7 Steps – How To Make Your Money Work For You
I once heard it said that one of the biggest differences between the average “Joe” and the wealthy is this:
Wealthy people earn interest while everyone else pays it.
Knowing what I know now, you can replace the average “Joe” with the average “doctor”.
Many high-income professionals that I speak with shortly after joining the Passive Investors Circle are paying A LOT of interest. Typically the higher their income, the MORE interest they’re paying.
The sad thing is that their ONLY income source is….you guessed it…..the income from their practice/work.
Does this sound like you?
If so, I’m glad you’re here because I’ve taken it upon myself to help by sharing my failures along with specific wealth building tools geared towards growing new passive income streams.
Just a few short years ago, yours truly had ONLY one income source, earned/active income. Which, by the way, is the HIGHEST taxed income.
My goal is to get you thinking differently about money. Yes, money can help you achieve financial independence plus many other things such as giving and helping those in need.
I’ve always told my boys, “The MORE money you make, the MORE people you can help.”
If you want to break free of the chains of practicing/working until you’re physically unable to then you must learn how to make your money work for you – NOT you for it.
Here’s 7 ways to get started….
7 Steps – How To Make Your Money Work For You
“Money is my military, each dollar a soldier. I never send my money into battle unprepared and undefended. I send it to conquer and take currency prisoner and bring it back to me.” Kevin O’Leary Aka Mr. Wonderful
#1 Invest in yourself
“The most important investment you can make is in yourself.” Warren Buffett
Unfortunately, too many of us complete training with a “I’m done with school/education attitude.”
I get it.
I was there too until I realized how LITTLE I really knew about building wealth including setting financial goals.
I don’t know about you but I learned ZERO regarding running a practice or how to manage money in dental school.
Actually, I think it’s a disservice. It’s no worse than taking a kid out of high school or college from the projects and throwing him in the NBA with a multi-million dollar contract. It’s a disaster waiting to happen.
Why do you think so many professional athletes go broke?
So if we’re not going to be taught about money and you want to learn how to earn, keep and grow it, then you MUST take it upon yourself to do something about it.
Investing in yourself is the key.
Here’s a few ways to get you going in the right direction:
a. Read books. That’s right, read. Most millionaires read so should you. Consider books that focus on:
- basic personal finance
- investing
- the stock market
- mutual funds/index funds/retirement accounts
- real estate
- growth mindset
- wealth building
- entrepreneurship
If you need some specific examples, check out our Resources section.
b. Understand basic financial calculations. Get to know the power of compound interest, financial risk, the time value of money and the expected rate of return of different financial assets.
c. Listen to podcasts. As we become busier and busier, many turn to podcasts for education. There’s one out there for literally any subject you’d like to learn more about.
If you’re really bored, here’s a few podcasts I’ve been interviewed on.
Join the Passive Investors Circle#2 Limit your spending and debt
Do you want to learn how to make your money work for you? Pay off your debt and quit spending money you don’t have.
Newsflash: Your money can only work for you once you’re out of debt.
If you’re not sure where to start, try Dave Ramsey’s Debt Snowball method. This is what we used to pay off almost $300K in student loan debt.
It’s simple.
Pay the minimums on all of your debt, but focus on paying more money to the debt with the lowest balance first.
The reason is that it allows you to get a small win and pay it off quickest before moving to the next one.
Regarding lifestyle, if you’re considering buying something like a car or boat change your habits.
If you can’t afford to pay cash for it, you can’t afford it. I don’t care if you get 0% financing or 100,000 credit card points.
Just ask all of those people during the COVID-19 crisis that lost their incomes but still had to keep paying for stuff they didn’t originally pay cash for. Ask them how good of an idea that was.
Consider practicing stealth wealth. If you can’t buy it then consider renting. There’s no shame in renting a house until you’re financially prepared to buy one.
BTW: We rent cars when traveling. Why? It helps us keep our cars longer. I’d rather put the extra mileage and wear and tear on a rental than my personal vehicle.
Be sure that you are spending your money on the things you value most.
#3 Pay yourself first
We’ve learned in the past that #1 on the list of 7 wealth building lessons from the book, The Richest Man in Babylon, was pay yourself first.
Paying yourself first is also one of the key lessons David Bach teaches in his books:
Until you save up at least $100,000 or more, don’t worry about the interest rate you’re getting. Instead, focus on the savings rate and piling up as much cash as you can.
As Grant Cardone teaches, “keep stacking the cash until it’s big enough to deploy.”
Should you really be concerned if you’re making 10% a year on $10,000? Honestly, $1,000 in annual interest or $83.33/month isn’t too exciting.
But when you’re making 10% on $100,000 ($10,000/yr), then things start to pick up.
Start saving early by paying yourself first. Remember that every dollar you save in your twenties and thirties is 8 times as valuable as one saved in your fifties.
Don’t Miss Any Updates. Each week I’ll send you advice on how to reach financial independence with passive income from real estate.
Sign up for my newsletter#4 Don’t lose money
“Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.” – Warren Buffett
If we can be taught anything during the COVID-19 pandemic it’s this: Have a game plan in place to help prevent the loss of money.
Most of us don’t ever think about being hit with a catastrophe, but it’s inevitable as we’re all going to die at some point.
Make sure that you have the appropriate insurance policies in place such as:
- health
- life
- disability
- liability
With regards to investing, if you’re not sure what you’re doing and risk losing money (or have a low risk tolerance) then either educate yourself or find a mentor or financial advisor.
My local real estate mentor has taught me more about how to not limit my thinking than about real estate. All investing starts with getting rid of the scarcity mentality.
#5 Grow passive income streams
Passive income, aka “mailbox money,” is any money earned with little to no effort expended.
Is it as easy as most say it is?
From my experience no.
That’s right. Just like anything in life that’s beneficial, it takes work. If you put in the hard work to invest in yourself, become a doctor or other professional then that’s hard work.
You don’t just wake up one morning after graduating high school and expect the mailbox money to start rolling in.
Once you’ve set yourself up to be in a position to invest in assets that produce passive income streams, that’s when you begin to start seeing huge payoffs.
Common forms of passive income include real estate investments (we get into shortly) or silent partnerships in businesses.
#6 Decrease taxes
For most people that fall on the left side of Kiyosaki’s Cashflow Quadrant, they have one source of income that keeps them in the highest tax bracket.
If you really want to know how to make your money work for you, do everything in your power to legally minimize your tax burden.
Take it upon yourself to learn the basics of the tax code.
Are you taking advantage of maxing out tax-advantaged retirement saving accounts and funding 529s?
How about capitalizing on the the triple-tax advantage that health savings accounts (HSAs) offer?
If you REALLY want to lower taxes, invest in real estate. Which leads us to….
Join the Passive Investors Circle#7 Invest in real estate
One of the best ways to not only build wealth but lower your taxes involves investing in real estate.
Some of the benefits include:
- Ability to recover the cost of income-producing property through depreciation using a cost segregation study
- Using 1031 exchanges to lower tax burdens now and defer profits from real estate investments
- Personal residence exemptions – helps with capital gains taxes
- Mortgage interest deduction
If you choose NOT to be an active investor like myself, there are ways to passively invest such as in syndications.
Real estate allows your money to continue working hard for you by creating cash flow.
Each time you invest in real estate (either physical property or a passive syndication), you develop an extra stream of cash flow which moves you one step closer to your goal of income replacement.
Are you ready to learn how to make your money work for you?
Join the Passive Investors Circle.