace, that's one thing, y you know, I always like to say one-trick pony, but man, that's one hell of a trick; that's that's a that's a big pony; that's exactly so that's the key, the key is getting really amazing amazing at something, you know. Um, there it's you see it you see it throughout life, you know, and then as you get up into like the executive chains and see that what you see is guys that are elite at one thing. Like this guy, no matter what he does, he can get any customer to like him. This guy, no matter what he does, no matter how rude he is to his customers and how bad he is on the phone, the guy just always closes. He's just a closer. Something that he does is is constant is a constant closing event. So I think yeah, elite is the most important thing because that's that comes from that knowledge and that effort base where you're then creating that discretionary income, and then you're going to maximize the effects of that discretionary income when you're elite.
Yeah. And again, by becoming elite at something, you could see around corners and kind of avoid big catastrophes.
Absolutely. You could see value creation. You can see mispriced opportunities.
Yep. You can see people who are motivated sellers so you can do disrespectful offers. It's just empower just so powerful if you're in the top 10 or even top 1% of something.
Absolutely. Dion, what do you what do you think? Become elite at something.
So, not only becoming elite at something, but understanding that the thing that you chose uh uh fits you. Yes. And I I usually quote Charlie Munger. He says uh, you know, Kevin O'Leary and and Warren Buffett want you to diversify a diversified index portfolio. Mr. Wonderful says no more than 20% in one asset class. No more than 5% in one asset. But Charlie said you focus on one thing to become wealthy. Once you're wealthy, you diversify to protect it. So I really like that. So let's look at in our earlier video today. Uh, you mentioned that it it seemed like I can see the future because I started my plan. I can plan out 10 years. What I saw was my thing 10 years in the future. I couldn't see the future in 2013 when I closed on that first duplex. If I could see the future, I'd have bought Bitcoin. It's been the best performing asset of the last decade. But but it wasn't my thing. Subject two, Pace has made hundreds or tens of millions, whatever. That's not my thing. My thing is in the beginning when I can save a down payment, I'll buy the next great deal that I find. Took a couple years to get the first one, couple years to get the next one. But at 10 years, I had mastered my thing to where I can look at the market. It takes minutes to to figure out if this is a deal worth looking at or to pass on. Uh, I'm still not even to the point where I want to diversify to protect my wealth. I've diversified inside my asset class. But that focus on one thing while there were other things that could have made more, but not chasing five rabbits and starving.
Yeah. I absolutely think you find your thing. Make sure it fits your timeline, your resources, your goal, and uh, stick with it.
Love that. Love that.
Well, here's the one that really pisses most people off. It's step three of the simple wealth formula: 10 years. You've got to do everything we talked about in step one and step two for 10 years. It's a decade. This is not get-rich-quick. Um, you know, quick money often goes just as fast. Look at lottery winners. This is a 10-year journey. In the first five years suck. It's where you make mistakes, lessons learned, all of that. U lots of people give up, you know, year two, year six. It's a 10-year journey. If you stick in, if you do this and you're elite for a decade, your opportunities in different market cycle cycles, your chances of success are astronomically higher. If you kind of vision a 10-year journey, uh, Dion, we'll go back to you. What What do you think? 10-year step three pitch.
What I would add to it would be expectation management. If you think, okay, in 10 years I can be Elon Musk. Yeah, I could have spaceships going. I could have 10 different companies. Yeah, that 10 years is probably going to suck. Imagine the risks you're going to take to try to grow something that that fast, that big, right? But if you think in 10 years, here's my goal. It's attainable. Here's the timeline it would take to get to it. It might be hockey stick growth. It might be slow and gradual. You might have that income snowball somewhere in the middle. But yeah, no, it it's absolutely 10 years. And what's what's very frustrating to the new investor is you don't go to new investors to get advice. The go the goal is find somebody who's done what you want to do, ask them how they did it, find out their actionable steps, and then do those steps. So it's normal to say they have it now. How do I get it now? But they didn't get it overnight. They got it over a decade. And you need to as well. And yeah, there are some people who will do it a little bit faster. They'll be happy if they set a 10-year plan and beat it. If you set that four-year plan, you're definitely going to quit in six or eight years.
Yeah, that's the real key of the 10-year plan because I know I know people that are on this show that maybe did it in seven or eight or something. But I just want people to have to be happy if it's sooner. I don't want to say five and then it takes seven and you're pissed off, right? So again, I think I think going in with the 10-year plan, seeing it, you know, one house every two years for 10 years, I think it's just so powerful. And again, if you whatever your thing is, if you're elite at your thing for a decade and you can go through different cycles of recessions and growth and all of that, the ability to find motivated sellers, add value, look around corners to avoid the big catastrophe, it's ju it's it's just there for your taking. Uh, but most people aren't willing to do the work for a decade, and that's where they kind of fall down. Uh, Matt, closing thoughts and where they can find you?
Sure. Lumberjack Landlord, 900 PMs on Thursday, Eastern time. Uh, I'll answer your questions about anything real estate. Um, and I think uh, I think you guys are exactly right. I mean, I think that the time horizon very often when people need to buy something, they pay the most when they have a specific timeline in mind. You pay the least when you can take it as it comes. Right? And so that's why for me, whether it was houses or sports card collecting or whatever, I made the decision that, okay, I'm going to buy these assets, but it's because they came to me through a relationship or somebody that I knew and it was like they need to sell. They're trying to create that timeline. That makes it easy for me because my money is worth more because they need it. So, I think that that's a great lesson to teach people, which is it might be five, it might be 10, and it's also market dependent. The market where you are might suck right now. It might be awesome right now. You have no way of knowing. But when you go through 10 years, you have a complete cycle there. You have a complete cycle over a 10-year period. So, you can be buying low and uh, or you could be buying high, but you have enough time for it to work itself through the system over a 10-year period. So, I completely agree.
Love that. Dion, find you in closing thoughts.
You can find me right here on YouTube, Dion Talk Financial Freedom. I think the easiest thing to do is to overthink things. And one of the main reasons so many people never reach financial freedom, never have a better financial future, live paycheck to paycheck or credit card payment to credit card payment is because when you overthink things, you make it uncertain. You're uncertain. Uncertain breeds insecurity. Insecurity makes you not take action. Not taking action feels safe because you're avoiding big risks. The biggest risk is that not taking action. Imagine the opportunity cost of never trying and never starting. And that's where I want to say 98% of people are.
Love that. At the end of the day, folks, getting wealthy is simply three steps. You can argue them. You could parse, you know, parse the vocabulary. At the end of the day, um, not easy. Lots of off-ramps, lots of mistakes could be made. But if you want to get wealthy, I think it is just these three steps, guys. Thank you so much.
Thanks.