Our family just got back from a quick Vegas turn around trip to spend time with some relatives that were in town from Georgia. A Vegas trip breeds a lot of hyper consumer habits. You walk through high end boutiques like Gucci, Louis Vuitton etc and see how “attainable” things are. You walk through luxury hotels and think “gotta get back to stay here”. You start plotting on your next trip, your next vacation and how next time you are going to vacation even harder and even more lavish. I had to catch myself because I can’t lose track of the goal.
When you are frugal you often times exist in environments with the people who aren’t frugal they are just poor. An example is when you stay at the hotel that is reasonable instead of the hotel you can afford. Another is when you fly on the airline that is reasonable not just the airline you can afford. You are forced to rub shoulders with the weirdos and those with no tact. The reason why we do this though, the reason why we tolerate it, is because you live like no one else so later you can live like no one else. Part of that “living” is living low on working income so you can have the money to free yourself from working for income.
Invest first consume later
I love vacations, I love nice hotels, I love luxury goods. But all of those things have their time and place. The book of Rich Dad states that ASSETS buy luxuries. If you want a luxury then it is your responsibility to create an asset to afford it. If you choose to divert from the ways of Rich Dad you will be forced to endure years and maybe even decades in the rat race.
As I was walking around with my sister looking at things we can easily afford out of working income or our credit cards I told her that isn’t how you do it. You put the assets before the luxury. You invest first and you invest hard then you consume later.
You don’t pour your working income and cc balances into the hands of owners, you become an owner and you use your ownership profits to live life at that level. If you are really smart you just never even live at that level. You make more more more and spend less less less… This way you never run out of money. Wealth is when you can’t ever run out.
Instead of consuming hard you must put in the time, energy, effort, and your high level, working during your prime when your expenses are without kid, income toward investing, to acquire rental properties, to put money away permanently. Go all in on the asset column then circle back around in a few years and live like no one else. This is just the financial corollary of Gary Vee’s clouds and dirt. Eat dirt financially and then ball out in the clouds.
My pastor always talks about how when we sin we are not ashamed to sin. We are the best sinners. We brag about drinking so much and who we had sex outside of marriage with but when it comes to church and God we want to be reserved, quiet and low key.
The same is true with our spending. When we spend, we go all in, we stretch the budget, we go without, we max out cards we spend our money before we get paid. This is the same mentality I encourage you to take when it comes to investing. Go all in, max it out, invest it before you get it. Go full retard.
If we invested as hard as we consume we wouldn’t have any problems. The problem is that most of us want to use our working income to fund our expensive goals and dreams. We consume first and then wonder why we don’t have the money left over to invest and make money. This means we invest small which means we shoot for a too high ROI which is why we gamble and lose it all.
A better strategy is massive money that you can then accept a reasonable rate of return on but that still be a massive income. Why do you think banks can take such a low rate? Because they are lending hundreds of thousands. You take out a $500,000 loan at 4% and pay that bank $20,000 a year. Then the person with $20,000 to invest is out here trying to double their money and flip. Investing with such a high ROI requirement is why people go broke. Gamble gamble gamble.
When you invest hard you are going to be looked at funny by those who consume hard. Just accept it. If you are getting comments from consumers about buying new shoes, a new car a new whatever that is just proof that you are living like no one else.
Why invest hard?
Well the reason why I am on the invest first tirade is because I had to change some things. I was doing the same things and not getting results. I was looking like money with the all new everything but I didn’t have any money in the bank to show for it.
Isn’t it funny that when you buy the things that are supposed to make you look like money that you suddenly don’t have money? I never understood that until I got around people who use money differently.
Another reason to invest hard is that there is no better time than now than to go all in. Most of us are making more money than ever. Most of us have the least expenses as ever. Don’t be the person that used their single or married no income free cash to buy things that will have no value in years. I want to be the person that used my high income no expenses to load up on assets that pay me forever, forever ever not for some trinkets that make people think I got it.
The key is that if you work a job you aren’t rich, you wont ever be rich and if you live a rich life out of that job income you just committed financial suicide. You have to take that working income and turn it into passive income. OR at least use other creative means to create passive income. You can’t just spend spend though. Take advantage of this point in the economy to accumulate not to spend frivolously.
My Vegas goals are to vacation on my terms. I want my rentals to pay for everything from the suite at whatever hotel I want to stay in to the shopping sprees at whatever store. The homes fund the trip not the job. And if the only source of income currently is the job its my responsibility to flip it from cash to asset back to cash. That is what I was trying to explain to my sister.
Here are some of the things I focus on now:
PILE: Passive income greater than living expenses
For those that have played the Cashflow game you all know what I am talking about. This is where you take your working income and invest for passive income to that point that your passive income is greater than your living expenses. This is why assets and investing come first. You front load your asset accumulation and then live out of the passive income WHILE still hustling and working your job.
You can’t get to this point if you are merely fitting in your investing and acquisitions AROUND your hyper consumption. You have to become a hyper investor and hyper acquirer who then turns around and lives lavishly from non working, guaranteed money. The money that can’t fire you, the money that can’t lay you off, the money that can’t make you work weekends if you don’t want to work weekends.
Massive income to passive income
Part of the reason why I went to law school was because I knew I needed to get massive income to turn into passive income. I didn’t know this formula in those words but I knew there were big money investments I needed like property and businesses that will allow me to live how I want to live.
In reality, most of the things in Vegas that are for the wealthy that you can finesse with your job aren’t really for you. Those are reserved for the owners. The owners can afford those with ease. They aren’t hoping for a bonus, they aren’t stretching tax refunds, they aren’t sacrificing and scrimping to get to the Louis Vuitton. To them it is normal it is attainable it is nothing. To you it is something special. It is special because you want to skip steps and live like them without the sacrifices they made. They hustled, front loaded assets or high paying careers, now they get to live like no one else.
Its going to require discomfort. Either the discomfort of investing first and foregoing the flash or the discomfort of having flash but no cash…
FIRE: Financial independence, retire early
We can’t act as though our debt is something we just make payments on and living a consumption life around. Well you can, but realize you will be a slave forever. For those that aren’t familiar with the lending industry most lenders consider your mortgage “permanent debt”. In our office when we do development projects we financing the build with a construction loan and then refinance or pay off that loan with “permanent” debt.. this means that the debt is basically there forever.
I have seen people die in homes with a mortgage still on it because all they cared about was making the monthly payment. I have seen people live in a home for 15 years and still not make a dent in the principal. This is permanent debt. The way to hack this is to front load the payments and hustle it out. This creates financial independence.
Retirement is a paid off home not a lofty 401k. We are getting hustled. We are making min payments on the mortgage and cars, investing in a 401k hoping to get saved at the end. This is just financial hustling. You get the bank rich and the fund company rich. The hack is to flip it on its face. Don’t do what they tell you to do because that usually just makes them rich. Do what makes your family rich.
The moral of this post is that the culture has schooled us to spend our money foolish. But spending foolish has a time and a place. Spending foolish should come from your assets not your working income. Working income must be used to acquire assets.
I have been doing this for a while so I know that most people will disagree with me but SOME people will listen. This post isn’t for most people this is for those that get it. This is for the rental property buyers, the business owners, the long term thinkers that acquire and never sell.
If you are interested in investing with our club on either the stock or real estate side we would be happy to welcome you into the partnership. Email firstname.lastname@example.org today to join.
Be great, invest well,