The Silent Killer of Your Financial Freedom | DO 67

Residual Income

Freedom Possible

On the last episode (#66), Matt busted two of the biggest wealth-creating myths that people subscribe to, and then hinted to a solution.

On today’s episode, Matt expands on the solution and reveals the third and biggest trap that is the silent killer of financial freedom.  This trap ensnares some of the most educated, savvy, and well-intended investors.  If you are not aware of it, it will most certainly ambush you as well.

The information in this episode, which is part 2 of the Freedom Possible Series, is necessary if you plan to change your financial future!  If you haven’t already done so, please be sure to listen to part 1 of the series for a thorough introduction to creating financial freedom:

Episode 66: Freedom Possible – Let’s Get Started

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5 Important Lessons from the Episode:

1   The difference between cash and cashflow is a critical distinction. It is the difference between working for your money and having your money work for you. It is the difference between becoming financially free and being dependent on church, family, or state in your old age.
 
2   Even if you understand the difference between cash and cashflow, the lure of a big payday can be very tempting. To avoid this trap, you can’t just understand the value of cashflow intellectually; you must incorporate the cashflow mindset into your daily behavior.
 
3   If you are struggling with grasping the value of cashflow, take a good look at your portfolio and savings and determine the answer to this important question: At the rate you are currently saving, how old will you be until you can save an amount of money that will yield enough monthly cashflow to cover your expenses?
 
4   The shift from an accumulation mindset to a residual income mindset is the most important step in securing your future. If you are able to overcome the three traps of the accumulation mindset, you virtually guarantee yourself financial freedom.
 
5   Success leaves indisputable evidence: 94% of the wealthiest 1% of Americans 65 or older have used residual income to get there. Shouldn’t you too?

 

What You’ll Learn:

  • How you can use systems to create wealth automatically without your direct and daily involvement.
  • Why most people don’t apply the power of residual income to their daily lives; and
  • How you can educate yourself and shift your mindset so that you don’t fall into that trap.
  • What the third trap of the accumulation mindset is; and
  • How it can deceive even experienced investors.
  • The type of investment that Matt recommends because it has the flexibility to produce either cash or cashflow, depending on your current needs.
  • Why creating cashflow is easier and more reliable for creating wealth than the “get rich slowly” model promoted by many “gurus.”
  • Why financial freedom is impossible to attain by traveling the road that you are currently traveling.
  • How to avoid the seduction of cash and take the first step to creating residual income.

 

Resources Mentioned in this Podcast:

  • Get started on your own “do over” by downloading “The 3 Pillars of Creating the Ultimate Do Over” at FreeDoOver.com

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Podcast Transcript:

Voice Over: During an era where countless people, businesses and organizations are feeling the pinch, running out of time, running out of money, losing confidence, and feeling as if life is unfair.

Praying for another chance and unless something is done, life is going to pass them by. Fortunately, in the nick of time there is not a place where the ignored, underestimated and unknown steps to producing results and making life work are revealed.

Save your career, save your business, save your health, save your relationships and save your life. Get from where you are to where you want to be faster and with greater ease than you ever thought possible. Say hello to your Do Over.

Matt Theriault: Welcome, this is episode 67 of the Your Do Over Podcast. This is Matt, The Do Over Guy, Theriault and this is the podcast that will show you how to start over. It will help you identify whatever it is that didn’t work for you the first time or didn’t work for you last time.

This is your chance to Do Over. To learn from your past mistakes, to learn from other’s past mistake so that you can build a life of peace, joy, love, blessings and abundance.

Enjoy that life during the most active years of your life to enjoy that life while you are still young enough to enjoy it. To help you get a jumpstart on your Do Over, you can download The Three Pillars of Creating the Ultimate Do Over for free at FreeDoOver.com, FreeDoOver.com. There you’re going to download this free 55-minute mp3 audio program that I created just for you to help you start over as you Do Over, alright?

Okay, so here we are for part two of our multi-part freedom possible series. If this is your first time listening to this show or if you haven’t been here for a while, make sure you go back and download the previous episode, episode 66. So you can catch up and get on the same page, alright? You know we discussed a few traps that keep people from attaining their financial independence.

We discussed the 401k, we discussed the idea of paying off your personal residence and we tapped in to the solution a little bit, the idea of creating residual income and instead of focusing on making and saving money as most people do. The answer would be to shift your focus to creating residual income what very few people do.

In fact, only the wealthy do really. Whether they’re conscious of it or not, it’s what they do. I gave you an example demonstrating not only how residual income significantly increases your potential of becoming wealthy and financially independent but also how it could take half the time than the way you’re probably doing it right now.

The way you’re doing it right now meaning the way that you are making and saving money, your approach to making and saving money even if it’s just your mindset is to make money and save it.

There’s a problem there. Then I ended the episode with the suggestion of a third trap that even if you agreed with everything I’ve said in that episode, yes the 401k is crap.

You believe me there or you agree with me there. I see how rushing to pay off my home actually isn’t prudent financially, right? Wow, they residual income thing rocks, you agree with that? I need to get some of that, right?

On the double, even if you’re on board on the same page and agree everything that I said, there’s a third trap that will prevent all of it from happening for you. Even if you believe every word that I said, even if you act your actions are correlate to those thoughts.

There’s a third trap that will forth everything. Now as I let you in on that in the end of the last episode, the road that is going to get you to your financial independence gets the residual income road.

To travel that road, you’ll need a dramatic shift in mindset, dramatic significant shift. I don’t know how much drama, there is but it’s definitely is to just really change your whole way of thinking, a shift from the accumulation mindset to a residual income mindset, residual income.

Stop accumulating and start creating income residually. You know the group that chooses this path lives life quite differently than those who do not.

I mean they wake up every day with a focus on creating or managing systems to work for their money as opposed to working for their money themselves. It’s a very different life.

It’s a very different way of thinking and it starts with that shift in your thoughts and your shift in your mindset. You know their focus, it’s placed on creating residual income either through a business system or with their money, earning money itself.

They understand that once their residual income exceeds their expenses, once that passive income, that cash flow, that residual income exceeds their expenses, the accumulation of assets and the creation of wealth will essentially happen automatically whether they get up and go to work or whether they go fishing. They also understand that it doesn’t take 40 years for wealth to be created in this manner, far from it.

You know contrary to the risky label, this road to wealth is commonly given by our society, I mean this is the road that gives you the greatest shot at creating wealth. I mean it’s rather ironic. In fact it’s irony in the most literal sense of the word.

You know society, it considers this path risky but per the statistics, per the facts, it’s the only path that is working for the average person. You know as more and more studies and research is conducted about this, the misconstrued concept of residual income and it’s wealth creating power becoming more common knowledge by the day.

It’s breaking into the mainstream. People are opening their eyes but in my opinion, they’re not opening up fast enough. But they are opening them up.

It is becoming more and more common knowledge by the day and that being the case; you know one has to wonder why more people don’t apply this knowledge once it has been learned.

There’s actually a really simple reason why more people don’t apply this powerful knowledge to relate their daily lives. You see most people looking to make the transition from accumulator to residual incomer. They confuse cash with cash flow. That’s the third trap that I’m speaking of. They don’t understand the difference between cash and cash flow.

I’m going to explain. I’ll explain using real estate investing as an example because it simplifies this idea unlike anything else that I can think of at the moment or that I have yet to think of. You know one thing, one among many things of the attractive attributes to real estate investing possess as an investment vehicle is that it can produce two types of income.

Real estate can produce large amounts of cash through short term strategies like fix and flip and wholesaling using, you know, Flip That House on TV. That’s what I’m talking about. They can have ginormous pay days.

They can make a lot of cash with that strategy but also real estate can also produce smaller amounts of monthly cash flow through long term strategies like buy and hold and lease options basically just becoming a land lord and putting tenants in place or rental property owner and hiring someone else to manage it and they can be the land lord, whatever.

But that’s what I’m talking about long term smaller amounts of money. You know the accumulator looking to transition to residual incomer will typically, if not always, choose a $30,000 fix and flip cash pay-out over a $300 buy and hold cash flow deal.

So an accumulator that wants to become a residual incomer, if they’re given the choice between a $30,000 fix and flip real estate deal or a $300 a month buy and hold deal, they’ll choose the $30,000 fix and flip almost every single time.

Even although that they’ve got the greatest intentions of becoming a residual incomer, they’re accumulation mind set is so engrained in their psyche that they can’t resist the big cash pay outs that real estate offers. They can’t resist it. It’s their mind set. This is what I meant by “If you believe everything I’ve said up to this point, this is the trap that’s still going to get you unless you get straight on this.”

It’s their mindset that prevents them from recognizing the true value of $300 of monthly cash flow. They failed to recognize the true value of it.  Because the accumulator tragically confuses $300 of cash with $300 of cash flow, they continue to exchange time for dollars. They are enslaved to that next fix and flip deal and they never take that first step toward the freedom of becoming a residual incomer.

That’s the trap. The large cash payout interferes and prevents the accumulator from ever becoming a residual incomer. Their mindset has them thinking that they’re actually prospering because they just made this large amount of cash, they just made $30,000, how could that be wrong, right? I’m prospering. I’m making money. I’m getting wealthier. That’s what they’re thinking.

That’s what their mindset has them thinking. Unfortunately in reality, what they have done is they have extended the time that it’s going to take for them to achieve their financial freedom?

They extended the time by taking the large chunk of money. But can you blame them? I mean you can’t, really. It’s extremely counterintuitive and it isn’t quite really making sense on the surface, does it?

Some of you might be out there right now scratching your head. How could turning down $300 of cash flow in exchange for $30,000 of cash possibly prolong the road to financial freedom? Doesn’t make sense, does it?

Even if you understand the difference of which I’ll get to in just a moment, even if you understand the difference between the value of cash and cash flow, it’s very easy to get caught up in the moment when you’re staring at a large pile of cash.

If you think about it, I mean what’s so appealing about $300 a month in cash flow when you’ve got the $30,000 of cash staring you back in the face? Why would I want that $300 of monthly cash flow?

I mean I agree that there’s nothing sexy about $300. It has very little value today. I mean it might buy you what, a pair of designer jeans? Or, you know, a nice dinner with a significant other and a bottle of wine?

Then it is gone, right? However, $300 of monthly cash flow, $300 a month coming into your mail box every single month to the residual incomer, it has tremendous value. They’re not the same thing.

In fact, the value to the residual incomer is so tremendous that it eclipses the value of the $30,000 of cash. It eclipses it, yes. $300 of cash flow eclipses the value of $30,000 of cash.

You know what eclipse means, right? The value of $300 of cash flow blacks out the value of $30,000 of cash. The value of $300 of cash flow is so big, you can’t even see the $30,000 pile of cash.

And here’s what I mean. Think about this falling scenario, you know as I’m recording this. The financial institution, ING, is advertising a 1% interest rate on their money market account. It’s actually a little less but I’m going to use 1%.

I’m going to be generous to our economy and ING and to keep the math simple. That’s really why I’m just going to round it up to 1%. I’m going to keep the math simple.

I choose to use ING as an example because their money market account is just about the most generous savings account available today for the average consumer, the accumulator.

So I’ll ask you this question, how much cash would you need to deposit into that ING account to generate $300 of monthly cash flow? How much cash would you need to deposit into that ING account to generate $300 of monthly cash flow? Forget the calculator. Sorry, the answer is $360,000.

More than a quarter of a million dollars, almost half a million dollars. $360,000, you heard that correctly. You would have to make, save and maintain a balance of $360,000 in an ING money market account to generate $300 of monthly cash flow. So what that means is, $300 of cash is worth $300 of cash, right?

However, $300 of cash flow is worth $360,000 of cash sitting in the most generous saving account at this moment. You get the difference? That’s the difference between cash and cash flow. $300 of cash equals $300 of cash. $300 of cash flow equals $360,000 of cash sitting in the most generous savings account available to you today.

This is how the accumulator, even if they make great money, extends the time it takes to achieve financial freedom. They chose $30,000 over $360,000, get it? So which is a longer, more difficult road to travel? Is it accumulating $360,000 of cash or creating $300 a month of cash flow?

Which one takes longer? Which one is more difficult to go out and earn and save $360,000 of cash or to go out and create $300 of monthly cash flow?

Hey, you know your situation, you know your skill, you know your resources much better than I do. However in every real world scenario that I can think of, creating $300 a month of cash flow is not only faster and easier but it is also more realistic for more people.

It’s do-able, it’s possible. It’s even more likely than the traditional “get rich slow” program that has society by the neck.

The same program that your financial guru promote day after day after day on TV, the radio and yeah, even here, even on podcasts. These gurus, they are extremely popular.

They have a ginormous audience with millions of loyal followers. I mean it’s no wonder that 97% of 65-year olds today are financially dependent.

97% of 65-year olds today are financially dependent. After working 40 to 50 years of their lives following this traditional crap, today’s retirees are rewarded in their golden years with dependency.

They are financially dependent on either church, family or state. Okay, let’s get back on topic here because earlier I can hear the doubters. I can hear the naysayers. I can hear the wheels turning.

I know what you’re thinking and I’ll go ahead and I’m going to beat those naysayers to the punch. They’re thinking something along the lines of $300 of cash flow does not equate to financial freedom, right?

$300 of cash flow does not get give me financial independence. That wouldn’t help me right now at all but that $30,000 sure would help me right now. I don’t want the $300 of cash flow.

I want that $30,000 because that’s going to get me out of my issue right now. I get it. I understand that $300 might not make a difference for you right now. So what would then? $5,000 a month?

Would that make a difference for you? Or maybe $10,000 a month? Would that make a difference for you? That would certainly make a difference for you, right? So let’s look at this way.

Let’s say you need $10,000 a month of cash flow to make a difference in your life. You need $10,000 a month to make a difference. By performing the same math that we did with today’s interest rates that we do with ING, you would need to accumulate and deposit $12,000,000. You need to earn and save $12,000,000 and then maintain that balance in that ING to create $10,000 a month of cash flow.

Once again, which do you think is a longer, more difficult road to travel? Is it accumulating or is it saving $12,000,000 of cash? Is it saving $12,000,000 of cash or is it creating $10,000 of monthly cash flow?

Big difference in zeroes right there on those two numbers.  I mean this question is much easier to answer, isn’t it? I mean $12,000,000 of cash sounds just flat out unrealistic, doesn’t it?

I mean that’s a lottery winnings. $12,000,000, I mean I don’t know. Maybe I’m being presumptuous and you are already on track to reach that number. I mean check your accounts. Check your portfolio. You know your situation much better than I do.

Look at your numbers. Sit down with your accountant or your financial planner and forecast it out and do the math. Break out the calculator and do the math.

Do it together with your trusted financial professional and answer this question, “At the rate you’re currently saving, how old would you be once you actually do accumulate that $12,000,000?” Go sit down with your professional.

Break out the calculator together and sit down and just answer this question. “At the rate you’re currently saving, how old would you be once you actually do accumulate $12,000,000?”

Here’s the answer, “Whatever age you come up with, you’ll likely be too old to enjoy that money anyway.” The best years of your life would be behind you. What happens if you’re willing to take that risk?

Let’s say you’re going ahead and you’re going to take that risk, you’re going to stay the road, you’re going to stay the course that you’re currently travelling because you think you can save that $12,000,000 and something unforeseen happens.

Like that one thing, that one thing every 10 years or so that causes the stock market to experience a significant fall, what are you are going to do then?

What happens if you stay in the road and it just doesn’t work out? What then? It’s not like you can go back and start over. You can’t call Do Over on your savings plan at 65 or 70 years old, can you?

Nor do you have enough years in your life to do it again or probably you have the energy or the desire to keep working to earn money so that you have something to save. At this point, you have no choice but to get the residual income route.

You got to try residual income now because you don’t have enough years in your life to try the other option. Listen, I’m going to speak in absolutes and I’m just going to come out and say it.

It’s impossible. Freedom and retirement are impossible travelling the road that you’re currently travelling, but generating $10,000 of monthly residual income, well, that’s possible, very possible. For that to become a possibility, you just need to make a shift from an accumulator mindset to that of a residual incomer mindset.

By changing just that one thing, changing that one thing just one time and taking actions to which correlate to that mindset. Not only is that type of residual income possible, get this, it’s probable. It’s not just possible with the actions correlate to the shift in that mindset, it’s probable.

Remember the statistics that I referred to last episode. You know according to the Department of Health and Human Services, you know, 95% of today’s 65-year olds are either dead or they’re dead broke.

Four percent of 65-year olds just squeak by and they barely make it, 4%. They just barely make it. Then there are the 1% that retire wealthy. There’s only 1% that retires wealthy. And of that 1%, 94% of that 1%, guess who they are?

They’re residual incomers. 94% of the 1% are residual incomers. Success leaves clues, doesn’t it? Or in this case success leaves evidence, indisputable evidence. 94% of the wealthy 1% create their residual incomes in one of two different ways with many using both.

There’s a reason for this. They use these two methods because they offer the greatest probability of creating a substantial residual income. They are the most manageable and the most predictable. They offer the greatest probability of creating financial freedom for you and those who you care about the most.

We are going to dig much deeper into those methods in the next episodes but before we go there, if you get nothing else from this freedom possible series, please get the following. Please get this:

First, if you ever expect to create wealth and experience any sort of financial independence while you’re still young enough to enjoy it, you need to adopt, embrace and implement a residual income mindset. That’s first.

Second, don’t get stuck in your pursuit of residual income by confusing the value of cash with monthly cash flow. That $300 of monthly cash flow might not look too appealing right now but you have to take the first step. Only then can you add another $300 of monthly cash flow to it.

Now you got six and then you can add another $300 of monthly cash flow to it. Then you got $900. You got almost a $1,000 of monthly cash flow. How would that change your life right now if a thousand dollars a month just showed up in your mailbox? Every month, $1,000 showed up in your mailbox.

The dollar’s certainly lost its value. Inflation got a hold of the economy but you can still do some stuff with $1,000, can’t you? But you’re never going to get to $1,000 unless you take that first step of the $300 or the $250 or the $200. Whatever it is, that first step of residual income, you got to take that first step.

Don’t get stopped by confusing the value of cash, that $30,000 pay out with monthly cash flow. The $300 a month, $250, $200, even if it’s a hundred bucks, you have to take the first step to start building it.

Don’t get hypnotized and seduced by the big cash in avoiding building your cash flow. The more you take those big cash pay-outs, the more you postpone your financial independence, the first one or two decisions like that is going to be a little difficult but when you’re star adding them together, it becomes easier and easier and easier.

Remember, making the transition from accumulator to residual incomer and creating wealth can take some time but by maintaining your focus on cash flow, the time it takes will be nothing in a remote vicinity of the 40-year traditional alternative, got it? Now if not 40 years, how long will it take you to hit your residual income goal?

If not 40 years, it’s going to be a lot shorter than that but how long will it take you to hit your residual income goals? It’s going to be different for everybody but it’s going to be shorter than 40 years, I guarantee that. How long will it be for you to hit your residual income goal? Well, meet you on the next episode and we’ll figure that out together.

That’s it for today, God loves you and so do I. I am Matt, The Do Over Guy and I will see you on the next episode of your Do Over.

Voice Over: Thank you for tuning in to your Do Over. Where the ignored, underestimated and unknown steps to producing results and making life work are revealed and remember, knowledge is potential power.

Take action on what you learned to day. This is not your learn over, it’s your Do Over. To view the resources referenced in today’s show and to retrieve a complete show transcript, visit www.TheDoOverGuy.com.

Stay connected with Matt, The Do Over Guy, Theriault on Twitter @TheDoOverGuy and on Facebook at www.facebook.com/DoOverGuru.

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