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About Indestructible Wealth: I’m Jack Gibson. I’m your wealth strategist and I’m here to help you make some money. The Indestructible Wealth Podcast is for young entrepreneurs who want to make, keep and grow wealth to enjoy now, and for years to come.
Episode #24 – How to Force Your Wealth Up, Quickly
Podcast Episode Transcripts:
Disclaimer: Transcripts were generated automatically and may contain inaccuracies and errors.
Welcome to the Indestructible Wealth Podcast. This is the place where we help young entrepreneurs to make, keep, and grow wealth that you can enjoy now, and for years to come. I’m your host Jack Gibson, a serial entrepreneur, founder of multiple seven and eight figure businesses, and wealth building strategist. Each week I’m going to share my tips, resources and secrets, to help you create a plan and build the life you’ve dreamed of.
I think you guys should be super excited about this podcast today, because today we’re going to talk about forcing your wealth up. How does that sound? Does that sound really fucking exciting? Or, oh no, let’s do this. How about I, what if I came out of a podcast with this, Hey guys it will takes 40 years to build. It happens really slow, by the time you’re 65 or 70, 75, if you just keep putting a few hundred dollars or a couple thousand dollars a month into an index fund, you can eventually about when you hit 65, you can enjoy your money. At that time statistically there’s a pretty good probability that you could be dead and maybe that your health won’t be all that good. And like how does that sound like you guys? That’s like the traditional bullshit that we’re fed. So today I’m here to disrupt your thinking and what mainstream says is the way to invest and we’re going to force your way into a high net worth at a young age. I like it. It’s exciting. First off, I want to tell you what wealth really is. Now wealth is of course, monetarily, it is net worth, right? It is multiple streams of income, but I’m going to tell you this. Kara just says last night, she said, Hey Jack, we’re doing date night tomorrow night. We’re going golfing. I’m like, yes, you are the best. This is the best wife I could possibly get. She was to go golfing with me on Friday nights. Now she does, she prefers 9 holes. I like 18. So she’s kinda got to tough out the second 9. But other than that, she watches college football, college basketball. she’s super hot. She’s patient with me, like I need somebody patient that’s well, and then we’re going to go out and have a nice little steak dinner afterwards at this restaurant on one of our favorite courses. This is going to be a great night. So I’m super jazzed up. So anyways, that’s wealth.
Now let’s talk about forcing up your financial wealth. So there’s 3 ways that you guys that we all can have available to us to be able to create wealth. So there’s one that requires some luck, there’s one that takes a lot of patience and there’s one that takes aggression. So here’s the first one that takes luck. You can inherit it. That does happen for certain people. Baby boomers are going to be passing on a huge chunk of wealth over the next several years. as they pass on their wealth, they control an enormous amount of the wealth. So that’s got to go somewhere, right? I mean, they can’t take it with them. So it’s going on to they’re heirs, if they have them or wherever they decide that they want it to go, but it’s going to get passed on a big chunk of wealth is going to get passed onto the millennial generation over the next decade. So if you’re lucky, great. If you’re not, what else do you do when you have wealth coming your way. I would much prefer to build my own. And because as Jim Rohn said, it’s not giving a person a million dollars and it’s really not all about having the money. It’s the person that you become in building the money. So what you have to go through, what you have to learn, the experiences that you have to endure. It’s the person that you become by building a million or a multimillion dollar net worth. It’s not so much the money itself. I think a lot of people would say bullshit, just give me the fucking money. I want the money. I don’t care about the person that I become, but they’re missing out on the big picture.
So then the next one you can do it passively over time by slowly and steadily reducing your expenses, increasing your income, taking that in those investible dollars in buying assets like stocks and crypto, that you have no control over and just steadily plodding being patient for the most part of that process. For the average person takes several decades to be able to do, unless you’re a super high earner, let’s think about it this way. Even if you’re an employee, you earn a million dollars. It’s still not that quick of a process to build wealth because 50% of that is going to be getting taxed right away. So there’s $500,000 off the top. And then out of that, you’re going to typically live a pretty extravagant lifestyle. So typically, even if you had $100,000 to invest, It’s still going to take you some time to get there. Now you’re going to get there a lot quicker, of course. But it’s just not that easy of a process, no matter what.
And then the 3rd way is that you can actively and quickly force it out. So if option 1 is out and you weren’t that patient like me, like I’m not patient at all. I don’t want to wait until I’m 65. If you guys caught my drift on that first little kind of rant, then option 3 is your best bet. And how do you force your wealth up? There’s 2 ways. As Robert Kiyosaki explains in Rich Dad, Poor Dad. You force your wealth up by starting a business and investing all into that. And as that business grows it’s cash flow, Your net worth also grows as all businesses are valued based on their earnings. Even stocks they’re largely valued based on their earnings.
What’s earnings? Earnings is essentially net income. earnings is the money that’s left over after all expenses are paid out. So a company that makes $1,000,000 in revenue. That’s not their earnings. If they pay out $900,000 in expenses such as employees, cost of goods, what else like advertising, marketing, cost of capital debt payments, all of those things that factor into that add up as you’re growing a business and operating the business. so they have a $100,000 leftover after the million in sales. That’s $100,000 in earnings. And that’s how a company’s valuation is based on. Now, how do companies get valued? A lot of companies like publicly traded companies, they get valued at a much higher multiple than a private business does. I don’t really understand why, I haven’t done a lot of research on that. I know that a lot of them are traded at 10, 15, some even crazy high multiples like over 20. So that means that the valuation of the stock, let’s say, so in this example, there’s $100,000 in earnings, then it’s a 10 times valuation then that stock would be totally worth $1,000,000. So that’s pretty high. Most private businesses are valued somewhere along the lines of about a 3 times multiple, maybe up to 5 to where you could sell your company for example, in this case if you have $100,000 in earnings, you could sell it for $300,000.
Now there’s a lot that goes into value in private businesses. I’m not going to really do a deep dive on this today because I don’t think most of us are going to be selling our private business anytime soon. However, you do have that option and it does count towards your net worth. If you have $100,000 in this scenario in earnings. If you have a company that is more automated like it doesn’t really depend on any one person such as you for example, and it’s a lot more of a recurring revenue type business where the money just keeps coming in through subscriptions or consumption or just automated payments. Then that company has a higher higher multiple, so more like a 5X type multiple. So in this case that company would have a $500,000 value. Now, if you have $1,000,000 in earnings coming in, now you have a 3 to 5 times multiple where your business is worth $3,000,000 to $5,000,000. That’s pretty exciting.
So this is why I love taking a business, forcing the value up by my active nature, my aggressive nature, impatient nature, and then I’m in control and then I’m in the driver’s seat. So then I can force the valuation of my net worth up through aggression through activism. So once you get this concept down, now, you guys can start thinking a little bit differently about investing back into your own business versus investing into other people’s businesses, A.K.A stocks. I’m not totally against investing in stocks. I just don’t think that it should be a 100% of your portfolio like what most people are recommended that they do. I would take like 10%, 20% of your revenues, your earnings, and start putting into other people’s companies. I would say you want to focus initially as you’re growing you want to be all in you want to be focused on your own business. Why would you invest into somebody else’s business when your business needs those funds, your business needs that reinvestment, your business needs that capital, your business needs marketing to expand, your business needs maybe a new brick and mortar location. That’s where you got to start thinking where can I redeploy this money to get the fastest return? And typically it’s with your own business where you’re in the driver’s seat, you’re in control. When you give your money up to somebody else and invest into somebody else’s company you have no control over the outcome. It’s a lot harder and a much slower process. I shouldn’t say it’s harder. It’s easier to just invest in somebody else’s business. It’s a lot slower to make that happen because it requires a lot of patience.
So once your earnings of your private business grow, it starts to become substantial. You have options then, and typically what you want to consider doing to continue forcing your net value of your net worth up is then you buy properties and you can fix them up or repurpose them and you force the value up. By forcing your wealth up versus buying and praying. Wow! Pretty exciting.
So this is how I built a very large net worth by age 43, even with a ton of mistakes along the way. Now, what you guys have to also understand what you’re made of. What’s your personality type? I’m not patient, I’m not patient at all. I have an aggressive nature. Like I want to be in the game. I love making deals. I love sales. I love marketing. I love being in the game. So instead of just buying an asset and waiting for it to go up over a long period of time, I buy assets and through my actions I force the value up. So for example, my father is a very patient person. He’s not aggressive in nature. He doesn’t want to get involved in any type of business. He was a professional for his entire life. He was great at what he did. Arson investigator. So essentially in arson he had to figure out when somebody’s business went on fire, whether they did it on purpose or it was accidental. So then they could deny the claim or they could process the claim. If it was legit, he was very good at and skilled at what he did. He wasn’t a high earner he did well, but he wasn’t a high earner. So for him, his best strategy was investing in other people’s businesses and he’s very conservative, very frugal. He can just steadily plot along patiently and doesn’t really care that much to create wealth early at a young age. We’re just totally different human beings. That’s not my game, that’s not my style at all. So that’s what you got to keep in mind is what are you made of, what’s your personality type? What do you think is going to be best for you? If you’re very conservative, you’re an employee, you’re a decent wage earner, but not a higher earner. You’re pretty conservative. You just don’t like a lot of risk. Then that’s probably just dollar cost averaging your way over the course of time the market goes up. Market goes down, whatever the case you just continue buying over every month over the course of many years. I think doubtedly at some point in the future, it could be multi decades, but you’re going to have some wealth accumulated for sure.
So it just depends on how do you want to play the game? Each one works. There’s definitely more than one different way to build wealth, but my philosophy and opinion is that if you want to do it at a young age, retire young to fire whether they’re calling it FIRE on social media, am I too old to say fire? F I R E is an acronym. Fire, an acronym for financial independence retire early. If you want to fire, then I think your best bet to do that is building hyper-focusing on your own business, driving that cashflow up and their earnings up, and then taking the excess cashflow and investing into cash flow producing assets and forcing the way up, forcing those valuations up with your actions.
That’s a wrap for this episode on the Indestructible wealth podcast. Before we part ways, I want to help you to take advantage of 2 incredible tax saving strategies that could help you save a lot of money. All you have to do is leave me a 5 star review – if I’ve earned it – and comment in iTunes, Stitcher, Spotify, or wherever you tune in. After you’ve done that simple step, just email me a screenshot to [email protected] and I’ll send you everything you need to save money on your taxes for years to come. If you’d like to dive deeper into your own wealth building strategy, check us out at myindestructiblewealth.com and follow along on social media. Also, please share this podcast with anyone who’s looking for guidance on their own wealth building journey. Until next time, remember our mission here is to help you make, keep, and grow wealth you can enjoy now, and for years to come.