Never spend the principal amount


You are a product of your environment.  The beauty of this statement is that you can sometimes place yourself in the environment that you WANT to be a product of.  For me, this occurred at the early stages of my career when I became a financial adviser.  From there I went into private banking and now I work for a family office with assets north of 200 million.  As I have grown, the level of net worth that I have been exposed to has grown.  With that exposure comes a completely different view of how wealth works.

This new exposure influences everything.  Two people can read the same book or the listen to the same lecture or podcast yet their experience and exposure will lead them down two different paths.  I tell my mom this all the time.  She, as a CPA who deals with families who own entire acres of land and who have family trust that kick off one million in income per year, passive, could read the book Tax Free Wealth and take much more out of it than I can.  On the other hand, I could read a book about investing such as Set For Life and take more out of it than she can.  The difference is our level of experience and exposure.  Our context creates the lens with which we filter information.

A while ago I wrote an article about professional athletes using their high salaries as the basis of their wealth not the substance of it.  What I mean is that if Lebron has 200 million, he could invest it at 10% annually and live out of 20 million for year for the rest of his life, and still have the 200 million in wealth.  Many times what we see athletes and entertainers do though, is they live out of the 200 million, and they take care of their family out of the 200 million. At the end of their life they are left with nothing but memories.

This is significant because I took some heat for this message.  Some genius came into my mentions to tell me how using the money in an annuitized fashion was wrong and how they could make more money by investing in an index fund.  He was probably right but I think he missed the point.  The point is that, whatever you invested your principal in, you don’t spend the principal.  You don’t eat the tree you eat the fruit of the tree.  Whether the fruit is apples or oranges makes me no never mind.  My point is that you only get one tree.

I read a lot of books.  Right now I am reading Set For Life and he makes this point. He said that you never spend the principal.  You spend the gains on the principal.  I also read a similar concept in Millionaire Fastlane when he said once the wealthy get to a certain level they become lenders and they live a plush lifestyle off the interest their money pays them not off the actual money. An example is the wealthy family I work for which merely lends out their money at this point.  Most people never see this level of wealth so most people can only argue from their limited viewpoint.  One of the most important things you can do is be careful who you get advice from and be careful who you let shake your convictions.  If they don’t have what you want they likely cant tell you how to get what you want.  

The key here is that once money gets invested it is gone.  You don’t go back and pull it out you merely focus on getting more money.  This is the only way to be “Set For Life”.  If you are looking to do this I highly encourage you to join our investment club.  We have almost 150 members and we are going to keep building until everyone is a member of this wonderful movement. Email to sign up today. 

Be great,

Todd Millionaire

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